Note: the information in this article is general in nature only and provided in good faith. For financial advice specific to your situation, please speak to your financial advisor or tax accountant.
If you have ever wondered whether taking out private health insurance will save you at tax time, then you are not alone. But it’s not an easy, one-size-fits-all answer.
Google that very question and you’ll get 216 million results to sift through – and if you wade through all that information, the answer could still be “it depends”.
Taking out private health insurance may reduce how much tax you pay depending on your personal circumstances. How much you earn and what you pay for your cover will be factors.
Medicare Levy Surcharge
When it comes to tax time, singles earning above $90,000 and couples and earning above $180,000 can expected to pay the Medicare Levy Surcharge (MLS).
The MLS is an Australian Government initiative designed to encourage Aussies to take out private health insurance.
It’s an amount additional to the Medicare Levy and is calculated as a percentage of your income. The extra tax payable is between 1% and 1.5%, depending on your income - Private Healthcare Australia has a handy little calculator that will give you an estimate of your MLS (it takes less than a minute).
How to avoid paying MLS
If you earn over the income threshold amounts for paying the MLS, you can avoid paying the surcharge if you take out an approved private hospital cover with a registered health insurer, such as Latrobe Health.
Approved level of cover means a basic or higher level of hospital cover where how much excess you pay in any year cannot exceed $750 for singles or $1500 for couples or families. (It’s worth noting that extras cover and ambulance-only cover will not exempt you from the MLS.)
PrivateHealth.gov.au has more information on the MLS and what constitutes approved cover.
How do I work out whether I’ll be better off getting hospital cover?
If you’re motivated purely by the bottom line, then the easiest way to understand how the costs stack up is to compare what MLS you’ll be charged compared to what you’ll pay in premiums.
We suggest you get a quote with us on an approved product – either online or call us on 1300 362 144. What you pay for hospital cover will depend on the level of cover you choose, the excess amount, your age and the amount of government rebate you are likely to receive.
It’s also recommended that you discuss your options with your financial advisor or tax accountant, who can base their recommendations on your specific circumstances.
Victorian Agency for Health Information data shows that average overdue wait times for elective surgery in the semi-urgent and non-urgent categories have blown out to well over 120 days in Victoria (as at March 2021).
When weighing up the pros and cons of private hospital cover, in addition to any tax benefits, it’s worth keeping in mind the choice that health insurance offers – choice of where you’ll receive treatment, choice of when you’ll receive treatment and choice of doctor.
A final note about tax for existing Latrobe Health members
Latrobe Health Services private health insurance tax statements are reported directly to the Australian Tax Office – which means you no longer need to submit your statement when you complete your tax return.
If you’re already a Latrobe Health member, your private health insurance tax statement will be uploaded to your Online Member Services account after the end of the financial year. So if you want a copy, check back after the first week in July!