Crunch time…hurty thirty…no it’s the end of the world. It’s tax time! If you’ve watched TV lately, you’ve more than likely seen plenty of ads warning you about private health cover and June 30. Some providers mention savings others scare with confusing jargon and tax implications.
The reality is June 30’s an important day in the PHI world because if you purchase private health before June 30 you may be able to make a tax savings rather than lose money. Of course it’s not as straight forward as it sounds and depends on a few different factors.
It’s important to remember that any tax benefits you make by purchasing private health before the end of this financial year won’t be seen until next year’s tax return. Yes you can take out private hospital cover part way through a year and still get some benefit, but to get the full benefit you have to have had private health cover for the entire financial year. That’s why June 30 is an important date.
With all the tax myths out there, it’s hard to know whose telling porkies. So Frank’s going to set the record straight! In this blog will explain who needs to be concerned, the reasons why and how to avoid/save at tax time.
Who’s in the firing line?
1. Those who will earn over $84,000 p.a. as a single or $168,000 p.a. as a couple in the 2012/13 financial year.
2. Those that are turning 31 years old
Due to the Medicare Levy Surcharge people who earn over $84,000 p.a. as a single or $168,000 p.a. as a couple in the 2012/13 financial year will generally have to pay more in tax (if they don’t have PHI) than the whole cost of an annual premium.
For example, in 2012/13 a single person under age 65 with an income of $85,000 a year without PHI will pay $850 a year for the Medicare Levy Surcharge (1% of their income- as they are in tier 1 of the ‘tiered rebate’ system). Frank’s cheapest cover on “50% back” starts at $646.85 per annum for basic hospital cover- a difference or saving of $203.15.
And why 30 years old you ask?
The Government wants you to take out private health insurance at 30 because, statistically you’re more likely to visit the hospital more frequently after 30. To encourage people to purchase hospital cover at 30 the Government introduced Lifetime Healthcover Loading (LHC) on the 1st of July 2000.
The LHC Loading is an extra charge on top of your normal hospital cover premiums if you take out hospital cover after you turn 31. The loading starts at 2% per year for every year after 31. E.g. If your 51 and never had hospital cover then a loading of 40% would be applied. If you pay a premium of $646.85 p.a. and applied the 40% loading you would pay an extra $258.74 per year. It’s best to avoid the LHC Loading by joining a health fund before you turn 31 years old.
You’re not alone! This stuff even confuses Frank. Check out Frank Uni for simple, short explanations without the B.S. There’s loads of info about LHC loading, the MLS rebate and much more. We also have a blog on the new 2013/14 income thresholds for the private health insurance (PHI) rebate and the Medicare Levy Surcharge (MLS).
Realised you need health insurance?
Need health insurance?
So you’ve just realised your one of those people that needs health insurance for next year’s tax purposes. No probs! Franks open 10am to 6pm on Saturday and 11am to 8pm on Sunday to answer any questions you might have. To purchase a membership without any fuss, go to frankhealthinsurance.com.au and do it all online from home.