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Private Health Insurance Rebate Tiers 2025–26

How your income and age determine the government rebate on your health insurance premiums — with the full rebate table, worked examples, and how to claim.

Updated April 202610 min read
Based on ATO & privatehealth.gov.au data2025–26 financial year

2025–26 PHI rebate at a glance

  • What it is: a government contribution toward your private health insurance premiums, means-tested by income and scaled by age
  • Maximum rebate (under 65): 24.288% of premiums (Jul–Mar) or 24.118% (Apr–Jun)
  • Maximum rebate (70+): 32.385% of premiums (Jul–Mar) or 32.158% (Apr–Jun)
  • Tier 3 (high income): 0% rebate — singles above $158,001, families above $316,001
  • How to claim: as a premium reduction through your insurer, or as a tax offset when you lodge your return
  • Applies to: hospital cover, extras cover, combined policies, and ambulance cover with a registered insurer

In this guide

  1. 1. What is the PHI rebate?
  2. 2. Rebate tiers for 2025–26
  3. 3. Income thresholds by tier
  4. 4. How age affects your rebate
  5. 5. Why there are two rebate periods per year
  6. 6. How to claim: premium reduction vs tax offset
  7. 7. Worked examples
  8. 8. How the rebate interacts with the MLS
  9. 9. Registered health insurer requirement
  10. 10. Frequently asked questions

What is the private health insurance rebate?

The Australian Government pays a percentage of your private health insurance premiums as an incentive to take out and maintain cover. This is the private health insurance rebate (also called the PHI rebate or the health insurance tax offset).

The rebate percentage you receive depends on two things: your income for surcharge purposes (which determines your tier) and the age of the oldest person covered by the policy. Higher income means a lower rebate. Older age means a higher rebate.

At the base tier, a person under 65 gets roughly a quarter of their premiums covered by the government. A 70-year-old at the same income level gets almost a third. At Tier 3 — the highest income bracket — the rebate drops to zero for all ages.

PHI rebate tiers for 2025–26

The rebate uses a four-tier system aligned with the Medicare Levy Surcharge income thresholds. Your tier is determined by your income for surcharge purposes — the same income measure used for the MLS.

Because the rebate is adjusted on 1 April each year, the 2025–26 financial year has two sets of rates. The first set applies for nine months (July to March), and the second for three months (April to June).

1 July 2025 – 31 March 2026

Age on 1 JulyBase tier≤$101K / ≤$202KTier 1$101K–$118K / $202K–$236KTier 2$118K–$158K / $236K–$316KTier 3>$158K / >$316K
Under 6524.288%16.192%8.095%0%
65–6928.337%20.24%12.143%0%
70 or over32.385%24.288%16.192%0%

Rebate percentages for 1 Jul 2025 – 31 Mar 2026. Income thresholds shown as singles / families.

1 April 2026 – 30 June 2026

Age on 1 JulyBase tier≤$101K / ≤$202KTier 1$101K–$118K / $202K–$236KTier 2$118K–$158K / $236K–$316KTier 3>$158K / >$316K
Under 6524.118%16.079%8.038%0%
65–6928.139%20.098%12.058%0%
70 or over32.158%24.118%16.079%0%

Rebate percentages for 1 Apr 2026 – 30 Jun 2026. Income thresholds shown as singles / families.

The slight drop between the two periods reflects the annual Rebate Adjustment Factor (RAF). For most people the difference is small — around $2–$5 per month on a typical hospital policy.

What this means in dollars

Under 65, base tier, paying $1,800/year for basic hospital cover

$437 rebate per year

At 24.288%, the government covers $437 of your $1,800 annual premium. Your out-of-pocket cost drops to $1,363/year ($114/month). If you're claiming it as a premium reduction, your insurer applies this automatically.

Income thresholds by tier (2025–26)

These are the same income thresholds used for the Medicare Levy Surcharge. Your tier is based on income for surcharge purposes: taxable income plus reportable fringe benefits, reportable super contributions, and total net investment losses. For families, the combined income of both partners is used.

Singles

Base tier
$0 – $101,000
Tier 1
$101,001 – $118,000
Tier 2
$118,001 – $158,000
Tier 3
$158,001 – No limit

Families

Base tier
$0 – $202,000
Tier 1
$202,001 – $236,000
Tier 2
$236,001 – $316,000
Tier 3
$316,001 – No limit

Family thresholds increase by $1,500 for each dependent child after the first. A family with 3 children has a base tier ceiling of $205,000 instead of $202,000. Single parents use the family thresholds.

