Private health insurance rebate and Medicare levy surcharge

From 1 July 2012, an individual’s entitlement to a private health insurance rebate will be income tested. These changes are for the 2012-13 financial year.

Taxpayers will not be entitled to their current rate of rebate if their income for Medicare levy surcharge purposes is either:


  • a single income of $84,001 or more
  • a combined family income of $168,001 or more.

There are also two new income thresholds where taxpayers will pay a higher rate of Medicare levy surcharge at 1.25% or 1.5%.



Income thresholds
Singles $0 – $84,000 $84,001 – $97,000 $97,001 – $130,000 $130,001 and above
Families* $0 – $168,000 $168,001 – $194,000 $194,001 – $260,000 $260,001 and above
Private health insurance rebate
Unchanged Tier 1 Tier 2 Tier 3
Aged under 65 30% 20% 10% 0%
Aged 65-69 35% 25% 15% 0%
Aged 70 or over 40% 30% 20% 0%
Medicare levy surcharge
Rates 0% 1% 1.25% 1.5%

* The families’ threshold is increased by $1,500 for each dependent child after the first. Families include couples and single parent families.

In May 2012, we will send letters directly to your clients. Your client will receive this letter where we have estimated their income for surcharge purposes is in the range where they will be affected by the changes.

Your client will receive this where one of the following applies to their situation:


  • they have private health insurance and claim the rebate as a premium reduction
  • they have claimed the private health insurance tax offset
  • they have paid Medicare levy surcharge.

The letter provides information to help your clients work out whether their entitlement will decrease. Your client does not have to do anything. They may choose to contact their private health insurer to reduce the rebate they currently receive as a premium reduction to avoid incurring a liability at tax time in 2013.

The letter to taxpayers that claimed the tax offset or paid Medicare levy surcharge advises them of the changes. No action is required by the taxpayer.

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