2013 Tax Mini Series - Private Health Insurance Rebate
Most people who have private health insurance only pay 70% of the premiums to their health fund, on account of the ‘private health insurance offset’ which is recovered by the health fund from the Government.
This is the result of the 30% rebate that most people have enjoyed, until June last year (2012). People aged 65+ years get a higher rebate.
But many people do not realise that since last July, they are no longer to the full 30%.
The tax offset available to a single person will start to reduce once income exceeds $84000. Once it exceeds $130000, there will be no tax offset benefit at all.
A couple or family will start to lose the tax offset once your combined income exceeds $168,000 and will completely disappear where your combined income exceeds $260000.
So your 'after tax' cost of private health insurance premiums may increase significantly.
What may have cost $70 after-tax before, for $100 of health premiums, costs $100 from 1 July 2012 - an increase of around 43%!
If the above changes affect you, and you are still paying only 70% of your premiums, you will be hit when you lodge your 2013 income tax return.
It will be a big surprise for some, and you should budget for it now.
We recommend that all clients consider pay 100% of their premiums to their health funds, and if you are entitled to a tax offset once your income tax return is finalised and lodged, then you will enjoy the benefit once the assessment is issued by the ATO.
Thinking of dropping cover? Then take care!
High income earners who do not have the requisite private hospital cover may find they are exposed to Medicare Levy Surcharge of up to 1.5%, in addition to the standard 1.5% Medicare Levy. That is a total of 3% in medicare levies.
You should compare the available policies with this insurer with others available on the market place. For your information, there is a heavily-marketed comparison website that suggests you can search their website and find the best policy, but it only lists private health insurers that subscribe to it.
For this reason, we suggest you complete a search on the government website, at www.privatehealth.gov.au to assist you find the most suitable policy. Just go to that website and click on the option "Compare Policies".