Get ready for it, over the next two weeks, there’ll be plenty of advertisements suggesting you get private health insurance before June 30, or risk being financially worse off come tax-time.
A number of insurance comparison websites are running commericals telling people that time is running out for them to take out private cover and avoid paying the Medicare Levy Surcharge.
This however isn’t going to be true for everyone, particularly when the average Australian wage is around $79,000. But this type of advertising is designed to get your attention.
Here’s what you need to know, so you can do the math yourself.
The Medicare Levy Surcharge is payable at tax time for those who don’t have private health insurance after their income exceeds $90,000 for singles and $180,000 for couples.
The surcharge rate you are charged starts at 1 per cent for those singles earning $90,000 plus, and goes to 1.25 per cent and 1.5 per cent for those on higher incomes. Click here to get those rates.
Kate Hills chartered accountant at Whitehead Dingley and Betar said the cost benefit of private health at tax time is “debatable” for middle-income earners, who might pay out less in the surcharge levy if they didn’t have private health cover.
For example, a person with a taxable income of $110,000 would pay a $1375 surcharge, which is about $125 less than the average cost of basic private health insurance. That saving goes up to $1000 if you compare it with hospital plus extras cover. This excludes any government rebate which is what you can get for taking out private cover.
Insurance is there for worst case scenarios. But the difference with health insurance is that in an event of an emergency, every Australian is covered by Medicare.
However private patients have more options when it comes to elective surgery, choice of hospital and extras benefits like dental care.
Australia wide, the average private health fund member receives $380 in benefits back a year, compared to $2324 for the average cost of a yearly premium with extras, and $1507 for the average basic cover, according to analysis of 38,000 policies taken in 2015 by consumer advocacy group CHOICE.