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Health Insurance News: Private Health Insurance Rebate and Medicare Levy Surcharge

aldwin sab February 17th, 2012 0 comments
Health insurance Australia

You may already have seen or heard the news about Australian health insurance: the Government has plans to change the way the Private Health Insurance Rebate and Medicare Levy Surcharge are calculated. This may mean added costs for many Australians, whether they do or don’t have private health insurance.

Image by Olga Lednichenko

Private Health Insurance Rebate: Going Down

Legislation to base eligibility on means testing for the Private Health Insurance Rebate has already passed the House of Representatives. If it passes the Australian Federal Senate when it resumes on February 27, 2012, it will become law. Income testing will then come into effect from July 1, 2012. The proposal is to introduce three new “Private health incentive tiers” according to income, and the new Private Health Insurance Rebate and Medicare Levy Surcharge amounts will depend on which of these tiers a person or household comes into.

This means testing will reduce the Private Health Insurance Rebate paid to single people earning over $80,000 and couples or families earning over $160,000. Currently, Australian private health fund members receive a rebate of 30% of their private health insurance premiums for the under-65s, increasing to 40% for the over-70s. This may be claimed as a tax rebate on the policyholder’s private health insurance premium each year, or the equivalent reduction may be applied directly to their premium.

The changes will see the rebate fall to lower percentages for people with a higher income, while those earning over $124,000 (or $248,000 as a family) will be in Tier 3 of the new system and will receive no rebate at all. The income limits given here are not final at present; they are likely to be adjusted for the 2012 average weekly earnings (AWE), which will be announced by the Australian Bureau of Statistics on the 23rd February2012. Families with more than one dependent child will receive an extra allowance on their income limit.

Medicare Levy Surcharge: Going Up

The Government also has plans to increase the Medicare Levy Surcharge, which will rise from 1% to as much as 1.5% of taxable income for Australians in the highest income tier. The Medicare Levy Surcharge is applied if an Australian taxpayer does not hold private health insurance, and earns over $80,000 ($160,000 for families). Again, these income limits are not final.

The Medicare Levy Surcharge is an extra tax on top of the standard 1.5% Medicare Levy all Australian taxpayers pay; there are no plans to change the Medicare Levy itself. It has been suggested that a large amount of the money the Government sources from the Medicare Levy Surcharge may be spent on improving access to dental health care for Australian citizens.

What to Do About Health Insurance Tax Changes

With all these changes in the pipeline, now may be a wise time to compare private health funds. Determine what level of private hospital cover and/or private health extras cover you need, if any. If you want to use private health insurance, find out about ways to reduce your premiums if possible. If you won’t be using private health insurance, you might like to work out what income tier you’ll fall into for Medicare Levy Surcharge purposes.

We’ll continue to report any new information released by the Australian Government with regard to these changes in the health insurance and tax system.

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