What tax time means for your health insurance costs

The end of the financial year is a busy time for many Australians. As we all scramble to file our tax returns, health insurance can often be the last thing on our minds but it’s worth paying attention to the rules around health cover as it can have an impact on your finances.

You may be one of many Australians who are impacted by health insurance rules and regulations that kick in at tax time – and don’t even know it. For example, some funds reset their extras at the end of June – although if you’re with ahm, read on, as we’ve got good news below.

You may also be liable for the Medicare Levy Surcharge (MLS), depending on how much you earn, if you haven’t held eligible health cover during any part of the financial year. 

Subject to your age, you may even have to pay a Lifetime Health Cover loading (LHC) if you don’t have health insurance and don’t take out an eligible policy before June 30. We’ve explained this in more detail later in this article.

We know you don’t want to pay more than you have to. That’s why our trusted advisers are here to help you find a policy for your needs, or help you save on your existing cover.

Here’s How You Do It:

Step 1: Select your current life stage below.
Step 2: Once you select your preferred coverage options, you will have the opportunity to compare quotes from multiple health funds.

Choose your life stage.

I’m looking at health cover for…

Do health funds reset their extras at the end of the financial year?

If you already have health insurance and haven’t claimed up to your yearly extras limit before the extras reset date, you will likely lose them. Any unused benefits are unlikely to roll over, with the exception of ahm in 2020.

There are five funds – ahm, Peoplecare, Defence Health, Navy Health, and Onemedifund – whose extras usually reset on July 1. However, in recognition that this has been an exceptional year, with the COVID-19 lockdown meaning many customers couldn’t use their extras, ahm have announced that their customers will have any unused extras annual limits rolled over into the following year.

To be eligible for the extras annual limit rollover**, ahm customers must hold an ahm extras product on 30 June 2020, have unclaimed extras annual limits, maintain the same extras product that they held on 30 June 2020 until ahm apply the annual limit rollover to their policy. 

So, if you change to another extras product after 30 June 2020, any annual limit rollover will not apply to their new product. 

Outside of the five funds who usually reset their extras on 1 July, the majority of health funds reset theirs at the start of January. Make sure you check with your fund, to get the most out of your policy.

What is the Medicare Levy Surcharge (MLS)?

If you don’t have hospital insurance and earn over $90,000 as an individual or $180,000 as a couple or family, you will pay an additional charge when you lodge your tax return, known as the Medicare Levy Surcharge (MLS).

And a quick note: if you’ve got more than one child, the family threshold increases by $1500 for each child after your first-born.

The ATO will determine if you’re liable for the MLS and the rate you will pay, which will be up to 1.5 per cent of your taxable income. This is on top of the usual 2 per cent Medicare levy paid by most Australians.

If you are liable for the MLS, you’ll need to pay it for any part of the financial year you weren’t covered by an eligible policy. So the sooner you take it out, the sooner you’ll start getting something for your money.

What is the Lifetime Health Cover loading (LHC)?

Lifetime Health Cover loading was designed to encourage younger Australians to get health insurance cover. So, if you don’t take out private patient hospital cover before you turn 31 but then decide to purchase a policy later on, you’ll pay an additional loading of 2 per cent on top of your hospital cover premium for every year you are aged over 30 at the time you join. 

For example, if you wait until you’re 40 to take out cover, you could pay an extra 20 per cent per year for 10 years. There is a maximum loading of 70 per cent. 

You can avoid the LHC loading if you take out hospital cover before July 1 following your 31st birthday.

Get Started Now:

Step 1: Select your state below .
Step 2: After answering a few questions, you will have the opportunity to compare quotes in your area and could be eligible for significant savings.

Choose your area.

Which area are you in?

*Average savings based off 20,400 customers during 2019

What should I do next?

If you don’t have health insurance, you can take out an eligible policy to minimise charges like the MLS and LHC.

If you’re with one of the health funds whose extras reset, or you simply feel you’re paying too much, it’s worth comparing policies to see if there’s equivalent cover at a cheaper price – that way you won’t have to serve any new waiting periods.

Our trusted advisers are on hand to help you find a great first policy or save on a new policy. By comparing with us, individuals were able to save an average of $380.79 on their yearly premiums last year and families were able to save an average of $600.31 (based on average customer savings in 2019).

Get in touch with us today and explore your options.

**Limit rollover excludes: optical where it has a separate annual limit; pre and post-natal services and joint fluid replacement injections rolling year limits; orthodontics and laser eye surgery lifetime limits; and hearing aids limits that reset every 3 financial years.

This article is opinion only and should not be taken as medical or financial advice. Check with a financial professional before making any decisions.

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