The government has proposed to means test the 30% private health insurance rebate for middle to high income earners according to age. This is going to be achieved through introducing a three tier system with a parallel increase in the Medicare Levy Surcharge rate to penalise taxpayers who do not have eligible private health insurance.
Tier 1 – Singles with income of more than $75,000 (more than $150,000 for families), the rebate will be reduced to 20%, increasing to 25% at 65 years of age, and to 30% at 70 years. The Medicare Levy Surcharge for not having eligible private health insurance remains at 1%.
• Tier 2 – Singles with income of more than $90,000 (more than $180,000 for families), the rebate will be 10%, increasing to 15% at 65 years of age, and to 20% at 70 years. Medicare Levy Surcharge for not taking out eligible private health insurance will be increased to 1.25%.
Tier 3 – No private health insurance rebate for singles with income of more than $120,000 (more than $240,000 for families). The Medicare Levy Surcharge for not taking out eligible private health insurance will be increased to 1.5%.
Table of proposed change:
Source: Federal Budget Paper No. 2
The current arrangement will remain unchanged for singles with income less than $75,000 p.a. and families with income of less than $150,000 p.a.
The definition of income for this purpose will be same as the definition used for the Medicare Levy Surcharge which includes: taxable income, salary sacrifice super, personal deductible super contributions, net investment losses and reportable fringe benefits.