For many of us, the words Private Health Insurance leave tingles up and down our spines, becoming a point of stress for many. The rising premiums and confusion between the insurers and rebates has us all feeling a little overwhelmed.
Let’s break it down.
What is Private Health Insurance?
Private health insurance is taken out by an individual, couple or family to protect them against life’s unforeseen circumstances. Designed to take the burden off the public system, private health cover comes with benefits such as potential to reduce surgery wait times, reductions in tax levies and more doctor choices, which makes it appealing to many.
What Is The Private Health Insurance Rebate?
The government want as many people covered by private health insurers as they can to reduce the strain on the public system. In order to do that, there is a tiered government rebate offered to reduce the personal financial commitment for the service. This has recently been amended from 30% rebate across the board to a tiered structure based on income. The lower your income, the greater your rebate.
Those who do not have private health insurance are limited to the public health system. All Australian residents do have access to Medicare which was introduced in 1984. Medicare also subsidises doctor and other medical treatments, but the level of cover is restricted.
Awesome, How Can I Claim The Private Health Insurance Rebate?
Most people opt to receive their private health insurance rebate at the time they sign up for their cover to reduce their monthly premiums. For example, a premium of $200 per month could be reduced to as little as $142 per month with a top tier government rebate. You can also opt to settle your rebate entitlement at the time of filing your tax return.
So, What Are My Tax Implications if I Don’t Have Private Health Cover?
People who do not have private health insurance are charged with a Medicare Levy Surcharge (MLS) up to 1.5% to compensate for the extra strain on the public system. This surcharge is also means tested, so the more you earn, the higher your levy charges. The MLS is factored in at the time of filing your tax return.
For example: If your a single person and your taxable income is $89,900 with no additional income liabilities, then you will not be required to pay the MLS as you fall under the threshold. But, if your tax return has $27,000 of reportable fringe benefits added to it, then your taxable income becomes $116,900. This would push you into the Tier 2 of the MLS structure and you will be required to pay 1.25% in levies. This equates to $1375 in taxes you didn’t bank on.
Ok, So Should I Take Out Private Health Insurance?
At the risk of sounding cliche, this is up to each individual to assess their own personal circumstances. What might be best for one person may not be the right solution for another. Salary, tax obligations and age all play a part in assessing your requirements for Private Health Cover. It is worth mentioning that private health insurers place a loading on policies that begin where the individual first takes out cover over the age of 30. Loading’s are 2% for each year from age 31 until an appropriate level of cover is taken out.
For further advise on your tax implications regarding private health cover and how best to manage your cover, please contact our experts. We’re here to help make your tax liabilities into non-liabilities.