On 12 May 2021, The Private Health Insurance Amendment (Income Thresholds) Bill 2021 was introduced into the House of Reps on 12 May 2021, amongst other things freezing the income thresholds for the Private Health Insurance Rebate.

See below for further details.

[Tax Month – May 2021]



The legislation will freeze the PHI income thresholds for the purposes of the private health insurance incentive (which takes the form of a reduction in premiums or a tax offset) for another 2 years (2021-22 and 2022-23). Indexation will start again from I July 2023.

As a result, the rebate adjustment factor (RAF) for the 2021-22 period will be the same as those of 2020-21 period (the prior year – and indeed 2019-20). Therefore, the PHI Rebates effective from 1 April 2021 to 31 March 2022 will be as follows:

Private Health Insurance Rebate percentages from 1.4.2021 – 31.3.2022
Age Base Tier Tier 1 Tier 2 Tier 3
Under 65 25.059% 16.706% 8.352% 0%
65 – 69 29.236% 20.883% 12.529% 0%
70+ 33.413% 25.059% 16.706% 0%


These are the income ranges: Base Tier: Singles – $90,000 or less; Families – $180,000 or less; Tier 1: Singles – $90,001-$105,000; Families – $180,000-$210,000; Tier 2: Singles – $105,001-$140,000; Families – $210,001-$280,000; and Tier 3: Singles – $140,001 or more; Families – $280,001 or more.

Extract from Explanatory Memorandum



The Private Health Insurance Act 2007 (the Act) is the main law that sets out the requirements for private health insurance (PHI) and health insurers.

The Act makes provision in relation to the setting and annual indexing of PHI income thresholds (the income thresholds).

The income thresholds are used to determine government-funded PHI rebate amounts that may apply for consumers with eligible PHI cover, and Medicare Levy Surcharge (MLS) income thresholds and rates.

The MLS is levied on Australian taxpayers who do not have private patient hospital cover; and earn above a certain income. The PHI rebate is an amount the Government contributes towards the cost of Singles and Family PHI premiums. The rebate and MLS are income tested.

The Act describes how annual indexation of PHI income thresholds are calculated using an indexation factor. Additionally it specifies the PHI income thresholds for Singles and Family status. The Act also specifies the formula (Indexation factor) for applying indexation across the income thresholds each financial year.

The Act provides for the annual indexation of the income tiers to be determined by changes in average weekly ordinary time earnings (AWOTE) each financial year. The AWOTE is an Australian Bureau of Statistics (ABS) measure of earnings by Australians from ordinary time worked each week.

The Private Health Insurance Amendment (Income Thresholds) Bill 2021 (the Bill) continues the current pause on the annual indexation of income thresholds for another two years, allowing for annual indexation thereafter.

The Bill amends section 22-35, section 22-40, and section 22-45 of Subdivision 22B (the Subdivision) of the Act to extend the indexation pause on PHI income thresholds for a further two years and concurrently amend the indexation reference year to apply annual indexation from 1 July 2023.

Section 22-45 of the Subdivision provides for the annual indexation of the PHI singles tier 1, tier 2 and tier 3 income thresholds. Indexation of the PHI singles thresholds flows through to the corresponding PHI family thresholds (section 2240 of the Subdivision).

These PHI thresholds are used to calculate PHI rebates on qualifying PHI policies for single persons and families. The PHI rebate is income tested. If a person or a family’s income is higher than the relevant income threshold, a rebate may not be applicable. These rebate entitlement depends on a person or a family’s status on 30 June for the relevant financial year. The PHI thresholds apply depending on whether a single income or a family income status. These tiers and thresholds are provided for under Subdivision 22-B—Private health insurance tier.

[APH website: Bills Digest, Bill, Explan Memdm, 2nd Reading speech; LTN 89, 12/5/21]


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