A: From 1 July 2012, the Federal Government will be Incomes testing the Private Health Insurance Rebate. Previously all individuals who had Private Health received a 30% rebate on premiums charged by the insurer. The rebate was collected either as a reduction in annual premiums or claimed on your tax return.
Effective 1 July the rebates change as follows:
Private Health Insurance Incentive Tiers (2011-2012) with effect 1 July 2012
The income thresholds will increase annually, based on growth in Average Weekly Ordinary Time Earnings (AWOTE). Single parents and couples (including de facto couples) are subject to the family tiers. For families with children, the thresholds are increased by $1,500 for each child after the first.
If you elect to cancel your Private Health Insurance, you would liable to pay the Medicare Levy Surcharge.
As you are in your 50s, have 2 dependent children and your family income is $210,000, your Private Health Insurance Rebate will reduce to 10%. This will equate to a substantial increase in your Private Health Insurance costs.
Determination of the eligible rebate applicable appears to be managed by the Private Health Insurer and the individual on a self assessment basis. So be careful to apply the right rebate as you may receive a nasty surprise come tax time.
There is a one off opportunity to prepay a year of Health Insurance premiums prior to 30 June and receive the old rebate of 30%. To the best of my knowledge neither the ATO nor the insurers have been advertising this fact. I have checked with NIB, HCF and Medibank and they are stating that clients are only allowed to pay 12 months in advance. So it may be best for you to check with your health insurer to see if they will allow pre-payment of additional years.
Strongly suggest you put this on your pre 30 June to do list!