I’m Fit, Strong And Invincible - But I Still Have Private Hospital Cover
Article By Nathan Rigney of NGR Accounting
Edited by Rhys Donovan of Biomechanics Healthcare
Year after year I see my regular clients and I’m lucky enough to meet and engage with new clients needing my accounting services. Most of the clients I see have private health insurance, some because they know that they’re not invincible and others because they don’t want to be slugged with the additional tax payable (known as the Medicare Surcharge) because they don’t have appropriate private hospital cover.
When it comes to healthcare, it’s important to understand the difference between the benefits of our public health care system (Medicare) and our private hospital care system.
What is Medicare?
It’s the name for a scheme that gives Australian residents access to free or low cost medical, optometric and hospital care. Medicare was designed on the basis that all Australians should have a right to quality healthcare, regardless of their financial circumstances. The Medicare Levy is a type of tax that helps fund the scheme.
Majority of Australian tax payers will pay the Medicare Levy, which is calculated by multiplying your taxable income by 1.5% (2% from 1 July 2014). For low income earners, the Medicare rate is reduced to nil or is reduced depending on your/families combined taxable income. If your taxable income is less than $20,542 for individuals and $39,638 for families you are below the Medicare levy low income threshold and you won’t need to pay the levy. The threshold is increased by $3,640 for each dependent child or student. (These rates apply to the 2013-14 financial year)
What is the Medicare Surcharge?
Not having private hospital cover can attract unnecessary tax if your taxable income is $84000 if single or $168,000 for couples/families you could be liable for the Medicare Levy Surcharge! The surcharge is currently imposed at the rate 1%, 1.25% or 1.5% (imposed on single or combined taxable incomes) multiplied by your taxable income. The good news is, the surcharge only applies when a taxpayer does not have adequate private health insurance cover and exceeds the relevant income threshold. If you don’t have cover and your income is greater than the threshold, you can beat the additional tax for the entire 2015 financial year by taking out private hospital insurance before 30 June 2014. If you haven't got private health insurance yet and could be liable for the surcharge, don't dispare! The Medicare Levy Surcharge is calculated according to the number of days per year that you don't have private health insurance. So if you took out cover on the 31st July, you would still get an exemption for 334 days fo the year (365 - 31).
Why should I Get Private Health Insurance?
An average (single) Joe earning over the Medicare Threshold of $84000 could be paying as much as $840 Medicare Surcharge without having appropriate private hospital cover. The question I often pose to clients without private health insurance is why pay the additional tax and not receive the private hospital cover or the additional extras thrown in by the health insurance provider.
The majority of health insurance funds will pay part of your typical health cover items like the Dentist, Optometrist and GP. More and more health funds are now starting to include non-traditional benefits in their extras, like Physio, Osteopathy, Remedial Massage and Naturopathy. Obviously each heath fund will be different, so it’s best to check them all out before committing to a health insurance policy that does suit your needs.
Private hospital cover (at the very least) makes sense, and it doesn’t matter who you are, even if you’re the strong, fit and invincible stereotype!
If you’d like to know more, check out https://www.ato.gov.au/Individuals/Medicare-levy/ or contact Nathan Rigney from NGR Accounting.