Latest news with #MedicareLevySurcharge
ABC News
30-06-2025
- Health
- ABC News
Is private health insurance worth it? What to weigh up at tax time
As Australians prepare to do their tax returns and take stock of their financial affairs, those with and without private health insurance may be considering whether their cover is worthwhile. For many, it's not just a question about accessing the private health system — it can also be a maths equation that takes into account the tax penalties for not having coverage, if you earn above certain thresholds. For about 15 million Australians, private health insurance premiums jumped in April, after the federal government approved the biggest annual average premium hike in seven years. So, is health insurance a good deal for you? Here's what to consider when weighing it up. Australia's private health system is meant to complement Medicare by taking pressure off the public system. People who can afford it are incentivised to be treated privately, with shorter wait times for elective surgeries and the ability to choose their doctor. Successive governments have implemented policies designed to push people into the private system — like the Medicare Levy Surcharge (MLS). But the system is under strain as Australia's population ages, placing more pressure on public hospitals and increasing reliance on private health insurance. A report by EY for the federal government in 2023 found that for those aged over 75, average hospital claims were over $7,000 per person, while for 40–45-year-olds, the average hospital claim was about $850 per person. By 2064–65, nearly one-quarter of the population is projected to be aged 65 and over. "There are a lot of benefits and a lot of strengths of the private system," said Stephen Duckett, an honorary professor at the University of Melbourne and former secretary of the federal health department. To ensure they remain profitable, insurers have stripped back coverage, increased excess payments and hiked prices, leaving many Australians wondering if taking out cover is necessary. The answer depends on your income, age and health needs. Professor Duckett says for young, healthy Australians, private health insurance often provides little value. Some policies, he says, offer minimal benefits but are strategically priced just below the MLS threshold, enticing people to buy coverage that does little beyond avoiding a tax penalty — essentially, "junk insurance". The MLS is a tax that's been around since 1997 and is designed to encourage higher-income earners to take out private hospital cover. The tax ranges from 1 per cent to 1.5 per cent of income and kicks in once individuals earn above $97,000 or couples/families earn above $194,001. Professor Duckett said the MLS was "a strange concept [for] a private market". "Remember, the purpose of this is to force people into private health insurance who will not use the product at all, so that the risk pool is improved." Individuals can work out how much their MLS would be using the ATO's calculator. Whether your spouse and any dependent children have private hospital cover also affects your liability for the MLS. The surcharge is calculated when you process your tax return each year, rather than covered in your employer tax withholding, so may affect the amount of any tax refund or add to a tax bill. It's also based on the number of days you hold cover for, so if you don't have coverage for the full financial year, you may still end up paying tax. Greg Jericho, chief economist at The Australia Institute, said the private healthcare system was struggling "because it is not attractive to those who are least likely to need it, and [those people] are also the most likely to be profitable". In his opinion, private health insurance was not a good option for young Australians. "Possibly if they are in competitive sports and at higher risk of needing knee or shoulder surgery. But otherwise, there is no real need." He also said junk insurance policies had become more common. "In 2000, around 3 to 4 per cent of private health insurance policies had exclusions — now it is around 65 per cent. "Similarly, we have gone from around half of all policies having excess payments to now around 85 per cent. "So there are many more policies that don't cover much and which require co-payments should they be used." Introduced by the Howard government, Lifetime Health Cover (LHC) loading penalises those who don't take out private hospital cover by age 31. The penalty is an extra 2 per cent for every year someone does not have cover after age 31. It's capped at 70 per cent and removed after 10 years of continuous cover. Before this policy, only 30 per cent of people in their 30s had private health insurance. A campaign titled Run For Cover boosted this figure to 50 per cent, but uptake has since dropped back down, according to Mr Jericho. Mark Blades, an insurance analyst from Choice, warns that LHC loading often catches people off guard in their 40s. For example, a 41-year-old who first takes out private cover would be hit with a 20 per cent LHC loading on their premium. But he said in most cases, it works out better for people to just pay the loading when they need health insurance, rather than take out a basic policy to avoid it later in life. "Basic cover is essentially overpriced for what you're getting because you're getting very, very little," he said. Mr Jericho said many people did "not see actual value in private health insurance and are merely taking it out to avoid penalties". Once someone is over 31 years old and earns above $97,000 a year, a double whammy comes into play — the MLS if you don't have hospital cover, and the lifetime loading. Mr Blades said those earning above the threshold could take out a cheap cover to save a couple of hundred dollars, but he warned it would likely be "a product you can't really use". The government contributes about $7.5 billion annually to subsidise private health insurance through a rebate program. The rebate is means-tested and ranges from about 8 per cent to 32 per cent, depending on income and age. Individuals earning more than $151,001 and couples earning more than $302,001 are not eligible. However, it has been progressively reduced in recent years due to rising medical costs and Australia's aging population. The rebate is indexed and was dropped last year by a few percentage points. And it dropped again this year from 24.6 per cent to 24.3 per cent. While big health insurers tend to make it difficult for people to drop their policy and pick up a new one (due to waiting periods and losing unused benefits, for example) — especially for top-tier cover — it's worth checking what you're covered for and shopping around. There is a range of websites comparing the market, including from the government, that help consumers look up the details of exactly what their policy covers — called a Private Health Insurance Statement — and compare policies across all health insurers in Australia. Factors worth weighing up include waiting periods and exclusions. Also, some policies require you to take out extras as well as hospital cover. If you are considering a cheap hospital policy to avoid tax penalties, Choice's Mark Blades says you need to consider extra costs that could come into play if you do need to make a claim. "If you did use it, you would be out of pocket from paying the excess, which is usually about $750 for basic cover, and pay gap fees. Disclaimer: The information in this article is general in nature. If you need personalised advice, please see a professional.
