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NIBThe private health insurance rebate is an income-tested tax offset that helps to cover the cost of health insurance premiums. This generally means you’ll receive a higher tax refund if you earn a lower income. This rebate can be claimed for premiums paid through a private health insurance policy that provides Hospital cover, Extras cover or combined cover.
This may help you cover some of the cost of your premiums and is associated with other benefits like avoiding the Medicare Levy Surcharge and Lifetime Health Cover (LHC) loading.
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Can you claim tax back on health insurance?
Generally, you’ll be able to claim tax back on your health insurance with the Australian private health insurance rebate provided that you meet the eligibility criteria. The rebate pays up to 33.413% of your private health insurance premiums. The claimable amount will generally depend on a variety of factors. These include your age, family structure and your taxable income.
How to claim your private health insurance rebate
If you’d like to receive the rebate on private health insurance there are two different claim procedures to choose from:
Upfront reduction from your health insurer
Choosing to receive your tax return as an upfront reduction on your private health insurance premium means you’ll pay less for your health insurance as the rebate will be paid directly to your health fund, and they’ll subtract the rebate from your premium.
Here’s how to claim:
- Register for the upfront reduction with your private health insurer.
- Complete the application to receive the Australian Government Rebate on Private Health Insurance as a reduced premium form and return it to your insurer.
Or, you may be able to log into your insurer’s online service and add your details there.
Through your tax return
You also have the option to claim your refund through your annual tax return from the Australian Taxation Office. You can do this through these following steps:
- Obtain your statement from your health insurer at the end of the financial year.
- Complete your tax return.
- Submit your forms to the Australian Taxation Office.
- For online submissions with myTax; you’ll need to set up a myGov account to use myTax.
Who is eligible for private health insurance rebate?
To qualify for the private health insurance rebate, you’ll generally need to have a complying health insurance policy, have a taxable income of less than $140,001 for singles and $280,001 for families and couples and be entitled to Medicare. The Private health insurance rebate does not apply to people who have overseas visitors’ health insurance cover (OVHC).
What is a rebate tier?
Generally, a private health insurance rebate tiers system is used to calculate the offset you’ll receive. The health insurance rebate tiers are used to separate different income brackets. However, it’s generally applied to the standard cost of cover.
How do you determine your rebate tier?
You’ll generally be required to determine your rebate tier when applying for your offset. To be eligible for the rebate, you or your family must have a taxable income of less than the Tier 3 income threshold. To do this, you’ll need to look at your annual taxable income and decide which tier applies to you.
If you aren’t sure which tier to choose or you select the wrong tier on your tax return, the Australian Taxation Office will adjust your tax return to the correct tier. Or, you could consult a tax agent or financial adviser.
Important note: For families with children, the threshold increases by $1500 for each child after the first.
Private health insurance tax benefits
When you sign up for Private health insurance, you can generally look forward to many different benefits. These include tax offsets and avoiding having to pay the Medicare Levy Surcharge and Lifetime Health Cover loading if you take out cover by July the year you turn 31.
Receive the private health insurance tax offset
If you have private health insurance, you may be able to qualify for a rebate when you submit your tax return. The private health insurance rebate is an amount the government contributes towards the cost of your private health insurance premiums. The Australian Government Rebate (AGR) pays up to a maximum of 33.413%. However, the amount you’ll be able to claim on your tax return will depend on your age, income and family structure.
Avoid the Medicare Levy Surcharge (MLS)
By taking out an eligible private health insurance policy, you may be able to avoid paying the additional 1% to 1.5% Medicare Levy Surcharge (MLS). The MLS is added to encourage people to use the private health care system, which in turn helps to reduce strain on the public Medicare system. If you don’t have a health plan, your percentage surcharge will be calculated based on your income as a single person or your combined income as a family (including single parents and couples).
To avoid paying the surcharge, you must have a taxable income of less than $90 000 if you are single or $180 000 for couples and families. Alternatively, you could avoid the surcharge if you are exempt from having to pay the Medicare levy or by taking out a private health insurance policy.
Avoid the Lifetime Health Cover (LHC) loading
If you don’t have an appropriate private health insurance policy in place before the 30th of June following your 31st birthday and you choose to take up health cover later, you may have to pay an additional 2% surcharge on top of your premium as part of the Lifetime Health Cover (LHC) loading for every year you did not have cover, up to a maximum of 70%. However, you can avoid having to pay this loading by applying for an eligible private health insurance policy before turning 31. However, you’ll need to have an eligible hospital policy in place by this time because extras cover on its own is not enough to avoid having to pay this loading. If you take out cover after you turn 31 and hold it for ten consecutive years, the LHC will be removed.
Take note: If you are currently paying an LHC loading, your rebate will not be applied to the LHC part or your private health insurance premium.
How much tax do you save with private health insurance?
By taking out an eligible policy, you could save on your taxes. By avoiding the LHC, you could save up to 2%. You’ll also be able to save 1-1.5% on the Medicare Levy Surcharge. In addition to these savings, you may also be entitled to a tax refund or use your rebate to get a discount on your premium.
How is the private health insurance rebate calculated?
You can use a private health insurance rebate calculator to determine your rebate. This calculation will generally take the following factors into consideration; your taxable income, whether you are single or a couple/family, the age of the oldest person covered by your health insurance and any dependent children. You’ll then be supplied with your claimable rebate percentage.
