Private ruling: Private health insurance rebate
Published: August 2012
Ruling period: Year ending 30 June 2012 | Year ending 30 June 2013
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to a 30% private health insurance rebate on premiums paid before 1 July 2012 for periods later than 1 July 2012? | A1: Yes | Q2: Are you entitled to a 30% private health insurance rebate on premiums paid before 1 July 2012 for periods later than 1 July 2012, where the premiums are increased due to an increase in the level of coverage? | A2: Yes | Q3: Is the amount of private health insurance rebate you are entitled to for premiums paid after 1 July 2012 subject to income testing? | A3: Yes

Relevant facts and circumstances: Due to changes to the private health insurance rebate, your health insurance fund invited you to pay your premiums in advance. You subsequently paid your premiums in advance before 1 July 2012 for thirteen months of insurance cover for the period following 1 July 2012. You then decided to increase your level of cover which led to increased premiums. Your prepayment therefore covered only a ten month period. Your health fund then required you to prepay an extra amount so that your prepayment covered a 12 month period. You made this additional payment after 1 July 2012.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 61-205, | Income Tax Assessment Act 1997 Section 61-210 and | Private Health Insurance Act 1007 Section 22-30.

Reasons for decision: Detailed Reasoning - Premiums paid prior to 1 July 2012: Section 61-205 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a taxpayer a tax offset in respect to premiums paid for an appropriate private health insurance policy within the meaning of the Private Health Insurance Incentives Act 1998 (PHIIA 1998). Section 61-210 of the ITAA 1997 outlines how the tax offset is to be calculated for the 2008 and later income years. The 30% private health insurance tax offset is calculated on the amount of the premium, or on the amount in respect of a premium, paid by the taxpayer, or by the taxpayer's employer as a fringe benefit, under the policy for the 2008 and later income years (section 61-210 of the ITAA 1997). Paragraph 1.113 of the Explanatory Memorandum (EM) to the Fairer Private Health Insurance Incentives Bill 2011 states that the amendments to the income testing rules apply for premiums and amounts in respect of premiums paid after 1 July 2012. In your case you have paid for a premium in respect of an appropriate private health insurance policy under the PHIIA 1998 during the 2011-12 income year. Part of the total premium you paid also provided cover for the following income year. According to the above EM, the new private health insurance rebate regime applies only to premium payments made after 1 July 2012 irrespective of whether the premium provides cover for any other income year. Therefore, under section 61-210 of the ITAA 1997 your allowable private health insurance tax offset for the 2011-12 income year is based on 30% of the total premium you paid in that year. | Detailed Reasoning - Payments for increased health cover: There is no distinction between prepayments for different levels of cover, the only determinant is when the premium payment was made. | Detailed Reasoning - Premiums paid after 1 July 2012: Section 22-30 of the Private Health Insurance Act 2007 (PHIA 2007) contains the income tiers which apply to the private health insurance rebate from the 2012-13 income year. In the 2012-13 financial year, the following income tiers will apply for families (a family being a couple with or without children) when calculating the amount of private health insurance rebate you are entitled to: Family combined income Amount of rebate Less than $168,000 30% $168,001 - $194,000 20% $194,001 - $260,000 10% $260,001 and above 0% (the income thresholds are raised by $1,500 for each child after the first child). These thresholds apply for all premium payments made after 1 July 2012. Hence the premium payments that you made after 1 July 2012 will be subject to the above income testing.

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