Tax time is here yet again.

Get ready, because this is when jargon like the Medicare Levy Surcharge and the Medicare Levy (er, there’s a difference?) is thrown around like confetti.

health insurance confused couple tax time

This time of year’s also when you want to make sure you’re getting the most out of your tax return.

Well, we’re here to cut through the noise surrounding 30 June to break down how health insurance can:

We also share one of the easiest and fastest ways you can shop for great-value health cover so you can spend more time on what matters most to you.

Your tax time cheat sheet (for private health)

When you may pay more at tax timeWho it affects
Medicare Levy SurchargeThose who earn more than $90k as a single or $180k as a couple/family, and who don’t fall into an exemption category
Lifetime Health Cover loadingThose over 31 who don’t already have health insurance (but only affects you if you take out cover in the future)
Medicare LevyEveryone who earns more than $21,980
When you may get money backWho can benefit from this
Australian Government health insurance rebateAnyone with extras, hospital, or a combined policy who earns under $140,001 (singles) or $280,001 (couples) a year

When you may pay more at tax time

The Medicare Levy Surcharge (MLS)

The Medicare Levy Surcharge (MLS) is an additional levy designed to encourage higher income earners without hospital cover to take out a policy.

Ultimately, the MLS can help reduce the burden on our public hospitals.

If you don’t have hospital cover and you a) earn over $90k a year and you’re single, or b) have a partner or family and earn over $180,000 a year, you accumulate the MLS every day you don’t have cover (unless you fall into one of the exemption categories).

In total, you’re charged between 1% and 1.5% of your taxable income each year, depending on exactly how much you earn, which is payable at tax time.

How could it affect you?

Let’s say you earned $95,000 per financial year, you’re single and don’t have hospital cover: your total MLS could be charged at one per cent.

This means you may need to pay $950 at tax time when this money could fund a hospital policy that:

  • provides cover towards treatment you need
  • may help you receive treatment faster for injuries or illnesses than if you were treated as a public patient[1]
  • offers you the choice of doctor*
  • allows you to enjoy the privacy of your own room*
  • covers the cost of ambulance services (except in Queensland and Tasmania, where the state governments cover these costs).

Instead, you lose out on that $950 altogether.

*Subject to availability.

Our table below outlines how the MLS may impact you this tax time.

Medicare Levy Surcharge – Income Thresholds
Surcharge0%1%1.25%1.5%
SinglesUnder $90,000

($0 payable)

$90,001 – $105,000

(~$900 – $1,050 payable)

$105,001 – $140,000

($1,312.51 – $1,750 payable)

$140,001+

(~$2,100+ payable)

Families^Under $180,000

($0 payable)

$180,001 – $210,000

(~$1,800 – $2,100 payable)

$210,001 – $280,000

($2,625 – $3,500 payable)

$280,001+

(~$4,200+ payable)

Retrieved from Privatehealth.gov.au | Information current at 03/04/2017. Dollar amounts payable are rounded up.
^For families with children, thresholds increase by $1,500 for each child after the first.
Families include couples, de facto couples, and single parents.
Can you avoid the MLS?

Not unless you’re earning under the income threshold when MLS starts applying or you have a hospital policy (which will also give you a raft of other benefits) or you fall into one of the exemption categories.

Taking out cover before 30 June might be worth considering if you don’t want to pay any MLS in the new financial year. All in all, the earlier you take out cover, the less you’ll pay at tax time.

The Medicare Levy

Not to be confused with the Medicare Levy Surcharge, the Medicare Levy is a tax many Aussies pay. One point of difference between MLS and the Medicare Levy is that you’re still charged the Medicare Levy, even if you hold hospital cover (so long as you’re not exempt from the levy).

The Medicare Levy partly funds Medicare, which provides all Aussies access to free or subsidised healthcare.

How could it affect you this tax time?

The Australian Taxation Office (ATO) says the Medicare Levy is charged two per cent of your taxable income.[2]

The levy is included in the total tax withheld from your employer.

When won't you need to pay the levy?

The ATO says you may be exempt from the levy if your taxable income is equal or less than the following thresholds for 2017-2018:[3]

  • $21,980
  • $34,758 for those eligible for the seniors and pensioners tax offset.

You’re only required to pay part of the Medicare Levy if your taxable income is between:

  • $21,980 and $27,475
  • $34,758 and $43,447 for those eligible for seniors and pensioners tax offset.

You may also be exempt if you’re a foreign resident, aren’t eligible to receive Medicare benefits, or meet specific medical requirements.

Over 30? Beware the Lifetime Health Cover (LHC) loading

Lifetime Health Cover (LHC) loading makes hospital policy premiums more expensive. This loading only affects you if you didn’t take out cover by, and hold it from, 1 July following your 31st birthday.

Overall, LHC is designed to encourage you to take out and maintain cover earlier in life.

