PHI rebate on hospital cover.
Rebate
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The rebate is a discount, not a bonus
The Australian Government Rebate on private health insurance is money the Commonwealth puts towards your hospital and extras premium. Most people take it as a reduced premium, so the insurer bills you less each month and reconciles with the ATO behind the scenes. You can also nominate to receive nothing during the year and claim the lot as a refundable tax offset on your return. The dollar value is identical either way, so the choice is really about cash flow: lower premiums now, or a larger refund later.
This calculator answers one question. Given your premium, your income for surcharge purposes, and your age band, what percentage does the government cover and what do you actually pay? It uses the rebate percentages and the income tiers that apply from 1 April 2025, which is when the rates are reset each year.
One quirk worth knowing is why the percentages are not round numbers. The rebate percentage is recalculated each April using a rebate adjustment factor tied to the gap between premium inflation and the consumer price index. Because premiums have risen faster than general inflation for years, the percentage drifts slightly lower over time. That is why the under 65 base rebate sits at 24.86 percent rather than a tidy 25 percent, and it is why two people on identical policies in different years can see a marginally different rebate.
Why your income tier matters more than your premium
The rebate is income tested, and the test bites hard. A single person on the base tier (income at or below $97,000) gets the full Tier 0 percentage. Step into Tier 1 (above $97,000), Tier 2 (above $113,000), or Tier 3 (above $151,000) and the percentage drops at each step, falling to zero once single income passes $151,000. Family thresholds are roughly double, and they lift by $1,500 for each dependent child after the first. A useful sense check: the income figure used here is your income for Medicare levy surcharge purposes, which adds reportable fringe benefits, total net investment losses, and reportable super contributions back on top of taxable income.
A $3,600 family policy, worked through
Take a couple with a combined hospital and extras premium of $3,600 a year. Both are under 65, and their income for surcharge purposes lands at $90,000, comfortably inside the base tier. The tool applies the Tier 0 percentage for the under 65 band, which is 24.86 percent.
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So the headline $3,600 cover really costs $2,705 once the rebate is applied. The chart below shows that split.
A common mistake: confusing the rebate with the surcharge
The rebate and the Medicare levy surcharge are two different levers that the same income test controls. The rebate reduces the cost of cover you already hold. The surcharge is an extra tax of 1 to 1.5 percent that applies to higher earners who do not hold an appropriate hospital policy. Above the top income tier you receive zero rebate yet may still face the surcharge, which is exactly why many high earners keep a basic hospital policy: the surcharge they dodge often exceeds the premium.
Frequently asked questions
Does the rebate apply to my extras cover as well as hospital?
Yes. The rebate applies to the premium for complying hospital cover and to general treatment (extras) cover such as dental and optical. It does not apply to ambulance only policies in some states, and it never applies to the Medicare levy itself, which is a separate 2 percent of taxable income.
I am 66 and my partner is 64. Which age band do we use?
The rebate uses the age of the oldest person covered by the policy. With one partner aged 66, the household qualifies for the higher 65 to 69 band, which lifts the base tier percentage above the under 65 rate. Select the oldest person's band in the tool to see the larger rebate.
What happens if I nominate the wrong income tier with my insurer?
Nothing is lost permanently. If you claim too high a rebate during the year because you under estimated your income, the ATO recovers the difference as a liability when you lodge. If you claim too little, you receive the shortfall as a tax offset. Estimating conservatively just means a smaller refund rather than a bill.