A very common question from taxpayers this year:
What’s the ‘private health insurance liability’ shown on my tax return?”
In short, the private health insurance liability is an amount you have to pay back at tax time if you over-claimed the private health rebate during the year.
This stems from the Government’s 2012 changes to the private health insurance rebate.
In the past, this rebate was a standard 30% regardless of your income. Not any more…
What are the private health rebate changes?
If you earn more than $90,000 as a single or $180,000 as a family you are no longer entitled to the full rebate. The other notable change is that from 1 July 2015 to 30 June 2018 the income tiers will be paused at the below threshold.
Your age also now plays a part in the rebate you’re entitled to receive. Take a look at the tables below to see whether your current private health rebate is correct based on your income and age:
Singles (01 April 2016 – 31 March 2017)
|Tier||Income 2014-2015 FY||Under 65 Years||65 years - 69 Years||70 years and over|
|0||$90,000 or less||26.791%||31.256%||35.722%|
|3||$140,001 or more||0%||0%||0%|
Couple, Family, Single Parents (01 April 2016 – 31 March 2017)
|Tier||Income 2015-2016 FY||Under 65 Years||65 years - 69 Years||70 years and over|
|0||$180,000 or less||26.791%||31.256%||35.722%|
|3||$280,001 or more||0%||0%||0%|
Please Note: Age is based on the age of the oldest person on the policy. Income = your combined annual taxable income.
How will this affect me?
If your income falls into one of the higher income tiers listed above and you have not informed your health insurer, then you might receive a larger private health rebate than you were entitled to. On your tax return, the ATO calculates your correct rebate based on your income and compares this with the rebate you claimed during the year. If you unknowingly claimed more than your entitlement (sometimes because your fund thought you earned less money than you really earned), the ATO will ask you to repay the difference. The amount of this repayment is listed as the private health insurance liability on your Notice of Assessment.
Do I need to do anything to fix my private health rebate?
If the ATO makes you repay part of your private health rebate, you have two options to correct this for the future:
- Report your income level to your health insurer: Give your health insurance provider a ring and let them know which Income Tier you fall into. They will then adjust your premium to reflect the correct rebate you are entitled to. Your health premiums will likely increase a bit, but you won’t have to pay the private health rebate back at tax time.
- Continue to claim the full private health rebate and pay the difference later: If you don’t want to pay any more in your insurance premium then you can continue to claim the full rebate. However, when you lodge your next tax return, the ATO will take the funds out of your tax refund or add them to your tax payable essentially meaning you’re required to pay back whatever you have over-claimed.