How health insurance could save you cash in tax time 2020
There's still time to get your health insurance sorted and prevent an unnecessary fee down the line.
With tax season 2020 just a couple of days away, Australians are being urged to look into health insurance as they may be able to save money on premiums and avoid unnecessary penalties.
Every year, on 1 July, the start of tax season coincides with the standard Lifetime Health Cover (LHC) loading base day. At the same time, the government is set to receive the latest information on your income, so you may be hit with a Medicare levy surcharge (MLS).
Both LHC loading and the MLS could end up costing you money, but many Aussies aren't sure what they really mean. In fact, Finder research shows that 61% of 25-39 year olds don't understand LHC loading, and 39% of all Aussies don't understand the MLS.
If you're among them, here's a quick recap. LHC loading is a penalty that applies to anyone who didn't get health insurance before their base day, which is usually 1 July immediately following your 31st birthday. When you do get health insurance, it adds 2% on top of your premium for every year you didn't have cover over the age of 30.
|Entry age||Additional cost|
According to government statistics, 10.9% of Aussies with hospital insurance are paying some level of loading on top of their premium. That's 882,791 people who have higher monthly premiums, because they waited until after the 1 July deadline.
Separately, the Medicare levy surcharge applies to singles who earn over $90,000 and couples who have a combined income of over $180,000. In this case, the MLS applies a fee of between 1% and 1.5% of your income, if you don't have adequate hospital cover.
|Income bracket for singles||Medicare levy surcharge||Annual MLS cost|
|90,001 - $105,000||1%||$900 - $1,050|
|$105,001 - $140,000||1.25%||$1,312 - $1,750|
|$140,000 +||1.5%||$2,100 +|
Thankfully, avoiding the MLS is easy. You just need to have hospital insurance with an excess of $750 or less if you're a single, or $1,500 or less if you're a couple. Incredibly, you can do that for less than the cost of the surcharge itself.
That means you could save hundreds or even thousands of dollars on your tax. Plus, you'll get private hospital insurance to boot.
However, getting your head around Lifetime Health Cover loading and the Medicare levy surcharge aren't the only ways to save money this tax time. If you do go ahead and buy health insurance, you can also take advantage of seasonal promotions.
Health funds know tax season is a popular time for people buying health insurance, so they often bolster their offers to attract new customers. Often, you can get several weeks free if you bundle hospital cover with an extras policy, or can even skip certain waiting periods if you sign up before 1 July.
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