Remember: LHC isn’t charged on extras policies (also known as general or ancillary cover); loading only applies to hospital policies. Similarly, holding an extras policy won’t prevent the LHC from accruing.

How could LHC affect you this tax time?

While LHC isn’t a tax, it is something that affects your hospital policy premiums at tax time.

How?

Every year on 1 July, your hospital policy premiums will increase by an extra two per cent for every year you’re over 30 and don’t have cover. The maximum loading you can be charged is 70%.

You won’t need to pay for loading, though, until you take out a hospital policy.

Once you hold continuous cover for 10 years, you’ll no longer need to pay this loading.

What can you do about it?

If you’ve been considering health insurance, now might be the time to review policy options before another year goes by and your loading increases by another two per cent.

Don’t forget – if you want to take out a couples hospital policy, you’ll be charged the average loading between you and your partner (if they have any loading applicable).

For example, if your partner has six per cent LHC loading applicable and you have two per cent loading applicable, you’d be charged four per cent loading (the average of six and two) on your couples policy.

What if you have a hospital policy and are paying LHC?

If you’re already paying LHC and your premiums are a bit expensive, let’s do something about it!

Start by only getting covered for services and treatments you need. Then, make sure you’re paying a good price for your policy against others in the market.

Sounds easy, doesn’t it? Comparing health insurance is a powerful way to determine whether you’re truly getting the most for your money.

 

Curious to see if a great-value hospital policy exists?

Give our free comparison tool a go. You can compare health insurance policies from some of Australia’s leading insurers to find cover that includes the treatment you need.

What’s even better, it takes only minutes to find quotes and our prices don’t cost anything more than going direct to the insurer; that’s just part of our Best Price Promise.

When you may get that sweet cash back

The Government health insurance rebate: what is it?

The Australian Government private health insurance rebate is an initiative designed to help Aussies who have health insurance pay for their premiums.

This support encourages you to keep cover and ultimately lighten the load on the public healthcare system.

Whether you have hospital, extras or a combined policy, you’ll be eligible for this rebate.

How could it affect you?

Either you can claim this rebate through your tax return, or you could benefit from it in the form of reduced policy premiums.

The rebate amount depends on your relationship/family status, your annual taxable income and your age.

We’ve outlined the rebate levels below:

Base TierTier 1Tier 2Tier 3
SinglesUnder $90,000$90,001-$105,000$105,001-$140,000$140,001 +
Families*Under $180,000$180,001-$210,000$210,001-$280,000$280,001 +
Under 6525.059%16.706%8.352%0.00%
65-6929.236%20.883%12.529%0.00%
70 and over33.413%25.059%16.706%0.00%
Retrieved from Commonwealth Ombudsman | Information current as of 24/05/2019
^ For families with children, thresholds increase by $1,500 for each child after the first.
Families include couples, de facto couples, and single parents.

The rebate percentages are adjusted every year on 1 April.

How you can shop smarter, not harder for cover

Our free comparison tool makes it easy to see how policies from some of Australia’s top health insurers stack up.

Once you enter your details, we’ll present you with a range of quotes based on this information. Our comparison service clearly indicates whether a policy is Gold, Silver, Bronze or Basic (as well as any ‘Plus/+’ policies).

After you’ve found the policy that provides cover for services and treatment you need, you can continue through our journey and make your purchase – best of all, purchasing through our service won’t cost you anything extra than buying direct from the insurer.

Compare health insurance

Don’t forget! It’s now even easier to compare policies

New Gold, Silver, Bronze, Basic tiers

Health insurance. These two words alone can make anyone stumble and fall into a black hole of confusion – especially when it comes to understanding what’s actually covered.

To help remedy this, the Australian Government has implemented brand spanking new categories that every hospital policy must fall under; Gold (the new comprehensive policy), Silver, Bronze and Basic.

With these new tiers, you’ll know exactly what you’re covered for and you’ll easily be able to find a great price for your hospital policy.

This is because every Silver policy on the market, for example, will include cover for the same treatments in hospital – no matter the insurer. The main difference between the two will be price and other factors, like:

Insurers can also offer extra services and treatments on top of the minimum, so long as they add a Plus/+ to the policy name (i.e. Silver Plus).

Health insurers have already started to roll out these changes, and have until 1 April 2020 to ensure their hospital policies subscribes to these new categories.

Sources

[1] Australian Institute of Health and Welfare (AIHW): Admitted patient care. 2017-18. Australian hospital statistics.
[2] Australian Taxation Office: Medicare Levy. Last modified: 24 August 2018. https://www.ato.gov.au/Individuals/Medicare-levy/
[3] Australian Taxation Office: Medicare levy reduction for low-income earners. Last modified 29 June 2018. https://www.ato.gov.au/individuals/medicare-levy/medicare-levy-reduction-for-low-income-earners/

So, what are you waiting for?

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