Private health insurance and the Medicare levy surchargehealth insurance

The private health insurance rebate and the Medicare levy surcharge are income tested against three new income thresholds from 1 July 2012.

If you have private health insurance, the rebate that you are entitled to receive from your insurer is reduced if your income is over a certain threshold. In addition, if you don’t have an appropriate level of hospital cover, and your income is higher than a certain amount, the rate of Medicare levy surcharge that is levied when you complete your 2013 tax return will increase.

If, for example, you are an individual and you earn more than $130,000 or as a family earn $260,001 or more, instead of the 30% private health insurance rebate enjoyed previously if you were under 65, there is now no private health insurance rebate regardless of your age.

There is no change to the Medicare levy surcharge if you have the appropriate level of hospital cover. If you don’t have the right amount of cover, you incur a 1.5 per cent Medicare levy surcharge.

If you earn less than $84,001 or less than $168,001 as a family and are under the age of 65, you will continue to receive the 30% private health insurance rebate, and not incur the Medicare levy surcharge whether you have private health insurance or not.

Reductions in the net medical expense tax offset

From 1 July 2012 the net medical expense tax offset is income tested.

People with an adjusted taxable income in excess of the Medicare levy surcharge threshold (above $84,000 for singles and $168,000 for families from 1 July 2012) will need to incur more than $5,000 out of pocket medical expenses to be eligible for the 20 per cent reimbursement for expenses incurred in excess of $5,000.

There are no changes to entitlements for taxpayers below the surcharge thresholds.