Tax time provides the ideal opportunity to review your financial situation and check in on your private health insurance. It’s helpful to know how your private health insurance can potentially impact you at the end of a financial year. Two key things to be aware of at tax time are Medicare Levy Surcharge and Lifetime Health Cover Loading. Here’s how these could impact you and what you can do about it.
Medicare Levy Surcharge
To ease the burden on the public health system, the Australian Government designed a system that uses tax to encourage Australians who earn over a certain amount to get private health cover.
Called the Medicare Levy Surcharge, the system aims to encourage Australians to take out private hospital cover and, where possible, to use the private system to reduce demand on the public Medicare system.
The Medicare Levy Surcharge is an additional 1-1.5% of annual income paid by Australian taxpayers who do not have private hospital cover but who earn:
- Over $90,000 for a single person
- Over $180,000 as a couple or family
The surcharge covers you and your dependents and includes:
- Your spouse
- Any of your children who are under 21 years of age
- Any of your full-time student children who are under 25 years of age
Are you a high-income earner?
Choosing to opt out of private health cover means that as your income grows over time, the amount you are required to pay to the Government in additional taxes will increase substantially.
If you earn above the threshold amounts, you can avoid paying the Medicare Levy Surcharge by taking out an appropriate level of private hospital cover. An appropriate level of cover is defined as a hospital policy that does not have an excess greater than $750 on a single policy or greater than $1,500 on a couple, single parent, or family policy.
All Astute Simplicity Health Hospital Covers exempt high-income earners from paying the additional Medicare Levy Surcharge. Find out more by contacting us today.
Lifetime Health Cover Loading
Lifetime Health Cover (LHC) is a Government initiative that started on 1 July 2000, and is designed to encourage people to take out hospital cover earlier in life and encourage them to maintain it. If you get hospital cover earlier in life, and keep it, you can avoid paying an extra amount called 'LHC loading'.
If you haven’t taken out and maintained private hospital cover BY the time you turn 31, you will pay a 2% Lifetime Health Cover (LHC) loading on top of your premium for EVERY year you are aged over 30. If you have LHC loading on your hospital premium, it’s removed once you have held your hospital cover for 10 continuous years.
Here’s what this means in practice:
Situation 1 – You take out a singles hospital cover policy before 1 July following your 31st birthday. The cost of your chosen hospital cover policy is $1,000 per year.
Situation 2 - If you waited until August following your 31st birthday you would have to pay an extra 2% on the cost of your policy - $1,020 per year.
Situation 3 - If you waited until you’re 40 to take out the same hospital cover policy, you could be paying an LHC loading of 20%. This would be an extra $200. The LHC loading will apply for 10 years of continuous hospital cover, so over this period if cover remained the same price, you would pay an extra $2,000.
To avoid paying the loading, take out hospital cover by 1st July following your 31st birthday, which is called your base day. Call the team at Astute Simplicity Health to find out more, and ensure you get covered by June 30.
To join, switch or have a cover comparison, contact the Astute Simplicity Health Customer Care Team today on 1300 090 960!
Website: www.astutesimplicityhealth.com.au
Disclaimer
Astute Simplicity Health products are underwritten by St Luke’s Medical and Hospital Benefits Association ACN 009 479 618 (St.LukesHealth), a registered private health insurer, [trading as Astute Simplicity Health] and members are introduced by Astute Financial Management Pty Ltd or related entities (collectively known as Astute) for which Astute receives a commission.
While all care has been taken in the preparation of this publication, no warranty is given as to the accuracy of the information and no responsibility is taken by Finservice Pty Ltd (Mortgage Express) for any errors or omissions. This publication does not constitute personalised financial advice. It may not be relevant to individual circumstances. Nothing in this publication is, or should be taken as, an offer, invitation, or recommendation to buy, sell, or retain any investment in or make any deposit with any person. You should seek professional advice before taking any action in relation to the matters dealt within this publication. A Disclosure Statement is available on request and free of charge.
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