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Home / Health Insurance / Means Testing FAQs

Means Testing FAQs – Post July 1 2013

Don’t understand the changes to the private health insurance rebate?

We’re here to help

What is (means testing) income testing?

It’s a process where a person's eligibility for a particular government benefit is determined by their level of income. For the Private Health Insurance Rebate, it means that if your income is over the defined tiers, the amount of rebate you receive may be reduced (or stopped completely).

When did the rebate changes take effect?

On April 1 2014.

I’ve heard that a majority of people won’t be affected by the changes. Is that true?

Yes, that’s true. Your rebate will remain the same if you’re annual income is:

  • under $88,000 for individuals
  • under $176,000 for couples and families

I’m a high income earner, how will my rebate be affected?

If you’re a high income earner, your rebate may be decreased or stopped completely.

The rebate thresholds for the 2013–2014 financial year are:

Australian Government Rebate
NO CHANGE TIER 1 TIER 2 TIER 3
Singles Less than $88,000 $88,001–$102,000 $102,001–$136,000 $136,001+
Couples/Families Less than $176,000 $176,001–$204,000 $204,001–$272,000 $272,001+

The threshold increases by $1,500 for each dependent child after the first. Single parents and couples with dependent children are also subject to the family thresholds.

What level of rebate will I get in the 2013 – 2014 financial year?


Australian Government Rebate
NO CHANGE TIER 1 TIER 2 TIER 3
Under 65 29.04% 19.36% 9.68% 0%
65–69 33.88% 24.20% 14.52% 0%
70+ 38.72% 29.04% 19.36% 0%

I have dependent children. Are the income tiers different for families with children?

Yes. For families with children the thresholds are increased by $1,500 for each dependent child after the first. Single parents and couples with dependent children are also subject to the family thresholds.

What’s the definition of a dependent child?

The rules regarding dependent children are complicated but in summary:

For calculating your rebate entitlement a dependent child is:

  • Your child under 18; or
  • Your sibling under 25, who doesn’t have a partner and is dependent on you for financial support on any day of the year

Health funds also have different rules and classifications for a dependent child. It’s best to speak with us about who can be listed as a dependent child on the policy you’re looking at.

For calculating your Medicare Levy Surcharge (MLS) a dependent child is:

  • Your child under 21; or
  • Your child who is a full-time student between 21 and 25

My rebate will be reduced (or stopped). Is there something I can do about this?

There’s always something you can do. And the good news is you’re in the right place to act. We can help you find great value cover to make up some or all of the loss.

Why do you need to know my level of income?

Your eligibility for and level of rebate depends on your annual income. So knowing your estimated annual income helps us provide the most accurate quote possible.

Which portion of my income will determine my rebate entitlement?

It’ll be determined by your income for Medicare Levy Surcharge purposes. This includes your taxable income, fringe benefits, super contributions minus any net investment losses. If you have a spouse, your combined income will be used to calculate your rebate entitlement.

Visit the Australian Taxation Office for a full overview.

I’m unsure of what my income will be for this financial year. How do I know which rebate amount to apply to my health insurance?

We simply require an estimate. The key is to select the range you think will be closest to your annual income.

What happens if I select the wrong rebate level?

The tax office will determine the rebate you’re entitled to when you lodge your tax return at the end of the year. If you claimed:

  • too high a rebate; you will have a tax liability in your tax return; or
  • too low a rebate; you will be entitled to a tax refund in your tax return

Is there any change to how I claim the rebate?

No, there’s been no change made to how you currently claim your rebate.

You can claim your rebate as a:

  • Reduction to your policy premium
  • Tax refund as part of your end of year tax return

I’m thinking of dropping my hospital cover. Is there a reason I should keep it?

Apart from offering peace of mind and the freedom to choose a participating hospital, doctor and when to be treated, by keeping your hospital cover, you’ll also avoid the new increases to the Medicare Levy Surcharge (MLS).

What are the increases to the MLS?

As part of the changes to the private health insurance rebate, the MLS has been increased based on annual income levels. Some people could be taxed up to 1.5% of their income for not having private hospital cover. So for many high income earners, it’s simply cheaper to have hospital cover than pay the MLS.

The MLS income thresholds for 2013 – 2014 are:

Medicare Levy Surcharge
NO CHANGE TIER 1 TIER 2 TIER 3
Singles Less than $88,000 $88,001–$102,000 $102,001–$136,000 $136,001+
Couples/Families Less than $176,000 $176,001–$204,000 $204,001–$272,000 $272,001+

What levy will I be charged in 2013 – 2014 financial year?

This table shows the MLS you’ll be charged by the Government if you, your spouse or your dependent children don’t have hospital cover.

Medicare Levy Surcharge
NO CHANGE TIER 1 TIER 2 TIER 3
All ages 0% 1% 1.25% 1.5%
Singles 0% $880–$1,020 $1,275–$1,700 $2,040+
Couples/Families 0% $1,760–$2,040 $2,550–$3,400 $4,080+

The threshold increases by $1,500 for each dependent child after the first. Single parents and couples with dependent children are also subject to the family thresholds.

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