How age affects your rebate

The government gives a higher rebate to older Australians on the basis that they are more likely to use hospital services and their premiums tend to be higher. The three age brackets are:

Under 65

Standard rebate

Base tier rebate of 24.288%. This covers most working-age adults. The age used is the age of the oldest person named on the policy as at 1 July of the financial year.

65–69

Higher rebate (+4 percentage points)

Base tier rebate of 28.337%. The roughly 4-point increase over the under-65 rate applies at every tier except Tier 3 (which remains 0%). For a couple where one partner turns 65, both benefit from this higher rate.

70 or over

Highest rebate (+8 percentage points)

Base tier rebate of 32.385% — almost a third of the premium. At Tier 2, a 70-year-old still receives 16.192%, whereas someone under 65 at the same income would only get 8.095%.

Key detail: for couples and family policies, the rebate is based on the age of the oldest person covered by the policy — not the policyholder. If you're 62 and your partner is 66, the 65–69 rate applies to the entire premium.

What this means in dollars

70-year-old couple, base tier, paying $3,600/year for hospital cover

$1,166 rebate per year

At 32.385%, a couple where the oldest partner is 70+ gets $1,166 off their annual premiums. Net cost: $2,434/year ($203/month). Compare this to a couple under 65 on the same income, who would get $875 — that's $291/year more for being in the older bracket.

Why there are two rebate periods in one financial year

The rebate percentages are recalculated each year on 1 April, based on the Rebate Adjustment Factor (RAF) set by the Minister for Health. The RAF reflects the gap between private health insurance premium increases and consumer price inflation. When premiums rise faster than CPI, the rebate percentage falls slightly.

Because the financial year runs 1 July to 30 June, this means every financial year straddles two rebate periods:

  • 1 July 2025 – 31 March 2026 (9 months): uses the rebate rates from the 1 April 2025 adjustment
  • 1 April 2026 – 30 June 2026 (3 months): uses the new rebate rates from the 1 April 2026 adjustment

If you claim the rebate as a premium reduction, your insurer handles the rate change automatically. If you claim it as a tax offset at tax time, the ATO calculates a blended amount for the full year based on the days each rate applied.

How to claim: premium reduction vs tax offset

There are two ways to receive the rebate. They produce the same total benefit over the financial year — the difference is timing.

Option 1: Premium reduction

Tell your health insurer your expected income tier. They reduce your premiums by the rebate amount, so you pay less each month.

Pros: lower out-of-pocket costs all year, no waiting until tax time.

Cons: if your income ends up higher than you nominated, the ATO claws back the difference through your tax return.

Most Australians with private health insurance use this method.

Option 2: Tax offset

Pay full premiums to your insurer and claim the rebate as a tax offset when you lodge your return. The offset reduces your tax payable.

Pros: no risk of nominating the wrong tier, simpler if your income fluctuates.

Cons: you pay more upfront each month and wait until after lodging to get the money back.

The ATO calculates the correct amount using your actual income.

Either way, your health insurer provides a Private Health Insurance Statement (sent each July or available through myGov) that shows the premiums paid and any rebate already received. This information is pre-filled in your tax return.

Try this scenario

Enter your income to see which rebate tier you fall into and how much MLS you'd owe without cover.

Check your rebate tier

Worked examples

Example 1: Single, 35, earning $95,000

Priya is 35, single, and earns $95,000 in taxable income with no fringe benefits, extra super contributions, or investment losses. She pays $1,600/year for basic hospital and extras cover.

Step 1 — Find the tier: income of $95,000 is below $101,000, so Priya is in the base tier

Step 2 — Find the rebate rate: under 65, base tier = 24.288% (Jul–Mar) and 24.118% (Apr–Jun)

Step 3 — Calculate the rebate:

  • Jul–Mar (9 months): $1,200 × 24.288% = $291
  • Apr–Jun (3 months): $400 × 24.118% = $96
  • Total annual rebate: $387

Priya's net cost for health insurance: $1,213/year ($101/month). She also avoids the MLS entirely since her income is below the $101,000 threshold.

Example 2: Single, 42, earning $130,000

Tom is 42 and earns $130,000. He's considering whether to get hospital cover or pay the MLS. He's looking at a basic hospital policy costing $1,800/year.

