Can You Save Tax on Health Insurance?
Government Incentives and Penalties - The Australian government has put in place a number of initiatives designed to get Australians covered by private health insurance. If you know what these initiatives are, you may be able to save on tax, time and money...
The 30% Government Rebate on Private Health Insurance
A 30 per cent rebate on annual health fund premiums, regardless of income and from 1 April, 2005, the rebate was increased to 35 per cent for those aged between 65 and 69, and to 40 per cent for those aged 70 or older.
- Learn more about the 30% Rebate
The Medicare Levy Surcharge
By taking out eligible levels of Private Health Insurance you may be able to save on tax (MLS). If you don't have the appropriate level of hospital insurance and are either single with a taxable income of $70,000 or more per year, or a couple or family earning a combined taxable income of $140,000 or more, you may be forced to pay an extra 1% in tax (MLS).
This is called the Medicare Levy Surcharge and can equate to a minimum of $700 a year for singles and $1,400 a year for qualifying families. Essentially this is money that is foregone and could have been used to purchase private cover. In addition to avoiding paying the extra tax, the Federal Government rebates 30% of your health insurance costs (levels of rebate depend on the age of the insured persons).
- Learn more about the Medicare Surcharge
Important Update - 31 December 2008 Transitional Arrangements
Changes were passed in the Australian Parliament last month (October 2008) which increased the taxable income Medicare Levy Surcharge thresholds to their current levels of $70,000 and $140,000 respectively.
Importantly, if after 1 July 2008 you have dropped, or avoided applying for health insurance due to the initial proposed changes by the Government to the thresholds (as proposed by the Government in May 2008), a transitional provision has been introduced by the Government to help ensure that you are not disadvantaged.
Essentially, this means if you take out eligible hospital cover by 31 December 2008 and maintain it through to 30 June 2009 you will be considered to have had cover for the full 365 days from 1 July 2008 to 30 June 2009. This will enable you to avoid the additional 1% Medicare Levy Surcharge for the 2008/09 taxation year.
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