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5 things you need to know about health insurance at tax time
Save on your taxes while getting some health perks.
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As you joyously riffle through all your tax time paperwork, you'll probably stumble across some questions about health insurance.
What goes in that field over there? Can you claim your health insurance?
Confused? Don't be. We've boiled down the most important things you need to know to max your tax (and keep your sanity.)
1. Turning 31?Avoid extra costs later in life
If you’ve haven’t yet got private health insurance and you turned 31 this year, you should seriously think about signing up.
If you don’t sign up to before June 30, you’ll start to walk into Lifetime Health Cover Loading land, and it’s an expensive place to be. Once you turn 30, a 2% loading is added to your hospital cover costs for every year you’re without hospital cover.
If you're over 32 and on the fence about getting health insurance, it could be worth taking the jump sooner rather than later.
Let’s put that in real terms. Say a health insurance policy is available for $600 per year, well if you only take out your first policy when your 40 – it’s going to cost you 20% more than that – $720 per year.
Here are a few examples:
|Age||Loading||Cost of cover||You’ve had cover since 31||If this is your first hospital cover|
Unless you’re 100% sure you’re never ever going to need any sort of private health cover, it’s a wise move to take it out now.
2. Private health insurance is often tax deductible
You can get cash back in the form of the private health insurance rebate.
It's the government's way of rewarding you for buying private health cover. Every year you hold cover, you get a little bit back from the government – ideally leading to a juicy refund (or a smaller tax bill at the very least). If you earn under $140,000, you can get back up to 34% of what you spent on a health insurance policy.
If you're eligible, you can get it one of two ways: by getting a discount on your premium (often called the Australian Government Rebate when you sign up) or by claiming it back on your taxes.
The best news is you can claim for any policy, whether that’s extras cover, hospital cover or a combined package.
3. Earn more than 90k? Pay for something or pay for nothing
If you make more than $90,000 a year as an individual or $180,000 as a couple and you don't carry private cover, the taxman will come looking for their Medicare Levy Surcharge.
It’s an additional 1-1.5% of your income that they tack onto the 2% Medicare Levy they're already charging you and everyone else for your Medicare card (except those on low incomes).
Why pay money only to get nothing in return? By taking out private health insurance you avoid that pesky surcharge entirely, and you can actually get excellent value in return. Like not having to pay for an ambulance if you need it because Medicare won’t cover ambulance costs.
4. Don't waste your money on junk
Wanna skate by with the cheapest policy possible just to avoid these taxes? Fair enough, but beware of junk policies that tick the tax box but give you next to zero should you ever need to use the policy. Don't wait until you actually need to use your private health cover in an accident or unexpected illness, to find out you've spent thousands over a few years on pretty much nothing.
Yes, Medicare will cover emergency treatment but it won’t let you choose your doctor, have a private room or pay for your ambulance. If you purchase a private health insurance hospital policy that at least ticks the basics, you're probably going to have a bit more peace of mind should you fall sick or get in an accident.
So if you're earning over 90k and just looking for the basics, by all means, filter those policies from low price to high, but check limits and inclusions to make sure you’ve got a few things for your dollars.
5. Keep an eye on the dates
What makes tax time so spooky? The fact they're due on Halloween of course! Get your taxes filed by 31 October to avoid any nasty surprises, and make sure they're in tip-top shape. To do that, you'll need your private health insurance statement which your insurer should send out around July.
Simply copy the details from that statement onto the private health insurance policy section of your tax return, and voila! Hello rebate and R.I.P. Medicare Levy Surcharge.
Start comparing policies before June 30 if you’re looking to avoid that LHC 2% yearly premium. If you’re earning over $90k, you just need to make sure you pick at least a hospital cover with an excess of less than $500 ($1,000 for couples). It starts from $15.62 a week, so what are you waiting for?
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