Private Health Insurance Rebate 2025-26: How Much You Get Back by Income
Complete guide to the Australian Government Private Health Insurance Rebate for 2025-26. Rebate percentages by age and income tier, how to claim, and the Medicare Levy Surcharge you'll pay without cover.
Rebate tiers by age and income for 2025-26
The Private Health Insurance Rebate is an income-tested government subsidy that reduces the cost of your health insurance premiums. For the 2025-26 financial year, the rebate tiers for singles are: Tier 0 (income up to $97,000) — 24.608% for under 65, 28.710% for ages 65-69, and 32.812% for 70 and over. Tier 1 ($97,001-$113,000) — 16.405%, 20.507%, and 24.608% respectively. Tier 2 ($113,001-$151,000) — 8.202%, 12.303%, and 16.405% respectively. Tier 3 (over $151,000) — 0%, meaning no rebate at all. For families and couples, the income thresholds are doubled: Tier 0 up to $194,000, Tier 1 to $226,000, Tier 2 to $302,000, and Tier 3 above $302,000. The family thresholds increase by $1,500 for each dependent child after the first. These percentages are applied to your total premium cost including any Lifetime Health Cover loading. On a $2,400 annual premium, the base tier rebate saves you approximately $590 per year.
Medicare Levy Surcharge: the penalty for not having cover
If you earn above $97,000 as a single (or $194,000 as a family) and do not hold an eligible private hospital insurance policy, you must pay the Medicare Levy Surcharge on top of the standard 2% Medicare Levy. The MLS rates for 2025-26 are: 1.0% for incomes of $97,001-$113,000, 1.25% for $113,001-$151,000, and 1.5% for incomes over $151,000. These percentages apply to your taxable income plus reportable fringe benefits, total net investment losses, and reportable super contributions — a measure called income for MLS purposes, which can be higher than your standard taxable income. For a single person earning $130,000, the MLS at 1.25% would cost $1,625 per year. Compare that to a basic hospital policy at roughly $1,200-$1,500 after the rebate, and you can see why many high earners hold hospital cover purely to avoid the surcharge. The policy must have an excess of $750 or less for singles ($1,500 for families) to be MLS-exempt.
How to claim the rebate: reduced premiums or tax return
There are two ways to receive the Private Health Insurance Rebate. The most common method is as a premium reduction — you notify your health fund of your estimated income tier, and they reduce your premiums by the applicable rebate percentage. This means you pay less each month or fortnight, giving you an immediate cash flow benefit. The second method is to pay full premiums throughout the year and then claim the rebate as a tax offset when you lodge your income tax return. This approach can be useful if your income fluctuates and you are unsure which tier you fall into, as the ATO will calculate the correct rebate based on your actual income. If you claim the premium reduction but your income turns out to be higher than estimated, the ATO will claw back the excess rebate through your tax assessment — resulting in a smaller refund or a tax bill. To avoid surprises, review your income estimate with your fund whenever your circumstances change, such as receiving a pay rise, bonus, or investment income. Your health fund issues a Private Health Insurance Statement by mid-July each year, which you need for your tax return.
Lifetime Health Cover loading and how it interacts with the rebate
Lifetime Health Cover (LHC) loading is a government initiative that penalises people who delay taking out hospital cover past the age of 31. For every year you are aged over 30 without hospital cover, a 2% loading is added to your premium — up to a maximum of 70%. For example, if you first take out hospital cover at age 40, you would pay a 20% loading on top of the base premium. The important interaction with the rebate is that the government rebate is calculated on your total premium including the LHC loading. So if your base premium is $2,000 and your LHC loading adds $400, the rebate percentage applies to the full $2,400. The loading is removed after you have held hospital cover continuously for 10 years. If you are approaching 31 and considering whether to take out cover, the LHC loading creates a strong financial incentive to sign up before 1 July following your 31st birthday. The loading applies to hospital cover only — extras policies are not affected by LHC rules.
Tips to optimise your rebate and reduce your net premium
Start by making sure your health fund has your correct income tier — if you are on a lower tier than your actual income warrants, you will face a tax bill later. Conversely, if your income has dropped (perhaps due to parental leave, reduced hours, or job change), updating your tier could immediately increase your rebate and lower your premiums. Consider the timing of your cover decisions around the 1 April rebate adjustment date each year. If you are a couple, assess whether combining your policies into a family or couples policy results in a better outcome after the rebate. For those near an income threshold, salary sacrificing into super can reduce your income for MLS and rebate purposes — potentially pushing you into a higher rebate tier or below the MLS threshold entirely. Use our Tax Calculator to model different scenarios. Finally, if you are aged 65 or over, you receive a significantly higher rebate percentage — make sure you are on the correct age-based tier with your fund, as some people miss out simply because their records have not been updated.
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General information and estimates only — not financial, tax, or legal advice. Always verify with a licensed adviser or the ATO.
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