Can you differentiate surcharges from rebates? Levies from lifetime health cover loading? You can save hundreds of dollars on tax season if you know how your health insurance affects your financial situation.
Here are 5 important things you should be aware of about your health insurance and your tax:
1. Save money by paying for private hospital cover.
Australian singles with an income of over $90,000 annually, or couples and families with income of over $180,000, who don’t own a private hospital cover, can pay an additional tax called the Medical Levy Surcharge (MLS). People who are included in this category will pay no less than 1% of their annual income on the MLS (for singles earning $90,000, that’s $900 annually). This amount may well be greater than the cost of getting private hospital cover, of course, depending on the scope of cover and the provisions in your policy. So you might actually save money by joining health cover.
2. You may claim rebate on the money you pay for your health insurance.
As another inducement to get private health insurance, individuals with income below $140,000 or couples and families earning less than $280,000, you may be qualified for a rebate on the cost of your health insurance. Depending on your income, you may qualify for a rebate of between 9% and 28% if the oldest member in the insurance policy is aged below 65 years. This rebate can be claimed either as a one-time cost at tax time or as a discount in your health insurance cost for the full year.
3. The rebate is higher, the older you are.
When you hit 65 your rebate is higher to assist you in paying your private health insurance premiums. This helps retirees afford health insurance. It also serves as an additional financial support if a person needs to get a policy that has a broader coverage, giving them added protection against exorbitant medical expenses.
The rebate increase is triggered when a person turns 65 years old and then again at 75 years old.
4. If you haven’t taken out a private hospital cover when you hit 31 you could be burdened with higher health insurance costs for the remainder of their life.
Don’t procrastinate with regards to taking out a private hospital cover. If you delay too long, the costs of your private hospital cover could be more expensive. You have until July 31 following your 31st birthday to decide. If you fail to take out private hospital cover before the cut-off date, you could be responsible for a loading on your private hospital cover once you finally decide to become a member. Every year you procrastinate taking out a private cover, you could be liable for a loading of 2% on your total hospital cover premiums (the highest loading is 70%). If you postpone for 10 years, your loading is 20%!
5. Add your spouse’s details to avail of the right rebate.
For individuals with a partner, their combined household income determines their income threshold for the private health insurance rebate. Make sure you are assessed correctly by including your partner’s income when claiming your rebate. You could end up repaying a part or the entire amount of your formerly claimed rebate if you don’t state your partner’s income details.
Understanding how your health insurance impacts your tax can help steer you in the right direction when considering your options. With the existing Government incentives, taking out private hospital cover may be cheaper than you think.
The article provides general information only. Seek advice about financial and taxation issues from an independent taxation expert. PJS Accountants offer expertise in managing your tax affairs with a complete range of compliance, corporate and individual tax services. We service large companies, SMEs, family businesses and individuals. The ever-changing tax laws and requirements could put businesses and individuals at risk. Putting nothing to chance! Contact PJS Accountants and talk to one of our team members now!