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Ruling

Subject: Private health insurance rebate

Question

Will you be entitled to a private health insurance rebate in excess of 20% of the premiums paid on your private health insurance policy?

Answer

No.

This ruling applies for the following period

Year ending 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts and circumstances

You and your spouse are under 65 years of age.

You hold a couples complying private health insurance policy.

You pay premiums to the insurer under the policy.

You arranged for the annual premium covering the 2012-13 financial year to be paid prior to 1 July 2012 by credit card.

Prior to 1 July 2012 the credit card was stolen. You arranged for it to be cancelled.

As a result your annual premium was not paid on the arranged date.

You paid your premium for the 2012-13 financial year after 1 July 2012.

Your combined income for (Medicare levy) surcharge purposes is expected to be in the Tier 1 range for the 2012-13 financial year.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 61-205

Income Tax Assessment Act 1997 Section 61-210

Reasons for decision

An Australian resident who holds a complying private health insurance policy is entitled to a rebate for a percentage of the health insurance premiums they pay, or are paid on their behalf, to the insurer. The rebate may be taken in the form of a reduction in health insurance premiums paid to the insurer or as a tax offset.

The legislation regarding the rebate has recently been amended and the changes take affect for premiums paid on or after 1 July 2012.

For premiums paid prior to 1 July 2012, a person who was a member of a couple/family covered by a complying private health insurance policy and who was eligible for Medicare was entitled to a rebate of 30% on the cost of their policy if the oldest person covered by the policy was aged less than 65 years. This level of rebate was also applied to those persons who paid their annual premium for the 2012-13 financial year prior to 1 July 2012.

For premiums paid on or after 1 July 2012, the amount of the rebate is affected by a person's age and income for (Medicare levy) surcharge purposes ('income'). Where a policy covers a family (which includes couples) the income of the adults is combined.

A person who holds a complying private health insurance policy, is eligible for Medicare and is a member of a couple is entitled to the following rebates where the oldest person covered by the policy is less than 65 years of age:

· 30% of the policy premiums if their combined income is less than $168,000

· 20% of the policy premiums if their combined income is between $168,001 and $194,000 (referred to as Tier 1)

· 10% of the policy premiums if their combined income is between $194,001 and $260,000 (referred to as Tier 2)

· nil if their combined income is $260,001 or more (referred to as Tier 3).

The income thresholds listed above are indexed on an annual basis.

You arranged for your health insurance premium to be paid by credit cared prior to 1 July 2012. As a result of the credit card being stolen, the premium was not paid until 1 July 2012.

A premium payment occurs when your insurer receives the amount. The time of the physical receipt of the amount by your insurer is the relevant time, not the date the payment was made to the insurer or when the insurer allocated the amount to your member account.

As the payment was not made until after 1 July 2012, the amended legislation applies to you. That is, you are entitled to a private health insurance rebate equal to 20% of your policy premiums.

Whilst it is accepted that exceptional circumstances prevented your premium from being paid before 1 July 2012, there is no provision contained within the taxation legislation or the Private Health Insurance Act 2007 which would deem your payment to have been made prior to 1 July 2012 and entitle you to a higher percentage rebate.