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The Private Health Insurance Rebate

Jonathan March 24th, 2015 0 comments
phi-rebate

Purchasing health insurance is very important for your well-being and your financial protection.  Without hospital cover, you could face restrictions on care, be limited to visiting a public hospital only, and still be left with large bills if you saw any providers whose fees exceeded the Medicare benefits schedule (MBS). Without extras cover, you could be forced to pay for all of your exams and routine treatments out-of-pocket.

Not only is purchasing health insurance a way to protect your health and your finances, it is also required for individuals above a certain income level.  While the Australian government mandates the purchase of hospital cover, it also provides assistance to individuals and families who need help affording their policies. This assistance comes in the form of the private health insurance rebate (PHI).

What is the PHI Rebate?

The private health insurance rebate is a rebate that the Australian government gives to individuals and families to help them afford private health insurance. Any Australian resident who qualifies to receive Medicare coverage who buys hospital or general cover (or both) and whose household income is below a certain level should be entitled to receive a rebate.

A rebate can be paid directly to an insurance company in order to reduce the premiums that you pay for coverage. The rebate can also be paid through your tax return.  Regardless of which of these options you choose, the PHI rebate may cover a significant portion of your costs depending upon how much you and your family make.  With the rebate, coupled with the important benefits that health coverage provides, there is no reason for anyone to go without cover.

How much do I get back?

The value of the private health insurance rebate is based upon what your household income is, as well as the cost of the premiums for the health fund that you purchase.  Individuals and families are grouped into different tiers depending upon their household income.  People who are married or who are in a de facto relationship will use their combined household income to calculate the rebate. This Health Insurance Rebate Calculator allows you to input your income, age, and relationship status so that you can determine the amount of your rebate.

Health Insurance Rebate Calculator

Depending on your age, family status, and income level, you may be entitled to a Government Rebate on your private health insurance policy. Use the sliders and dropdown menu below to calculate your rebate.

Please select status

You are entitled to a 1% Government Rebate on Your Private Health Insurance Policy.
Singles
Families
$90,000
$180,000
$90,001-105,000
$180,001-210,000
$105,001-140,000
$210,001-280,000
$140,001
$280,001
Rebate
Base Tier Tier 1 Tier 2 Tier 3
age 65 25.934% 17.289% 8.644% 0%
Age 65-69 30.256% 21.612% 12.966% 0%
Age 70+ 34.579% 25.934% 17.289% 0%

The rebate pays a percentage of insurance premiums. For an individual who makes less than $90,000 per year or a family with a combined income of less than $180,000 per year, the PHI is equal to 27.82% of premium costs as of April 2015.  This rebate for singles and families within this income threshold increases to 32.457% of premiums when between the ages of 65 and 69, or to 37.094% of premiums at age 70 or older.

As your individual or family income climbs, the amount you get back declines. For example, a single under age 64 who makes between $90,001 and $105,000 would only get a 18.547% rebate and would get a 9.273% rebate once his or her income was between $105,001 and $140,000.   No rebate is available for singles with an income of $140,001 or higher, or for families with an income above $280,001.

Single parents and couples are subject to the family tier, rather than the singles tier.  However, if families have multiple children, the threshold increases $1,500 per child for the second and subsequent children.

Who is eligible to receive the PHI rebate?

The PHI rebate applies to Australians who are eligible for Medicare coverage but who opt to purchase private insurance.  Any Australian resident who buys a qualifying health policy and whose income does not exceed the rebate threshold should be eligible to receive the rebate.

If you did not purchase health insurance prior to the age of 30, you are charged an additional cost for your insurance that is referred to as Lifetime Health Cover (LHC) loading.  The rebate does not apply to the LHC component of health insurance premiums. You will only receive a rebate for the standard base amount of premiums.

PHI rebates do not apply to overseas or visitors cover.  However, overseas visitors who are covered under a reciprocal health agreement (RHCA) and who are eligible for Medicare may be able to obtain a rebate for the purchase of either hospital or extras cover.

How do I claim the rebate?

You have two primary options for claiming the PHI rebate. One option is to claim it by having the money paid out directly to the insurer you buy your health fund through. This will lower your ongoing premiums.

You will need to inform the insurer of the tier that you fall into so your rebate is calculated correctly.   You may complete Form MS006, which is called an “Application to Receive or Change the Australian Government Rebate on Private Health Insurance as a reduced premium form.” This form is available on the website of the Australian Government Department of Human Services.  You may also ask your insurer about how to obtain and complete a form so your rebate can be paid directly to the insurer.

Your other option is to claim the rebate through the tax return filed with the Australian Taxation Office.  The rebate is considered a refundable tax offset.  You must lodge a tax return to claim the money back. The Australian Taxation Office has detailed information on lodging a tax return on its website.  The majority of people lodge a tax return, which can be done yourself using either myTax or e-tax. A registered tax agent can also assists with lodging your return and claiming your rebate.

What if you choose the wrong tier?

When you lodge your tax return, you should know your income and be able to select the correct tier when claiming your rebate. However, if you claim the rebate as a premium reduction, there is a risk that you may provide incorrect information on your income.

If you estimate your income too high and you receive less of a rebate than you should, this can be corrected when you lodge your tax return as you can claim the additional funds. However, if you estimate too low and your income is higher than expected, you will need to repay the additional rebate you received and should not have been eligible for.  The tax debt must be paid at the end of the financial year, but there are no penalties for estimating incorrectly.

Do all health insurance policies qualify?

Not all health insurance policies qualify. You should ask your health fund if the policy you are considering is eligible for the PHI rebate. The policy must be a complying health insurance product (CHIP) that provides hospital treatment, general treatment (ancillary or extras cover) or both.

The PHI rebate vs. the MLS

Both the PHI rebate and the Medicare Levy Surcharge (MLS) are affected by your household income. While the Private Health Insurance Rebate encourages you to buy coverage by subsidizing it, the Medicare Levy Surcharge encourages the purchase of coverage by imposing a fine if you fail to buy hospital insurance.

The Medicare Levy surcharge is assessed only if your income exceeds a certain level.  This Medicare Levy calculator can help you to determine if you will be required to pay for not having coverage.  The levy kicks in once a single person has an income above $90,000 or a family has an income above $180,000.  It begins at one percent and rises up to 1.5 percent for singles with an income exceeding $140,000 or families with an income exceeding $280,000.

Medicare Levy Surcharge Calculator

The Medicare Levy surcharge is an additional fee paid on top of the 2% Medicare Levy Surcharge that most Australian taxpayers pay. You can avoid the surcharge if you have Private Health Insurance (Hospital Cover).

The exact surcharge level you'll need to pay depends on your income level and relationship/family status. Use the slider and dropdown menu below to determine what surcharge you're liable for if you don't have private hospital cover.

Please select status

Your Medicare Levy Surcharge is 1% of your income, or $2050
Singles
Families
$90,000
$180,000
$90,001-105,000
$180,001-210,000
$105,001-140,000
$210,001-280,000
$140,001
$280,001
Medicare Levy Surcharge
Standard Tier 1 Tier 2 Tier 3
All ages 0.0% 1.0% 1.25% 1.5%

You do not want to pay a levy and be left with no coverage. Take advantage of the incentive the PHI provides and buy the cover you require to take care of yourself and your family’s medical needs.

Still have questions? Let's talk!

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