Private health insurance rebate
A government contribution towards your private health premiums, delivered as a discount or a tax offset.
The rebate reduces the cost of private health insurance for most Australians. You can take it as an upfront reduction in your premium, or claim it as an offset when you lodge your tax return.
The percentage you receive depends on your income and your age, with older policyholders receiving more and higher earners receiving less. Above the top income tier the rebate disappears entirely.
The rebate interacts directly with the Medicare Levy Surcharge. For many middle and higher earners, holding hospital cover subsidised by the rebate costs less than paying the surcharge for going without.
Why the maths often favours holding cover
If the surcharge would cost you $1,500 a year, a basic hospital policy priced below that after rebate leaves you better off — and you get insurance cover you would otherwise not have.
The bit people get wrong
If you nominate a rebate tier that turns out to be too generous for your actual income, the difference is clawed back when you lodge. Estimating your income too low means an unwelcome adjustment at tax time.
Common questions
Does extras cover count for avoiding the surcharge?
No. Only an appropriate level of hospital cover exempts you from the Medicare Levy Surcharge. Extras-only policies covering dental and optical do not qualify.
Is the rebate based on my income or my family's?
It is based on income for surcharge purposes, assessed on a family basis if you have a spouse or dependants. That combined figure can push a couple into a lower rebate tier than either would face alone.
Should I take the rebate as a premium discount or a tax offset?
The total value is the same either way. Taking it upfront lowers your monthly premium, while claiming it at lodgment gives you a larger refund. Choose based on cashflow preference rather than any tax advantage.
Run your own numbers