Excess Private Health Insurance Charge
The Excess Private Health Insurance Charge relates to situations where taxpayers have claimed too much rebate as a reduced premium on their private health insurance by being in the incorrect income category with their health fund.
By default, you will be placed in the Base tier of the income threshold (see the table below). Your private health insurance provider will apply for the maximum rebate from the government, which will be applied to reduce your private health insurance premiums.
It is a self-assessed system, however. If your income moves into the next Tier throughout the year, you would be entitled to less rebate, but you will continue to receive the maximum rebate unless you contact your health fund to adjust this.
If you don’t report this updated income to your health fund, they will overclaim your government rebate for the tier below. When you do your tax return, this will be reconciled, and the ATO will determine what category you should be in and claim back any ‘Excess Premiums’ that you have been over-allocated (if applicable).
What do I need to do?
1. Contact your health fund provider
Contact your health fund and inform them of your estimated income for the future financial year (including your spouse, if applicable), salary sacrifices and Fringe Benefits.Your health fund will then move you into the correct income tier and reduce the rebate you will receive from the government.
As a result, your premium will be adjusted to reflect this reduction in entitlement (i.e. your premium will increase).
2. Don’t do anything
If you don’t adjust your income with your health fund provider, you will continue to receive too much of a government rebate on your health insurance premium. As a result, when you prepare your tax return each year, the ATO will continue to charge you the Excess Private Health Insurance charge to claw this back each year.Note that this will come out of any potential refunds that you would be entitled to and will impact your end-of-year tax return.
In summary, the result between both options will be the same. Either your health fund will adjust/increase your premium by the excess health insurance charge in option 1, or in option 2, the ATO will take this same amount out of your ATO refund. However, we would always recommend reporting the correct income to your health fund to make your tax return process as smooth as possible.
Review Annually: As income can change year-to-year, review your situation annually to ensure you’re claiming the correct rebate amounts and notify your health fund if you move in or out of the income thresholds above.
Book an appointment with Befinancial Accounting to have your tax return completed.
Contact - 1300 699 161Email - info@befinancial.com.au
32 Main Rd Bakery Hill, VIC 3350