Managing your health care rebate

November 6, 2014


123rf - BAS refundYour health care rebate entitlement is calculated using your assessable income as well as your age. When you lodge your income tax return, your rebate is assessed using income thresholds.

The following table shows the rebate entitlements that apply to any premiums paid on or after 1 July 2014.


  Income Base Income Tier 1 Income Tier 2 Income Tier 3
Singles Up to $88,000

$88,001 –


$102,001 – $136,000 $136,001 & over
Families* Up to $176,000 $176,001 – $204,000 $204,001 – $272,000 $272,000 & over


Private health insurance rebate entitlement

Up to

65 years

30% 20% 10%


65 –

69 years

35% 25% 15% 0%

70 years

& over

40% 30% 20% 0%

All thresholds will be indexed annually. *Family thresholds increase $1,500 per child after the first child.

To prepare for your tax return, you should be aware of three methods of claiming your rebate entitlement:

Insurer premium adjustment. This involves contacting your insurer and advising them of the Tier that applies to you (you don’t have to disclose your income, only the Tier). By adjusting your Tier before the end of the financial year, any premium increases will be spread across the remaining months before 30 June. This helps to reduce any potential lump sum you might have to pay for the full year. If, at the end of the tax year, you find you nominated an incorrect Tier, your tax assessment will be adjusted to reflect your correct rebate without penalty and any excess payments will be refunded to you.

Tax offset. This method applies if you have not advised your insurer of your Tier. Your rebate entitlement is calculated at the time you lodge your income tax return and your assessment is adjusted accordingly.

Refund from a Department of Human Services. In certain circumstances some Departments of Human Services allow you to claim a direct rebate refund from them. However, if you choose this option, you may not use either of the first two options listed above.

Increasing private health costs often tempt us to forego our insurance policies. But there are two financial points to consider before dropping cover:

1. The health fund rebate is closely linked to the Medicare Levy Surcharge. If you decide to drop your health insurance you may end up paying a higher surcharge.
2. The Lifetime Health Cover (LHC) scheme, effective 1 July 2000, was introduced to encourage Australians to take out, and maintain private health cover. This is a loading that increases health fund premiums by 2% every year after your 31st birthday. If you decide to cancel your health insurance and re-instate it sometime in the future, you will most likely be subject to the LHC premium loading.

Sources: Changes to private health insurance rebate and Medicare levy surcharge (Last modified 11 April 2014) Federal government rebate FAQs Private Health Insurance Rebate and Medicare Levy Surcharge Income Thresholds for 2013-14 (16 April 2013) "Australian Government Rebate"

Health insurance policies and costs can differ widely so it’s important to fully understand the options available to you. If in doubt always seek professional advice before acting.
Call (02) 4926 2300 or email us.


If you wish to discuss your health care rebate and private health insurance further, please do not hesitate to contact Leenane Templeton.

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