The Private Health Insurance Rebate will be means tested from 1 July 2012. Many individuals and families will have their rebate cut or substantially reduced. If you are currently paying premiums net of the rebate of say $3,600 pa, then the value to you of the current 30% rebate is $1,543 pa (i.e. the total cost would otherwise be $5,143 pa).
The new Private Health Insurance Rebate regime will be based on income tiers depending on whether you take out ‘Singles’ or ‘Family’ cover.
From 1 July 2012, if your income exceeds $84,000 as a ‘single’ or $168,000 as a ‘family’, your rebate entitlement will reduce by at least 10% (click here for new income tiers).
As a one-off planning opportunity, if your earnings in 2012/13 as a ‘single’ will exceed $97,000 or as a ‘family’ exceed $194,000, you should give serious consideration to prepaying private health insurance premiums before 30 June 2012 as you will still be eligible for the higher rebate.
Some health funds are only allowing prepayments of up to 12 months whilst others allow up to 30 months. To be able to take advantage of this opportunity, you should contact your health fund now to ascertain how you can prepay your premiums for 2012/13 and potentially beyond.
If you have any questions concerning this matter, please do not hesitate to contact us.
Note: people with private health insurance hospital cover do not pay the Medicare Levy Surcharge. If you do not have hospital cover, or cancel your cover, you will pay the new Medicare Levy Surcharge based on the tiered income tests of up to 1.5% of your taxable income.