Health Insurance Rebate

The Australian Government currently offers a health insurance rebate to all eligible residents, with a green (full) or blue (interim) Medicare card. The rebate is designed to help cover the cost of health insurance premiums and applies to both hospital and extras cover.

The health insurance rebate is income tested, this means that the level of rebate you are eligible for will be dependent on your annual pre-tax income. The level of your rebate is also dependent on the age of the oldest member covered under your health insurance policy.

Annual rebate changes

From 1 April each year, your rebate contribution from the Australian Government will change based on a weighted average ratio, which is set by regulations provided by the Government.

The change will apply to any premium payments that are made on or after 1 April each relevant year. The rebate will continue to be paid as a percentage of premiums contributed, excluding any Lifetime Health Cover loading that may be applicable.

Income threshold changes from 1 July 2015

From 1 July 2015, the income thresholds will not be adjusted for three years – for 2015/16, 2016/17 and 2017/18. This may affect the tier level, and accordingly the rebate percentage, you are eligible for.

The table below details the different net rebate amounts after taking into account the weighted average ratio and sets out the eligibility based on income and age:

  Tier 0 Tier 1 Tier 2 Tier 3
Income thresholds for 2015-16, 2016-17 and 2017-18
Singles' Income Threshold ≤ $90,000 $90,001–$105,000 $105,001–$140,000 ≥ $140,001
Families' Income Threshold ≤ $180,000 $180,001–$210,000 $210,001–$280,000 ≥ $280,001
Rebate for premiums paid, 1 April 2014 – 31 March 2015
Under 65 years old 29.04% 19.36% 9.68% No Rebate
65-69 years old 33.88% 24.20% 14.52% No Rebate
Over 70 years old 38.72% 29.04% 19.36% No Rebate
Rebate for premiums paid, 1 April 2015 – 31 March 2016
Under 65 years old 27.82% 18.55% 9.27% No Rebate
65-69 years old 32.46% 23.18% 13.91% No Rebate
Over 70 years old 37.09% 27.82% 18.55% No Rebate

NOTE: The family income threshold is increased by $1500 for each Medicare levy surcharge dependent child after the first. Single Parent families are subject to the family income tiers. For more information please consult your tax adviser or contact the Australian Taxation Office.

Claiming the health insurance rebate

The most popular way of claiming the rebate by far is to simply deduct the amount from the cost of your health insurance premium. In fact, many health funds will quote your premium based on the assumption that you’ll choose to claim the rebate this way.

Alternatively, you can pay the full amount of your premium up front to your health fund and then claim the rebate as a cash amount from your local Medicare office, or claim it at tax time on your tax return.

Changes to the health insurance rebate

Choosi will continue to provide updates on our website regarding any changes the Government makes on the health insurance rebate.

If you claim your rebate as a deduction on your premium, your insurer will automatically adjust the deduction for any changes in the rebate for the tier to which you are allocated. However, should your eligible rebate tier change (i.e. your annual taxable income increases or decreases), you will need to notify your health fund so they can make the appropriate adjustments.

If you choose to claim your rebate as a tax offset, the Australian Tax Office will apply the adjusted rebate percentages to determine your correct private health insurance tax offset.

These articles are provided as reference material to allow more informed decision making, but are not intended as being a complete source of information on any topic. All readers should make their own independent analysis on the topic to make sure they have considered the aspects that are important to them.