Taxes and Your Health Insurance
With a new tax year just around the corner, it’s worth thinking about how your health insurance can be affected by your financial situation. Most Australians pay a mandatory 2 per cent Medicare levy (unless they have low household income) which helps to fund the Medicare system but depending on your income, that may not be the only area in which taxes and health insurance crossover.
If you’re not fully up to speed with the tax situation, you could be paying much more than you need to – for both taxes and health insurance. Many people are caught out by things like the Medicare Levy Surcharge and Lifetime Health Cover and find that the health insurance rebate isn’t generous enough to help them out much.
By simply taking out private health insurance at the right time, you could get savings on both tax and health cover.
Here is our 5 minute guide on health insurance and tax, and how you can save yourself big this EOFY.
The Medicare Levy Surcharge
The Medicare Levy Surcharge (MLS) was introduced to encourage higher earners to buy Hospital cover to reduce the burden on the public healthcare system. This is a mandatory payment on top of the 2 per cent Medicare levy for singles who earn more than $90,000 and couples/families who earn more than $180, 000 and do not have eligible Hospital cover.
The income tiers for the MLS are also used for the health insurance rebate, and are as follows:
|Standard||Tier 1||Tier 2||Tier 3|
*For families with children, the thresholds are increased by $1,500 for each child after the first.
Depending on which income tier you fall into, you would pay anything from 1 to 1.5 per cent if you don’t hold eligible Hospital cover:
|Standard||Tier 1||Tier 2||Tier 3|
The Health Insurance Rebate
The health insurance rebate was introduced to make it more affordable to buy health insurance by offering Australians a percentage of their premiums back. Many people choose to get this back through lower premiums but you can choose to receive the rebate as a tax offset.
How much you can expect to get back varies depending on your income and age bracket but the rebate has decreased across the board in recent years. It is not available for singles earning more than $140,000 or couples/families earning more than $240,001.
Lifetime Health Cover
Lifetime Health Cover (LHC) is intended to encourage more Australians to buy Hospital cover earlier in life and keep it as they get older. Loading fees of 2 per cent are added to premiums for every year that you did not have Hospital cover after your LHC base date.
Your LHC base date is July 1st after your 31st birthday. If you wait longer than this to buy Hospital cover, you will pay an extra 2 per cent on premiums for every year that you did not have it after the age of 30. Waiting until you’re 35 means that you’ll pay an extra 10 per cent, for example. There is a maximum loading of 70 per cent.
Not sure if you’re eligible for a rebate or confused about how you’re affected by Lifetime Health Cover? Get in touch with www.HealthInsuranceComparison.com.au today for expert advice on how you can save on your health insurance costs! We can guide you through the health insurance minefield and help you to get more cover for your money.
Disclaimer: The above information is correct and current at the time of publication.
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