Have you ever wondered how you could lower your taxes just by signing up for private health insurance? In Australia, we have something called the Medicare levy surcharge (MLS), which is a tax implemented by the Government to encourage people to use private hospitals alongside Medicare. This tax applies to individuals and families with higher incomes who don’t have eligible private hospital coverage. Its purpose is to ease the strain on the Medicare system by directing the funds collected back into it.
So, how does the Medicare levy surcharge actually work?
It’s pretty straightforward. The tax is calculated as a percentage of your taxable income, total reportable fringe benefits, and any amount for which family trust distribution tax has been paid. Once you hit the means testing amount you start paying the MLS. At the low end of the MLS you will pay 1% and 1.5% at the top end. For more information click here.
Now, let’s talk about the private health rebate.
The private health insurance (PHI) is a Government assisted rebate amount provided to assist with the cost of your private health insurance premiums. This rebate is subject to income testing, meaning your eligibility for it depends on your income for surcharge purposes. As a higher income earner, your entitlement to the rebate may be less or you may not be entitled to a rebate at all.
You might be wondering how the private health rebate can help you with your tax.
Well, if you qualify for the rebate, there are two ways to claim it. Firstly, you can have your private health insurance provider apply the rebate directly to reduce your premiums. Alternatively, you can claim the rebate as a refundable tax offset when you lodge your tax return.
So, by having eligible private health cover, you not only benefit from the private health rebate, you may potentially avoid paying the Medicare levy surcharge, which can reduce your tax liability. It’s a win-win situation where you can take care of your health and save on your taxes at the same time.
To compare private health insurance – Call us on 1300 861 413 or email hello@health.compare
Useful links
Private health insurance rebate eligibility – Find out if you are eligible for the private health insurance rebate and how you can claim the rebate
Medicare levy surcharge income, thresholds and rates – Based on your income for MLS purposes, you can work out which income threshold and MLS rates apply to you.
