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Incentivising private health insurance through the income tax regime: Capitalising on behavioural models


The Australian income tax regime is generally regarded as a mechanism by which the Federal Government raises revenue, with much of the revenue raised used to support public spending programs. A prime example of this type of spending program is health care. However, a government may also decide that the private sector should provide a greater share of the nation's health care. To achieve such a policy it can bring about change through positive regulation, or it can use the taxation regime, via tax expenditures, not to raise revenue but to steer or influence individuals in its desired direction. When used for this purpose, tax expenditures steer taxpayers towards or away from certain behaviour by either imposing costs on, or providing benefits to them. Within the context of the health sector, the Australian Federal Government deploys social steering via the tax system, with the Medicare Levy Surcharge and the 30 percent Private Health Insurance Rebate intended to steer taxpayer behaviour towards the Government’s policy goal of increasing the amount of health provision through the private sector. These steering mechanisms are complemented by the ‘Lifetime Health Cover Initiative’.

This article, through the lens of behavioural economics, considers the ways in which these assorted mechanisms might have been expected to operate and whether they encourage individuals to purchase private health insurance.

Author profiles

Andrew Johnston
Andrew works for TC Beirne School of Law, University of Queensland and Research Associate, Centre for Business Research, University of Cambridge.
Current at 1 December 2011
Prof Kerrie Sadiq CTA
Kerrie is a Professor of Taxation in the School of Accountancy at the QUT Business School, Queensland University of Technology. She holds a Bachelor of Commerce (B Com) from The University of Queensland, a Bachelor of Laws (Honours) (LLB Hons) from The University of Queensland, a Master of Laws (LLM) from Queensland University of Technology, and a PhD from Deakin University. Kerrie is a Chartered Tax Adviser as designated by the Taxation Institute of Australia and a Graduate of the Australian Institute of Company Directors. Kerrie primarily researches in international tax, tax expenditures and capital gains tax. She is author of numerous publications in both Australian and International journals and edited books and is a co-author of taxation texts. She is a co-editor of Australian Tax Review, one of Australia’s leading tax journals. Kerrie is often cited in the media in relation to international tax issues and regularly receives invitations to speak on contemporary tax topics. Recent work has been specifically on issues in international tax, such as transfer pricing, the OECD’s approach to base erosion and profit shifting (BEPS), Australia’s role in the G20 and the BEPS project, and automatic exchange of tax information. Kerrie writes balanced articles on BEPS for The Conversation. She has written and presented findings for the Committee for Economic Development of Australia (CEDA) and in 2015 appeared before the Senate Inquiry into Corporate Tax Avoidance. Prior to joining Queensland University of Technology, Kerrie spent 20 years at The University of Queensland, as a member of both their Law School and Business School. - Current at 09 December 2017
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