Get the Finder app 🥳

Track your credit score

Free

Earning over $90K? There’s an easy way to cut your tax bill

Posted: 11 June 2020 3:56 pm
News

Young man texting

High earners without hospital insurance are paying more tax than they need to.

The start of tax season is just a couple of weeks away and many Aussies are already looking for ways to reduce their bill. For the high earners out there, avoiding the Medicare levy surcharge is an easy way to do it.

Unfortunately, it seems thousands of tax-payers aren't sure how the surcharge works. In fact, a Finder survey found that 39% of Aussies don't understand the Medicare levy surcharge at all.

If you're among them, here's a quick recap: The surcharge applies a tax of between 1% and 1.5% to anyone earning over $90,000. According to 2016 figures, that's well over 2 million people in Australia.

However, the tax is only applied to those high earners who don't have hospital cover. Get private hospital insurance, and the tax is scrapped. It's that easy.

Here's the kicker though. The price of hospital cover is often cheaper than the surcharge itself. So even if you don't want health insurance, you save money by having it.

To demonstrate, Finder averaged the cost of three basic hospital policies from three different insurers, to get a sample cost of $813 a year. That's significantly less than many people will be paying in taxes.

IncomeAnnual MLS costSample hospital cover costPotential saving
$95,000$950$813$137
$110,000$1,375$813$562
$145,000$2,175$813$1,362

Strangely, it's a tip that only some Aussies are making use of. According to another Finder survey, only one in 10 people with hospital insurance bought cover to avoid the Medicare levy surcharge.

If you're one of the higher earners out there, you should definitely consider joining them.

Get hospital cover and avoid the surcharge

Picture: GettyImages

You might like these...

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site