Should I Prepay My Private Health Insurance?

From the 1st July 2012, the private health insurance rebate and Medicare levy surcharge will be means tested. This means that if you have private health insurance but earn over certain limits, you may not be entitled to the 30% rebate you have previously received. For those without private health insurance (or the appropriate level of patient hospital cover) the rate of surcharge you pay will be increased, depending on your income levels.

What are the income thresholds?

Depending on your situation, there are varying income thresholds where your premium rebate may be reduced, or your surcharge levels increased. the table below outlines the changes. For example, if you are single, aged 30, earning $100,000 you would be entitle to a rebate of 10%.

UnchangedTier 1Tier 2Tier 3
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
Aged under 6530%20%10%0%
Aged 65-6935%25%15%0%
Aged 70 or over40%30%20%0%
Medicare levy surcharge

* The family income threshold is increased by $1,500 for every child after the first child.


Can I claim the rebate on future years payments in the 2011/12 financial year?

Yes, the legislation is for premiums paid on or after the 1st July 2012. This means if you pay the premiums on or before the 1st July 2012 your rebate will not be means tested.  The premium is paid to the health insurer when they receive payment, not when payment is made. This means you will need to act fast, in case there are any delays in banking. There is no point sending a cheque to the insurer on the 30th June, as it is based on a received date.

You may be able to prepay up to 18 months worth of private health insurance depending on your insurer, meaning you will not be means tested until the 1st January 2014.  Please contact your private health insurer to discuss.

If your income levels are over the threshold and you do not choose to prepay, you can advise your insurer your estimated income and they will rebate the correct amount for your income level.  This will reduce your risk of having a payable amount at year end. If you have over or under claimed, this will be reconciled when completing future tax returns.

Please feel free to contact Paul on 0407 352 504 to discuss.