The rebate is adjusted annually on the 1st of April according to the Rebate Adjustment Factor (0.990 for 2020) which is calculated on the difference between the Consumer Price Index (CPI) and the industry weighted average premium increase (2.92% in 2019).
The amount you’ll receive depends on the age of the oldest person on your policy, and your expected taxable income for the current financial year as a single person or family/couple.
Australian government rebate tiers on Private Health Insurance:
Private health insurance rebate tiers for income brackets:
| Tier Level | Annual taxable income for a single person | Annual taxable income for a family |
| Base tier | $90,000 or less | $180,000 or less |
| Tier 1 | $90,001 – 105,000 | $180,001 – 210,000 |
| Tier 2 | $105,001 – 140,000 | $210,001 – 280,000 |
| Tier 3 | $140,001 or more | $280,001 or more |
Source: privatehealth.gov.au (March 2020)
Private health insurance rebate thresholds for 2020
Under the age of 65
Private health insurance rebate threshold if the oldest person covered on your policy is under 65 years old in 2019–20:
| Taxable Income | Rebate for 1 July 2019 – 31 March 2020 | *Rebate for 1 April 2020 – 30 June 2021 |
| Base Tier: <$90 000 for singles and <$180 000 for couples/family | 25.059% | 25.059% |
| Tier 1: $90,001 to $105,000 for singles and $180,001 to $210,000 for couples/family | 16.706% | 16.706% |
| Tier 2: $105,001 to $140,000 for singles and $210,001 to $280,000 for couples/family | 8.352% | 8.352% |
| Tier 3: $140,001 for singles and $280,001 or more for couples/family | 0% | 0% |
Source: privatehealth.gov.au (March 2020)
Age 65 to 69
Rebate if the oldest person covered on your policy is 65 to 69 years old in 2019–20:
| Taxable Income | Rebate for 1 July 2019 – 31 March 2020 | *Rebate for 1 April 2020 – 30 June 2021 |
| Base Tier: <$90 000 for singles and <$180 000 for couples/family | 29.236% | 29.236% |
| Tier 1: $90,001 to $105,000 for singles and $180,001 to $210,000 for couples/family | 20.883% | 20.883% |
| Tier 2: $105,001 to $140,000 for singles and $210,001 to $280,000 for couples/family | 12.529% | 12.529% |
| Tier 3: $140,001 for singles and $280,001 or more for couples/family | 0% | 0% |
Source: privatehealth.gov.au (March 2020)
Over the age of 70
Rebate if the oldest person covered on your policy is 70 years old or older in 2019–20:
| Taxable Income | Rebate for 1 July 2019 – 31 March 2020 | *Rebate for 1 April 2020 – 30 June 2021 |
| Base Tier: <$90 000 for singles and <$180 000 for couples/family | 33.413% | 33.413% |
| Tier 1: $90,001 to $105,000 for singles and $180,001 to $210,000 for couples/family | 25.059% | 25.059% |
| Tier 2: $105,001 to $140,000 for singles and $210,001 to $280,000 for couples/family | 16.706% | 16.706% |
| Tier 3: $140,001 for singles and $280,001 or more for couples/family | 0% | 0% |
Source: privatehealth.gov.au (March 2020)
Frequently asked questions
When does the level of rebate for private health insurance change?
Generally, the Private health insurance tax rebate is adjusted annually on the 1st of April. This figure will be adjusted annually by the rebate adjustment factor as a percentage of the Consumer Price Index (CPI) increases, and the average annual premium increase.What if you selected the wrong rebate tier?
If you select the wrong rebate tier when submitting your tax return or on your Australian Government Rebate (AGR) application to your health fund, the ATO will calculate the correct rate the end of the financial year. If you received a larger rebate than what you were entitled to, you might be required to repay the difference. Generally, if you chose a tier lower than what your income entitles you to, you may be eligible to receive a tax offset when lodging your tax return at the end of the financial year. If your income changes, you can resubmit your AGR form or contact your health insurance provider to adjust your income tier.Does the rebate apply to your Lifetime Health Cover (LHC) loading?
Unfortunately, if you have to pay the Lifetime Health Cover loading, as of the 1st July 2013, the AGR rebate will not apply to the LHC loading portion of your membership payments.Why was the rebate created?
The rebate was introduced to encourage the public to apply for private health insurance and make premiums more affordable. This, therefore, helps to reduce the burden on the public healthcare system and increases the affordability of private health insurance.Can you claim your spouse’s health insurance rebate?
Generally, you’ll be able to claim your spouse’s health insurance rebate as well as your own provided that they give you their consent and you are both covered under the same policy. Generally, their details should also be included in the spouse section of your private health insurance tax return, and your rebate will be income tested on your combined income.
How does the ATO collect the Lifetime Health Cover Loading? Is it debited on annual assessment or is adjusted through premiums/rebate?
Hi Barry.
Great question.
I assume you purchased private health insurance after you turned 31. The yearly 2% LHC loading will be added on top of your health insurance premium. The way ATO collects this by not including the loading in your private health insurance rebate.
For example, let’s suppose your health insurance premium is $220, however 10% ($20) of it is your Lifetime health cover loading. The premium amount that is eligible for the rebate is then $200 and not $220.