Private Health Insurance – Does it save us money at Tax Time?

We all hear the ads throughout the year “Get your health insurance with us now otherwise you may be hit with the Medicare Levy Surcharge (MLS)!!!”. But how much is the surcharge? Will you actually be saving money? Or is this just another money making technique from Private Health Insurance Companies?

It's a common misconception that paying for Private Health Insurance will save money at tax time (in fact it wasn't until I started writing this blog that my girlfriend learnt having Private Health Insurance doesn't necessarily save money). Personally I’m a believer of Private Health Insurance and think it’s a small price to pay for peace of mind, but it may not actually save you money. For many Australians, especially young people, the saving could be nil!

The Medicare Levy Surcharge is the governments way of encouraging Australians to get Private Health Insurance. But as many of you know Health Insurance prices increase every April, and this increase is far beyond the yearly CPI (See below).

The Conversation 2018, Private health insurance premiums compared to inflation and wage growth < http://theconversation.com/private-health-insurance-premium-increases-explained-in-14-charts-92825>

With Health Insurance being so high and history dictating its ridiculous price hikes, it’s no wonder many people have stopped paying and choosing to rely solely on Medicare. But do these people end up paying more at Tax Time?

It all depends on your Income threshold, which is the combined total of the following;

· your taxable income

· your total reportable fringe benefits, and

· any amount on which family trust distribution tax has been paid.

As an individual if you are below $90,000 there is no surcharge which means even if you didn’t have cover you won’t pay any surcharge at tax time. However, if this was over $140,000 there would be a 1.5% surcharge.

A full table can be found below which includes the income brackets for families

ATO, M2 Medicare levy surcharge (MLS) 2018, <https://www.ato.gov.au/Individuals/Tax-return/2018/Tax-return/Medicare-levy-questions-M1-M2/M2-Medicare-levy-surcharge-(MLS)-2018/>

Clearly Private Health insurance is not necessarily the most crucial thing to have organised prior to June 30th every year and based on the above figures it's no surprise that young people are walking away from Private Health policies like never before.

Get your Tax Returns done with us at Top Tier Accounting!

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