Tax time savings can deliver a healthier balance sheet

Getting hospital cover now could help you save more later

At present, individuals earning over $80,000 or families earning over $160,000 who do not have an appropriate level of hospital cover are required to pay the Federal Government’s Medicare Levy Surcharge, which is calculated at 1% of their taxable income.

However, from 1 July 2012, this cost will increase for many taxpayers with the introduction of a tiered income assessment. The good news is that some health insurance policies may cost less than the revised surcharge, according to popular health insurance comparison website, HelpMeChoose.com.au.

The company’s General Manager Julie Ryburn said, “Encouraging more individuals to experience the benefits of private hospital cover, the increased Medicare Levy Surcharge for higher income earners is the Government’s latest initiative aimed at easing the pressure on the public Medicare program.”

“From July, the Medicare Levy Surcharge will rise for some individuals and families based on their annual income. However, it will continue on a pro rata basis, meaning it is calculated on the number of days in the financial year that an individual or family does not have adequate cover. So, if you are considering getting private health insurance to avoid the surcharge then the sooner you do the better.”

“Many uninsured Australians may not realise it can be possible to purchase basic hospital cover for the same amount as, or sometimes less than, the Medicare Levy Surcharge. This means you can avoid paying the extra tax, while enjoying the benefits offered by private health insurance, including reduced waiting times for treatment, a wider choice of hospitals and greater control over which doctor treats you.”

“Another financial implication for uninsured Australians to consider is the government’s Lifetime Health Cover initiative. With this, if you do not have hospital cover on 1 July following your 31st birthday and do decide to take it out, you will pay a 2% fee on top of your premium for every year after.”

“On the bright side, the Federal Government rebates a percentage of your health insurance costs, which you can reclaim off your premium or as part of your tax return. However, from July, the rebate will be means tested based on income. There is also the option to prepay before 1 July your insurance premium for the year ahead and to receive the full 30% rebate.”

The following table demonstrates the impact the looming surcharge changes will have on uninsured taxpayers and it outlines the upcoming rebate changes that will affect insured Australians:
HelpMeChoose.com.au offers the following advice to those considering private health insurance:

1.   Get value for money health cover: Shop around to find the best value for money policy, but to help you avoid the surcharge be careful to look closely at the policy inclusions ie. to be exempt from the surcharge your policy must cover some or all of the fees and charges for a stay in hospital, be held with a registered health fund and have a $500 excess for individuals or $1,000 or couples/families.

2.   Get the most from your policy: Some policy providers offer incentives to entice people to join their fund. Policies may have similar cover but differences could include limited premium discounts or introductory offers such as the option to prepay your premium months in advance, gift vouchers, waiting period waivers and other gifts.

3.   Save time and money: Comparing policy prices and benefits online will save time shopping around and help educate people about the range of options available. Good comparison websites will analyse your lifestyle and needs against multiple options from a range of providers, all at no cost.

4.   Don’t pay for anything you don’t need: There are certain types of conditions that people are more likely or less likely to require treatment for, and thus insurance coverage for, depending on their age and current life status. To help reduce your premium, select the treatments you are more likely to need and exclude others. Keep in mind there are products that are suited to people who are looking to avoid the Medicare Levy Surcharge and/or who are wanting basic, cost effective coverage.  

5.   Save money by paying your policy in advance: From 1 July, the health insurance rebate will be means tested and a scaled rebate applied to different income brackets. By prepaying your policy before then, you could save money by avoiding the means tested rebate cuts, as well as saving you from having to pay next financial year’s annual policy cost rises.

Get a second opinion on your insurance policy. Visit www.HelpMeChoose.com.au.

For further information, comment or data please contact:

Julie Ryburn, HelpMeChoose.com.au

Phone: 03 8849 1029 or 0433 140 886

Email: Julie.Ryburn@HelpMeChoose.com.au