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Most Australians with private health insurance currently
receive a 30% rebate from the Australian Government to help cover
the cost of their premiums.
You have to pay the Medicare levy surcharge (MLS) if your
income is above a certain threshold and you (or any of your
dependants) don't have appropriate private patient hospital
cover.
From 1 July 2012 the private health insurance rebate and the MLS
will be income tested.
How will these changes affect you
If you expect to earn more than $84,000 as a single person or
more than $168,000 as a family in the 2012-13 financial year, your
rebate will be diminished.
If you are single, earn more than $84,000 and don't have
private health insurance hospital cover you will pay the MLS.
If you are a family, have a combined income of more than
$168,000 and don't have hospital cover for you, your partner,
or your children – you or your partner will have to pay
MLS (The MLS will also apply if you cancel your existing hospital
cover.)
These changes are summarised in the following table. The tiers
are based on your "income" for MLS purposes:
Note:
Single parents and couples (including de facto couples) are
subject to the family tiers. For families with children, the
thresholds are increased by $1,500 for each child after the
first.
"Income" for MLS purposes includes:
-taxable income
-exempt foreign employment income (if your taxable income is $1
or more)
-reportable fringe benefits (as reported on your payment
summary)
-total net investment losses (includes both net financial
investment losses and net rental property losses)
-reportable super contributions (includes reportable employer
super contributions and deductible personal super
contributions)
You may claim the rebate if you are eligible for Medicare and
have an appropriate level of private health insurance. Generally
speaking this means that the policy should cover hospital
treatment, general treatment (also known as ancillary or extras) or
both, and that the excess on the policy doesn't exceed $500 for
singles or $1,000 for any other policy, if taken out after 24 May
2000.
You can claim your rebate in three ways:
As a premium reduction through your private health insurer
(i.e. you pay less upfront to your insurer). If you want to claim
your rebate as a reduced premium, contact your insurer to arrange
this;
As a direct payment from Medicare; or
As a tax offset when lodging your annual income tax
return.
If you choose to receive your rebate through your insurer as a
premium reduction or Medicare, you should contact your insurer to
nominate the tier you expect to be in to avoid a potential tax
liability at the end of the year. There is no penalty for
nominating an incorrect tier.
Prepaying your insurance premiums before 30 June 2012
On 4 June 2012, the Tax Office released a fact sheet entitled Changes to private health insurance rebate and Medicare levy
surcharge. The fact sheet indicates that it is possible to
pre-pay your private health insurance premiums for
the 2012-13 financial year and beyond and still make a claim for a
private health insurance tax offset in your 2011-12 income tax
return.
To claim the rebate, the premiums must be actually
paid to your insurer (receipted by them)
before 30 June 2012 and the rebate must
not have been claimed as a premium reduction or as
a claim from Medicare.
Is there a tax benefit in prepaying my premiums?
For taxpayers not affected by these changes there will be no
benefit in prepaying your premiums.
For tier 1, 2 and 3 taxpayers pre-paying your premiums before 30
June 2012 will be an attractive way to reduce your total health
insurance costs over the period to which the prepayment
relates.
The Tax Office's fact sheet does not state that you are
limited to claiming a rebate for the 2012-13 financial year only.
In this respect, we are aware that some insurers are offering
policy holders the ability to lock in today's premium for a
period beyond the next 12 months, however conditions apply. You
need to act quickly if this something you wish to take advantage
of.
