Private Health Insurance Tax Offset - reduction in premiums received

Is the taxpayer entitled to a private health insurance tax offset under section 61-335 of the Income Tax Assessment Act 1997 (ITAA 1997), when the taxpayer has claimed a 30% reduction in their private health insurance premium through their health fund?

No. The taxpayer is not entitled to a private health insurance tax offset under section 61-335 of the ITAA 1997. Subsection 61-335(5) provides that a the taxpayer is not entitled to a private health insurance tax offset through their tax return when the taxpayer receives a reduction in premiums because of the operation of Chapter 2 or Chapter 3 of the Private Health Insurance Incentives Act 1998 (PHIIA 1998).

The taxpayer has an appropriate private health insurance policy.

The taxpayer received the full 30% private health insurance tax offset as a reduction in the premiums paid in respect of their private health insurance policy.

Section 61-335 of the ITAA 1997 provides a tax offset in respect of private health insurance premiums where: • The premium was paid by the taxpayer or their employer in respect of an 'appropriate private health insurance policy' as defined in the PHIIA 1998; • The premium was paid in the same income year that it is claimed as a tax offset, and • The taxpayer has not received a reduction in their private health insurance premiums in respect of the tax offset.

Subsection 61-335(5) of the ITAA 1997 disallows a private health insurance tax offset where a taxpayer has: • Received a cash or cheque payment from a Medicare office under Chapter 2 of the PHIIA 1998, the Incentives Payments Scheme, in relation to the payment; or • The premium, or the amount in respect of a premium, was less that it would otherwise have been because of the operation of Chapter 3 of the PHIIA 1998, the Reduced Premium Scheme.

The taxpayer has received the full 30% private health insurance tax offset as a reduction in the premiums paid in respect of their private health insurance policy. Subsection 61-335(5) of the ITAA 1997 will operate to prevent the taxpayer claiming a tax offset in their income tax return as the taxpayer has already received their full entitlement. Accordingly, the taxpayer is not entitled to a private health insurance tax offset under section 61-335 of the ITAA 1997. Note: where the taxpayer has only received partial benefits through premium reductions or Medicare payments, the taxpayer may be entitled to a reduced private health insurance tax offset in their income tax assessment for that income year.