“Save tax by getting private health insurance before June 30.”
How many times have you seen or heard this statement in the media? I have seen it many times and have on occasions thought about getting health insurance to save tax for myself, then I realise, hang on I am a registered tax agent and I know that Private Health Insurance Hospital Cover will in most cases not save any tax.
Let me explain, If your income is less than $90,000 and you are single or if the family income is less than $180,000 then taking out private health insurance hospital cover will not save you $1 in tax.
If your income is greater than those 2 thresholds and you do not have private health insurance hospital cover then you will need to pay the Medicare Levy Surcharge of 1%. The Surcharge increases at intervals from 1% to the maximum of 1.5% if your income is greater than $140,000 for singles and $280,000 for families.
The minimum costs will be $900 if you are single of $1,800 for a family. A family is either a couple or a couple with children and the threshold increase by $1,500 for each Medicare levy surcharge dependent child after the first child.
When signing up for private health insurance you can either have hospital cover, extras or hospital and extras cover. To not pay the surcharge you must have hospital cover, by just having extras cover you will still need to pay the medicare levy surcharge if your income passes the thresholds.
So the next time you see an ad promoting private health insurance as a way to reduce your tax, see it as an ambiguous tactic by the health insurer to get you to sign up, but if your income is greater than the thresholds then it may be something to look at.