The Health Insurance Rebate
At the moment, the health insurance rebate stands at a minimum of 30 per cent but there are plans to means test how much you can receive in line with your income. The proposed changes would mean that the current 30 per cent rebate would no longer be available for everyone and that higher earners receive a lesser rebate or none at all depending on income level.
The proposed changes won’t affect you if you’re single and earning less than $75,000 or a couple or family earning less than $150,000. Beyond that, the rebate will reduce on a sliding scale as follows:
The Health Insurance Rebate is provided on a sliding scale. From April 1st 2018 to March 31st 2019, the rebate will be available as follows:
- If you’re under 65 and earn up to $90,000, you retain a 25% rebate. The rebate is 30 per cent for those aged 65-69 in this income bracket and 34 per cent for 70+
- If you’re under 65 and earn between $90,001 and $105,000, the rebate drops to 17 per cent. The rebate is 21 per cent for 65-59 and 25 per cent for 70+
- If you’re under 65 and earn between $105,001 and $140,000, the rebate drops to 8 per cent. The rebate is 13 per cent for 65-60 and 17 per cent for 70+
- If you earn over $140,001, there will be no rebate regardless of age
- If you’re under 65 and earn less than $180,000, the 25 per cent rebate is unchanged. The rebate is 30 per cent for 65-69 and 34 per cent for 70+
- If you’re under 65 and earn between $180,001 and $210,000, the rebate drops to 17 per cent. The rebate is 21 per cent for 65-69 and 25 per cent for 70+
- If you’re under 65 and earn between $210,000 and $280,000, the rebate drops to 8 per cent. The rebate is 13 per cent for 65-69 and 17 per cent for 70+
- If you earn over $280,001, no rebate will be on offer regardless of age
The Medical Levy Surcharge
One of the tax-related benefits of arranging private hospital cover with a registered health fund is the ability to avoid an additional tax in the form of the Medicare Levy Surcharge (MLS). If you’re a single individual earning at least $80,000 or a couple or family earning at least $160,000 in the 2011-12 financial year, you’re in line for an extra tax on top of the Medicare tax that most Australian taxpayers pay unless you’ve already got private hospital cover in place. To avoid the tax, you simply need to take out approved private hospital cover with a registered health fund.
With concerns that many Australians will ditch their private health insurance or downgrade their cover if the proposed changes to the health insurance rebate go ahead, there are also planned changes to the MLS to compensate. The extra tax was set at 1 per cent across the board but there are plans to means test it as follows:
- If you earn between $75,001 and $90,000, the 1 per cent MLS will remain the same
- If you earn between $90,001 and $120,000, the MLS rises to 1.25 per cent
- If you earn over $120,0001, the MLS rises to 1.5 per cent
- If your income is between $150,001 and $180,000, the 1 per cent MLS will remain the same
- If your income is between $180,001 and $240,000, MLS rises to 1.25 per cent
- If your income is more than $240,001, MLS rises to 1.5 per cent
Depending on the level of cover that you’re looking to take out, getting private health insurance can actually work out to be cheaper than paying the MLS so you’re getting the best of both worlds – you’re securing valuable piece of mind for the future if an unfortunate medical situation were to befall you and/or your family and at the same time, saving on tax.
Other Benefits of Private Health Insurance
Saving money on tax is undoubtedly an attractive proposition but it’s not the only benefit of taking out private health insurance. By choosing private health care, you’ve got much more say over who treats you, when you’re treated and can expect shorter waiting times in comparison to public health care.