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Will the means-testing of the Rebate affect you?

Tuesday, 4 March 2014

The Federal Government legislation to means-test the Private Health Insurance Rebate is set to be introduced from 1 July 2012. For the majority of members this will mean no change to their current rebate entitlement or premium as only those earning above the tiered income thresholds shown below will be affected.

The legislation introduces three new Private Health Insurance Rebate Tiers. Under the new tiers, the rebate will start to reduce on a sliding scale for singles with an income of more than $84,000 and couples/families with an income of more than $168,000. In addition, the Medicare Levy Surcharge will increase to a maximum of 1.5% for higher income earners who do not hold private hospital cover.

The table below summarises the proposed new income thresholds for the Rebate and for the Medicare Levy Surcharge. Income in this context refers to taxable income* for Medicare Levy Surcharge purposes with the thresholds increasing for families by $1,500 for each child after the first.
Effective 1 July 2012 the threshold Tiers are expected to be: (for the 2012-2013 tax year)

 No change

Tier 1 

 Tier 2

 Tier 3

 Single income*

 $0 - $84,000

 $84,001 - $97,000

$97,001 - $130,000

$130,001 +

 Family/Couple income*

$0 - $168,000

$168,001 - $194,000

$194,001 - $260,000

$260,001 +

 PHI Rebate Entitlement



         Less than 65 years

30%

20%

10%

Nil

         65 to 69 years

35%

25%

15%

Nil

         70 years and over

40%

30%

20%

Nil

 Medicare Levy Surcharge
(if you do not hold private hospital cover)

Nil

1.0%

1.25%

1.5%


It's important to note:

. The changes will not take effect until 1 July 2012 (for the 2012/2013 tax year), so there is no need for members to take any immediate action.

. If you are earning under $84,000* single or $168,000* couple/family you are not affected by these changes and your Rebate entitlement will not change.

. If you are earning over the above thresholds and you cease your private hospital cover, you will need to pay a higher Medicare Levy Surcharge and therefore, even with a reduction in your Rebate it is likely you will still be significantly better off financially by keeping your private health cover.

. There may also be Lifetime Health Cover implications for those who cease their hospital cover as they may incur a Lifetime Health Cover loading on rejoining if they use up their days of absence.

. Financial considerations aside, we should all consider the health benefits of continuing our private health cover and maintaining control of our health care options, particularly in light of recent budget cuts in the public system.

St.LukesHealth will be writing to all members prior to the introduction of these changes with advice on what if any action you may need to take. In the meantime if you have any questions on how these changes may affect you please do not hesitate to call us on 1300 651 988.

* Taxable income for Medicare Levy Surcharge purposes includes taxable income, reportable fringe benefit amounts and salary sacrificed super contributions. Other inclusions and exemptions apply and therefore members should consult with their tax consultant or visit the Australian Tax Office web site at www.ato.gov.au for more information.

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