The cost versus benefit debate of private health insurance in comparison to relying solely on publicly funded healthcare is complex and can be influenced by a set of factors unique to you and your family. But one benefit of investing in private cover that is available to the vast majority of Australian residents is a tax benefit in the form of a private health insurance rebate. Eligibility for the rebate is tiered according to income thresholds for singles and families, discount and the rebate itself is also calculated according to the age of the owner(s) of the private health insurance policy. The rebate can be claimed as a reduction to your private health insurance premiums or as a refundable tax offset on lodging your annual income assessment with the Australian Tax Office.
The ATO’s official website is an excellent resource to fully understand how the private health insurance rebate is structured, approved but we’ll get you started with a brief intro summary and provide some links to specifics along the way.
Eligibility for the private health insurance rebate:
1) You must have a complying health insurance policy that is provided by a registered health insurer. Finding the right combination of appropriate cover and competitively priced premiums for you and your family among the most recognized names in health insurance is a good place to start. Also, the policy should provide hospital or general cover, or a combination of both.
2) You need to be a private health insurance incentive beneficiary (PHIIB), in other words, someone who pays for their own or their child’s private health insurance cover, or married to the other parent paying for the child’s cover.
3) You need to be eligible for Medicare.
4) You need to earn less than the Tier 3 annual income threshold.* For 2014-15, that is $140 000 or less for singles, or a combined family income of $280 000 or less.
-Entitlements are adjusted every financial year by the Department of Health using factors such as the increase in the consumer price index and average increase in private health insurance premiums.
-Depending on your age and if your income falls within the base, first or second tier order clonazepam thresholds, as an example, your rebate entitlement can range from a reduction of 9.68% up to 38.72% on premiums paid from 1 July 2014 to 31 March 2015.
-You can nominate an entitlement with your private health insurer at the beginning of the financial year and should any variables change throughout the course of the year, any differential will be calculated as a liability or a refundable tax offset in your return. You can forecast this yourself using the ATO’s online calculator:
Other costs when you don’t have private health insurance cover:
While the private health insurance rebate actively encourages taxpayers to invest in private health insurance cover, there are other measures that offer further incentive.
A) Medicare Levy Surcharge
If you haven’t taken out an appropriate level of private health cover during the financial year, the additional liability of a Medicare Levy Surcharge could be calculated into your tax assessment. This is means tested using a set of income thresholds.
B) Lifetime Health Cover Loading
Every year after the age of 30 that you are not covered by a private health insurance policy will add 2% loading to your premiums when you eventually do take out cover. For instance, if you wait until you’re 35 to purchase your first policy, an additional 10% will be added to your premium and you’ll need continuous cover for 10 years before the loading is removed. Here’s an important tip to avoid being penalised: at the very latest, make sure you take out an eligible private health insurance policy by 30th June following your 31st birthday.
Reading your private health insurance end of financial year statement:
In July of the new financial year, you’ll receive a statement from your private health insurer outlining the premiums paid during the year that are eligible for the private health insurance rebate for each person on the policy. The statement will also indicate how much entitlement has actually been received as a reduction to the premiums over the year.
If you’ve only taken out cover for the first time during the year after 1st July, you may be liable for the Medicare Levy Surcharge and the statement will also outline that liability.