The Australian Government’s Private Health Insurance Rebate is means-tested using four income tiers. The tier you fall into determines what percentage of your premium the government subsidises — ranging from 24.608% (under 65, base tier) to 0% (Tier 3). This article explains how the income test works, what income is counted, and how the family threshold applies.
The Four Tiers
| Tier | Singles income | Families income | Rebate (under 65) | Rebate (65–69) | Rebate (70+) |
|---|---|---|---|---|---|
| Base tier | $93,000 or less | $186,000 or less | 24.608% | 28.710% | 32.812% |
| Tier 1 | $93,001–$108,000 | $186,001–$216,000 | 16.405% | 20.507% | 24.608% |
| Tier 2 | $108,001–$144,000 | $216,001–$288,000 | 8.202% | 12.304% | 16.405% |
| Tier 3 | Over $144,000 | Over $288,000 | 0% | 0% | 0% |
Thresholds are indexed annually on 1 April. The figures above are for FY2024–25. Verify current thresholds at ato.gov.au.
What Income Is Used for the Test?
The test uses income for surcharge purposes — not simply your taxable income. Income for surcharge purposes includes:
| Component | Included? |
|---|---|
| Taxable income (including salary, investment income, rental income) | Yes |
| Reportable fringe benefits (shown on payment summary) | Yes |
| Total net investment losses (deducted losses added back) | Yes |
| Reportable employer super contributions (above mandatory SG) | Yes |
| Tax-free government pensions and allowances | Some |
The key difference from ordinary taxable income: net investment losses are added back. If you claimed $20,000 in rental property losses against your income, your income for surcharge purposes adds that $20,000 back. This prevents taxpayers from reducing their health rebate tier through negatively geared investments.
How Age Affects the Rebate Percentage
Within each tier, the government pays a higher rebate to older policyholders because older Australians typically face higher premiums and use more health services:
- Under 65: Base percentage applies
- 65–69: Mid-level percentage (approximately +4 percentage points per tier)
- 70 and over: Highest percentage (approximately +8 percentage points per tier)
For example, at Base Tier:
- Under 65: 24.608%
- 65–69: 28.710%
- 70+: 32.812%
The age used is the age of the oldest person covered by the policy.
Family Thresholds
For families (including couples and single-parent families), the combined income of all members is tested. The family threshold is exactly double the singles threshold for each tier ($186,000, $216,000, $288,000, over $288,000).
Additionally, the family threshold increases by $1,500 for each dependent child after the first. If a family has three dependent children, the family threshold for each tier increases by $3,000 (2 additional children × $1,500).
Example:
- Family of two adults + three dependent children
- Base tier family threshold: $186,000 + $3,000 = $189,000
What Happens If Your Income Falls in a Different Tier Than Nominated?
If you nominated a tier to your insurer that turns out to be lower than your actual tier (i.e., you received more rebate than you were entitled to), you must repay the difference at tax time. This is reported on your tax return in the Private Health Insurance section.
If you nominated a higher tier (received less rebate throughout the year than entitled), you receive the difference as a tax offset in your return — effectively a refund.
Practical Scenarios
Scenario 1 — Couple with combined income of $200,000
- Combined income = $200,000 (Tier 1 family)
- They each receive a 16.405% rebate on their policy premium (if under 65)
Scenario 2 — Single person with $130,000 income but $20,000 rental loss
- Taxable income: $110,000 (after rental loss deduction)
- Income for surcharge purposes: $110,000 + $20,000 = $130,000 (Tier 2)
- Rebate: 8.202% (if under 65) — not the Tier 1 rate that $110,000 taxable income would suggest
Related Articles
- Private Health Insurance Rebate — How to Claim
- SAPTO — Seniors and Pensioners Tax Offset
- Tax Offsets hub
- Taxes hub
Frequently Asked Questions
Is the $93,000 singles threshold the same as the Medicare Levy Surcharge threshold? Yes. The MLS and the private health insurance rebate income test use exactly the same thresholds and the same “income for surcharge purposes” definition. This alignment is intentional — the rebate and the surcharge form two sides of the same government policy encouraging private health cover.
If I am in Tier 3 (0% rebate), should I still have private health insurance? Possibly — if your income exceeds the MLS threshold ($93,000 single, $186,000 family), you pay the MLS (1%–1.5%) if you do not have private hospital cover. Even at Tier 3 with no rebate, private hospital cover may still cost less than the MLS depending on your premium. This comparison depends on your individual premium and income level.
Does the income test apply to ambulance-only cover? Yes, the rebate applies to ambulance-only policies and uses the same income tier test as hospital and extras cover.
This article provides general tax information only. Income thresholds are subject to annual indexation. For advice tailored to your situation, speak with a registered tax agent. Find one through the Tax Practitioners Board register or visit MoneySmart.