Private health insurance – tax return changes

From the 2012–13 financial year (so for your current tax return), the private health insurance rebate is being income tested against three income tier thresholds. This means if you have private health insurance, the amount of rebate you will be entitled to receive is reduced if your income is more than certain threshold income amounts (see table below).

Note however that the income on which these thresholds are based are “income for surcharge purposes”, which is not necessarily the same as taxable income.

For the purposes of assessing private health insurance rebate eligibility, your income for surcharge purposes is the total of the following amounts:

  • taxable income, including the net amount on which family trust distribution tax has been paid
  • reportable fringe benefits, as reported on your payment summary
  • total net investment losses, including both net financial investment losses and net rental property losses
  • reportable super contributions, including reportable employer super contributions and deductible personal super contributions.

As a result, some taxpayers who have been receiving reduced premiums from their insurer may end up receiving a tax liability.

The ATO has made changes to the private health insurance section in the tax return form that will allow it to determine the amount of rebate taxpayers are entitled to receive. You will need to provide your annual tax statement from your insurer to allow us to complete this question.

Other changes include:

  • each adult covered by the policy is income tested on their share of the cost of the policy, regardless of who pays for the insurance policy
  • each adult will receive their own statement from their insurer, which will be needed to complete the income tax return.

If you prepaid your private health insurance for 12 or 18 months in 2011-12, you still need to have the private health insurance policy section of your 2012- 13 tax return completed using the information on your private health insurance statement (including any “$0” values).

Private health insurance rebate income thresholds for 2012–13 (indexed annually)

Income thresholds
Singles $84,000 or less $84,001–$97,000 $97,001–$130,000 $130,001 or more
Families* $168,000 or less $168,001–$194,000 $194,001–$260,000 $260,001 or more

Private health insurance rebate entitlement

Base tier (no change) Tier 1 Tier 2 Tier 3
Under 65 years old 30% 20% 10% 0%
65–69 years old 35% 25% 15% 0%
70 years old or over 40% 30% 20% 0%

*Use combined incomes if applicable. Income threshold is increased by $1,500 for each Medicare levy surcharge dependent child after first child. The tier used is based on the oldest person covered by the policy.

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