Private health insurance rebate - ???

Hi knowledgeable people,

Every year, when I put my tax return in place, I get a statement from NIB that says in corresponding fields the following:
- your premiums eligible for AU govt rebate are such and such
- your AU govt rebate is such and such

I put the above numbers into corresponding fields of my tax return.

It is required to say that my private health insurer NIB does not know how much I earn and how much my wife earns.

Today both my wife and I got an email from ATO saying the following:
" Dear NNN
Check that your private health insurance rebate details are up to date
Our records indicate that you may have under reported your family income for private health insurance rebate purposes in previous years.

The private health insurance rebate is income tested. This means that your income determines the rebate you are eligible for. Different thresholds apply depending on your circumstances as of 30 June.

What you need to do
Check if your income details are up to date with your health insurance provider."

1. How on earth my health insurance provider knows my wages? and why should they know my wages?
2. If I put the correct numbers from NIB report and the ATO smart tax program knows everything, including my wages and losses because of rental properties, how could I under-report something?

Thanks,

 

I got the same email, wondered the same thing. Doesn’t make sense to me

 

Same. Your insurer doesn't know your income but you've selected a rebate with them that's based on an income.

I just changed the rebate level with the insurer to reflect current income. Hadn't been updated in 18 years so was a little dated.

It shouldnt really matter as it all comes out in the tax return wash anyways

 

That’s right, which is why this part of the email doesn’t make sense: “Our records indicate that you may have under reported your family income”. The ATO knows my income and my spouses income - how could I under report it?

I update my rebate level with my private health provider diligently.

 

Is this why I repay some of my Private Health Insurance rebate to the tax office each year?

 

Probably yes

 

Don't claim it and let it be sorted out at tax time?


The calculator.

Calculators and tools_Host

 

Health funds DO NOT KNOW taxpayer income. It is up to a each member of a fund to claim the right threshold IF they claim reduced pemiums from the fund and the fund claims the offset throug the tax year. Some overclaim and repay when they lodge. Some underclaim and get a credit when they lodge. Some are 100% correct.

The "income" is based on FAMILY adjusted taxable incomes. This isnt straight forward. Many people think it is taxable income or their salary. It isnt. I have seen taxpayer who think they only need to report "their" income, not family. Ignore FBT issues and ignore rental losses and salary sac super.
Income tests

The ATO are just letting you know you should UPDATE the health fund "tier" with the fund. Its not a hanging issue or a concern if you dont.

 

The ATO knows your income (only after you lodge). They dont share this with the fund and they cant predict what your income is until aftre you lodge (a year later ?) . Your health fund tier notification is YOUR estimate of what tier you think the income for your family falls into. When you lodge they settle up any excess or shortfall.

 

I wonder why the ATO can’t do the following. They surely know my wages and investment losses when I fill out my tax return thru their smart program. I also put what I got from my health insurer.
So, the program has all the info needed to understand my tier. Then the program can calculate the rebates and increase or drop my tax based on that rather than me guessing my tier and them sending emails after that

 

The ATO will balance it for the FY when you do your tax but you should be updating it for the current year with your insurance provider. The ATO can’t estimate your income for the next FY. Your insurance provider should have asked you what Tier to apply when you took out the insurance? I know mine did.

 

I know this may seem a strange question but is it worth claiming the rebate to lower the monthly payment of health insurance rather than not and sorting it all out come tax time?

Say the cost is $3k and the base rate for under 65 is 24.608%. That's around $60 per month. So what do people do with it? Just mix it with usual spending money or put it in a separate account to go towards the next IP or buy additional one share per month of STW?

(Tongue in cheek comment.)

 

There is no penalty (at this time) for doing this but I would argue it is dishonest.

 

Thanks, mine did not