Without cover — MLS: $130,000 is Tier 2, so MLS = 1.25% × $130,000 = $1,625/year

With cover — after rebate: Tier 2, under 65 = 8.095% rebate. $1,800 × 8.095% = $146 rebate. Net cost = $1,654/year

At this income, the MLS ($1,625) and cover after rebate ($1,654) are almost identical — but with cover Tom actually gets hospital insurance instead of just paying a tax penalty. If he shops for a cheaper policy ($1,400–$1,500 range), the math tips clearly in favour of cover.

Try this scenario

Model a $130,000 income with and without cover to see the MLS vs insurance comparison.

Calculate MLS on $130K

Example 3: Couple, both 68, combined income $190,000

Margaret (68) and David (66) have a combined income of $190,000. They hold a couples hospital policy costing $3,200/year.

Step 1 — Find the tier: combined income of $190,000 is below the family threshold of $202,000, so they're in the base tier

Step 2 — Find the rebate rate: oldest person is 68, so the 65–69 rate applies = 28.337%

Step 3 — Calculate the rebate: $3,200 × 28.337% = $907/year

Margaret and David pay $2,293/year ($191/month) out of pocket. The rebate saves them $907 — and they avoid the MLS, which at $190,000 would be $0 anyway since they're below the family threshold. The rebate is pure savings at this income level.

Example 4: High earner, 50, earning $200,000

Alex is 50, single, and earns $200,000. At Tier 3, he gets no PHI rebate. But the MLS calculation makes hospital cover worthwhile anyway.

Without cover — MLS: 1.5% × $200,000 = $3,000/year

With cover — no rebate: basic hospital cover costs ~$1,400/year. Tier 3 rebate = 0%, so the full cost is out of pocket.

Alex saves $1,600/year by getting cover even with no rebate — the MLS avoidance alone more than pays for the insurance. At high incomes, the MLS saving is the main financial incentive, not the rebate.

What this means in dollars

Tier 3 single earner ($200,000) choosing cover over MLS

$1,600/year net saving

Even without a rebate, hospital cover at ~$1,400/year is $1,600 cheaper than paying $3,000 in MLS. You also get actual hospital insurance — the MLS is a pure tax penalty with no cover in return.

How the rebate interacts with the MLS

The PHI rebate and the Medicare Levy Surcharge are two sides of the same policy system, but they work differently:

The rebate reduces your cost of cover

It's a government subsidy that makes private health insurance cheaper. It applies to hospital, extras, combined, and ambulance policies. The income thresholds and tier structure are the same as the MLS, so the higher your income, the less rebate you get.

The MLS penalises you for not having hospital cover

It's an additional tax of 1%–1.5% of your income, charged when you earn above the threshold and don't hold qualifying hospital cover. Extras-only cover does not exempt you from the MLS — only hospital cover (or combined hospital + extras) counts.

Together they create the break-even calculation

For most people above the MLS threshold, the real question is: does the cost of hospital cover (after the rebate) cost less than the MLS? In most cases the answer is yes, especially at Tiers 2 and 3 where the MLS is large. Even at Tier 3 with a 0% rebate, the MLS ($1,580–$3,000+) typically exceeds the cost of basic cover (~$1,400).

MLS Calculator

Enter your income, family status, and age to calculate your MLS liability, PHI rebate tier, and whether cover is cheaper than the surcharge.

Registered health insurer requirement

The rebate only applies to policies held with a registered Australian private health insurer. This means an insurer registered under the Private Health Insurance Act 2007 and regulated by APRA. All major Australian health funds qualify — Medibank, Bupa, HCF, nib, HBF, and others.

International health insurance, travel insurance, and overseas visitor cover generally do not qualify for the rebate. If you're unsure whether your insurer is registered, check the Private Health Insurance Ombudsman website or ask your insurer directly.

Your insurer sends a Private Health Insurance Statement each year (usually in July). This confirms your coverage dates, premiums paid, and any rebate already received as a premium reduction. The ATO uses this data to pre-fill your tax return.

Related guides

MLS Thresholds 2025–26

Full breakdown of MLS income thresholds, tier rates, and worked examples for singles and families.

Cheapest Hospital Cover to Avoid the MLS

Find the minimum qualifying policy and compare the cost against your MLS liability.

How to Avoid the Medicare Levy Surcharge

Step-by-step strategies including qualifying cover, timing, and exemption rules.

Frequently Asked Questions

Sources