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Changes to the Private Health Insurance (PHI) Rebate

As explained in our March 2012 newsletter, the changes to the PHI rebate mean that those taxpayers who earn more than $84,000 for singles or $168,000 for families, will be entitled to a reduced or no PHI rebate from 1 July 2012, depending on what income tier they fall into.
UnaffectedNew law - Tier 1New law - Tier 2New law - Tier 3
Singles$84,000 or less$84,001-97,000$97,001-130,000$130,001 or more
Families$168,000 or less$168,001-194,000$194,001-260,000$260,001 or more
Private health insurance rebate
Aged under 6530%20%10%0%
Aged 65-6935%25%15%0%
Aged 70 or over40%30%20%0%

TAX TIP for those with expected adjusted taxable incomes above $84,000 (singles) and $168,000 (families) for the 2012/2013 income year:

You may have received communication from your insurer indicating that prepaying your PHI premium for the entire, or part of, the 2013 income year by 30 June 2012 will retain your existing rebate for the period which is covered by the prepayment. If you pre-pay your premium, the new rules will only start to apply when you next have to pay your premium.

Based on the ATO’s current interpretation of the new laws, prepaying your premium could “buy” higher income earners another year’s rebate, thereby potentially saving thousands of dollars. Please contact your Ruddicks adviser for further information.

Reminder! If your own or your family income is expected to be within Tiers 1, 2 or 3 and you currently receive the rebate as a premium reduction directly through your insurer, you should contact your insurer to make sure you receive the correct rebate. This will assist you in avoiding a tax liability at the end of the year. You do not need to make a nomination if you (or your family’s) income is expected to be lower than the threshold (i.e. lower than $84,000 for singles and $168,000 for families).

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