Premium reduction or tax offset: two ways to receive the rebate
Choose the tier you would nominate and test the income you really expect: the calculator shows the rebate you are owed, so you can see whether a tax bill or a refund is coming.
Private health insurance rebate, per year
$482
16.079 %: Tier 1, oldest person under 65, rates of 1 April 2026 to 31 March 2027.
| Full premium | $3,000 |
| Rebate | -$482 |
| You pay | $2,518 |
| Per month | $209.80 |
Prepared by Radif Partners · How the figures are built · thresholds read on ato.gov.au, premiums from privatehealth.gov.au data · not tax advice
The private health insurance rebate can reach you in two ways, and the amount is the same in the end. Most people take it as a premium reduction: you nominate an income tier with your insurer, which charges you the premium minus the rebate of that tier. The alternative is to pay the full premium and claim the rebate as a refundable tax offset when you lodge your return. Either way, the ATO checks your actual income for surcharge purposes after 30 June. If you nominated a tier that was too low, you received too much rebate and the difference becomes a tax liability; if you nominated too high a tier, the ATO pays the shortfall as an offset. There is no extra penalty for a wrong estimate. In 2026-27 the tiers moved up: the base tier for a single person now runs to $105,000 instead of $101,000, so some people who nominated tier 1 last year can now nominate the base tier and pay less each month.
Same entitlement, different timing
The rebate you are owed for a year is fixed after 30 June, once your income for surcharge purposes and your family status on that day are known. What you choose is only how the money moves before then.
| Premium reduction | Refundable tax offset | |
|---|---|---|
| What you pay the insurer | Premium minus the rebate of the tier you nominate | The full premium |
| When you receive the rebate | With every payment | After you lodge your return |
| What you tell the insurer | Your expected income tier | Nothing about income |
| If your income lands in a higher tier | Tax liability for the excess rebate | Smaller offset |
| If your income lands in a lower tier | Offset for the shortfall | Larger offset |
Both are described on the ATO eligibility page and on PrivateHealth.gov.au. The rebate itself is the same percentage either way: 24.118 %, 16.079 % or 8.038 % under 65, more when the oldest person covered is 65 or over.
The cost of nominating the wrong tier
Suppose your full premium is $3,000 a year and everyone on the policy is under 65. Every step between the tier you nominate and the tier you end up in is worth a fixed amount, which the table sets out.
| Nominated | Actual tier | Result at tax time |
|---|---|---|
| Base tier | Tier 1 | pay back $241 |
| Tier 1 | Tier 2 | pay back $241 |
| Tier 2 | Tier 3 | pay back $241 |
| Base tier | Tier 3 | pay back $724 |
| Tier 1 | Base tier | offset of $241 |
| Tier 3 | Tier 1 | offset of $482 |
The amounts are modest, but they arrive in one go with the notice of assessment, and they come on top of any Medicare levy surcharge if the same income rise also took you above the surcharge threshold without hospital cover. Nominating a tier higher than you expect, or taking the rebate at tax time, removes the risk of a bill at the price of paying more during the year.
The rebate your real income gives
Private health insurance rebate, per year
$289
| Full premium | $3,600 |
| Rebate | -$289 |
| You pay | $3,311 |
| Per month | $275.89 |
The ATO example: a promotion in the middle of the year
The ATO tells the story of Belinda, single, whose employer pays her hospital premium under a salary sacrifice arrangement. At the start of 2025-26 her income for surcharge purposes is $132,000, tier 2, and her employer pays premiums reduced by the tier 2 rebate. Part way through the year a promotion lifts her income to $159,000, which is tier 3 for that year (the 2025-26 tier 3 threshold was $158,001). She is not entitled to any rebate from that point, but she does not tell her insurer. When she lodges, she has a tax liability for the excess reduction she received. Two lessons come out of it: the employer paying the premium does not change whose income counts, and a pay rise is the moment to update your nominated tier.
The 2026-27 thresholds move tiers down
Income thresholds rise each 1 July. For 2026-27 the single tiers are $105,000, $123,000 and $164,000, up from $101,000, $118,000 and $158,000. An income that has not changed may therefore fall into a lower tier this year, with a higher rebate. A single person on $103,000 was at tier 1 in 2025-26 and is at the base tier in 2026-27; if they kept their old nomination, they are paying $241 a year too much on a $3,000 premium and will get it back only at tax time. PrivateHealth.gov.au also notes that the new rebate rates of 1 April 2026 applied to the old thresholds until 30 June 2026, so a return for 2025-26 uses two sets of rates.
Changes of status during the year
Because the tier is tested on your family status on 30 June, a change of status can make your nomination wrong even when your salary has not moved. Moving in with a partner before 30 June puts you on the family thresholds, tested on your combined income: $210,000 for the base tier in 2026-27. Separating and having no dependent child on 30 June puts you back on the single thresholds, tested on your own income. A single parent is always on the family thresholds with their own income alone. The ATO table of statuses covers the less common cases, such as the death of a spouse during the year, where the incomes of both are still used.
When the change pushes you into a higher tier, the same reconciliation applies as for a pay rise: the excess rebate is collected when you lodge. When it pulls you into a lower one, the offset makes up the difference. Updating your tier with the insurer as soon as the change happens keeps both amounts small.
Before you choose
Look at the income you expect for the whole year, not your current salary: bonuses, reportable fringe benefits, salary sacrificed super and net investment losses all count. Income for MLS purposes adds them up. If you are near a threshold, the thresholds page shows what one more dollar changes for the surcharge and the rebate, and the rebate page gives the full table of rates.