Rebate, Loading and Tax

The Australian government has a number of initiatives, taxes and penalties designed to encourage Australians to be covered by private health insurance and alleviate the burden on the public system. If you know what these initiatives are, you may be able to save on tax, time and money.

What is the Australian Government Rebate?

Most Australians with private health insurance currently receive a rebate from the Australian Government to help cover the cost of their premiums. The private health insurance rebate is income tested and age responsive.

The rebate applies to hospital, general treatment and ambulance policies. It does not apply to overseas visitors cover. The rebate levels applicable from 1 April 2015 are:

 

Income

Singles < $90,000 $90,001 - $150,000 $150,001 - $140,000 >$140,001
Families <$180,000 $180,001 - $210,000 $210,001 - $280,000 >$280,001
Base Tier Tier 1 Tier 2 Tier 3
Age -65 27.82% 18.55% 9.27% 0%
Age 65 - 69 32.46% 23.18% 13.91% 0%
Age 70+ 37.09% 27.82% 18.55% 0%

Single parents and couples (including de facto couples) are subject to family tiers. For families with children, the thresholds are increased by $1,500 for each child after the first.

View reference (05/05/2015)

What is Lifetime Health Cover Loading (LHC)?

lhc diagram

Lifetime Health Cover Loading (LHC) is a Government initiative designed to encourage people to take out hospital insurance earlier in life and to maintain their cover. If you do not have hospital cover with an Australian registered health fund then decide to take out hospital cover later in life, you will pay a 2% loading on top of your premium for every year you are aged over 30.

For example, if you take out hospital cover at age 40 you will pay 20% more than someone on the same cover who joined when they were 31. The maximum loading is 70%.

If you do hold an LHC loading but take out hospital cover, that LHC loading will freeze and not grow any higher. Once you have paid a LHC on your private hospital insurance continuously for 10 years, the loading is removed as long as you maintain your cover.

View reference (05/05/2015)

What is the Medicare Levy Surcharge (MLS)

The Medicare Levy Surcharge (MLS) is levied on high income earners who do not have private hospital cover. The surcharge aims to encourage individuals to take out private hospital cover, and where possible, to use the private system to reduce the demand on the public Medicare system.

The surcharge is calculated at the rate of 1% to 1.5% of your income for Medicare Levy Surcharge purposes. It is in addition to the Medicare Levy of 2%, which is paid by most Australian taxpayers.

The surcharge levels applicable from 1 April 2015 are:

Medicare Levy Surcharge

 

Income

Singles -$90,000 $90,001 - $150,000 $150,001 - $140,000 $140,001+
Families -$180,000 $180,001 - $210,000 $210,001 - $280,000 $280,001+
MLS 0.0% 1.0% 1.25% 1.5%

Single parents and couples (including de facto couples) are subject to family tiers. For families with children, the thresholds are increased by $1,500 for each child after the first.

View reference (05/05/2015)

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