Yahoo
29-06-2025
- Health
- Yahoo
ATO $1,318 warning as thousands of Aussies urged to act now
Australians are being urged to check their health insurance cover, or risk being hit with an extra tax by the Australian Taxation Office (ATO). Hundreds of thousands of people are stung with the Medicare Levy Surcharge each year, with the average person forking out an extra $1,318 in tax. Fresh data from the ATO revealed that 768,537 people paid the Medicare Levy Surcharge in 2022-23, up nearly 25 per cent from 616,903 people who paid it in 2021-22. The Medicare Levy Surcharge is designed to encourage higher-income earners to take out private hospital cover. From July 1, the singles threshold at which the tax applies will be $101,000, up from $97,000, while the family threshold will be $202,000, up from $194,000. The surcharge is paid on top of the Medicare levy of 2 per cent, and is between 1 and 1.5 per cent depending on your income. RELATED $8,000 ATO boost applied to Medicare Levy Surcharge Days left for millions of Aussies to claim ATO $20,000 tax benefit ATO reveals 10 highest paying jobs in Australia iSelect spokesperson Sophie Ryan said health insurance wasn't typically top of mind around tax time, but urged Aussies to add it to their end-of-financial-year checklist. 'More than half of policyholders surveyed (55 per cent) weren't aware of the reduction in the private health insurance rebate this year,' Ryan said. 'Meanwhile, one in five of all Aussies (20 per cent) don't even know whether they're paying the Medicare Levy Surcharge – an extra tax that higher-income earners may have to pay if they don't have an appropriate level of hospital cover by July 1.' The private health insurance rebate is a contribution the government makes towards your private health insurance premium. It is income-tested and applies to singles earning $158,000 and under, and families earning $316,000 and under for the 2025-26 financial year. The rebate ranges from 8 to 32 per cent, depending on your income and you have hit the Medicare Levy Surcharge this financial year, you can't take out a health insurance policy now to avoid the charge completely. Tax Invest Accounting director Belinda Raso explained that taxpayers are liable for the surcharge for each day they are not covered by private health insurance. 'It's very hard to avoid it if your income's over that amount,' she told Yahoo Finance. 'A lot of people don't realise the reportable fringe benefits will get them in most cases because they get grossed up.' The ATO considers your combined taxable income, reportable fringe benefits, total investment losses, and reportable super contributions for your income for Medicare Levy Surcharge purposes. Raso said you would need to take out private health insurance before July 1 if you wanted to avoid the surcharge completely next financial year. If you already have a health insurance policy in place, it could be worth comparing your cover to make sure you aren't being stung with a loyalty tax. iSelect research found 76 per cent of policyholders had either never switched their health insurance or hadn't done so in more than two years. This could mean they are missing out on savings, with 65 per cent of Aussies who switched revealing they had saved at least $100 a year, 43 per cent around $200 and one in five $500 or more. 'A quick review to see if there's a more suitable deal according to your budget and health needs available could save you serious money and give you peace of mind,' Ryan said. Ryan recommended reviewing what things you are covered for, including any extras, plus considering your in to access your portfolio
Daily Mail
21-06-2025
- Business
- Daily Mail
I'm a tax accountant and these are the four biggest mistakes you're making on your returns - and it's costing you money
Australians are forgetting to claim work-related expenses and often select the wrong work from home deduction in their tax returns. That's according to a leading taxation accountant who has singled out the top five errors taxpayers make as tax time approaches on July 1. Belinda Raso from Tax Invest Accounting said taxpayers are missing out on hundreds of dollars by making little mistakes. 'They just rush in and lodge way too early and usually don't claim what they are entitled to,' Ms Raso said. WFH deductions One of the most common tax mistakes involves deductions made for working from home. Ms Raso said people who WFH do not always apply for the maximum deductions they can receive. Work from home expenses can be worked out via two different methods: the fixed rate 'shortcut' method of 70 per cents per hour, or the actual cost method, where they calculate their total expenses. 'It is very important that you work out both methods to ensure that you're getting the largest possible deduction,' she said. 'Another thing that people forget to do is, if they are going by that fixed rate method of 70 cents per hour... they're forgetting to claim everything else, and this includes computer equipment, it includes furniture, it includes software, the list is endless.' Medicare levy surcharge The next mistake Australians often make is incorrectly recording their liability for a Medicare levy surcharge - the additional charge on taxpayers who do not have private health insurance. Ms Raso said that the tax office will change the return if they have proof workers are liable for the levy. Australians forget to work out the most savings-efficient method for determining their claimable work-from-home expenses, Ms Raso warned 'It is up to you to understand when you are and when you're not liable for this,' Ms Raso said. Work related allowances The experienced accountant said some Australians make a huge mistake by failing to claim work-related expenses, such as claiming goods that they use for both personal and work use. 'As an example, one of the most common ones is a computer or laptop,' Ms Raso said. 'You sit there and think, "well, I use this for both personal reasons and for work, I can't claim it then". That's not true. 'Any expense that you're claiming, you can apportion a personal element to it and just claim whatever percentage is for work. It doesn't mean that you can't claim it.' Logbook Her final tip was for Australians who use a personal vehicle for work purposes. She said workers should ensure they are recording their usage accurately in a logbook. 'If you are travelling over 5,000 kilometres for work, for actual work-related travel, you should be keeping a logbook,' Ms Raso said. 'But this is more than just tracking your kilometres in a logbook.' Workers should also keep records of their fuel and oil costs, or odometer readings. They will also need evidence of other car expenses.
Yahoo
14-06-2025
- Health
- Yahoo
$8,000 ATO tax change for millions of Aussies in weeks: Good news'
The threshold to pay the Medicare Levy Surcharge will increase in weeks for the third year in a row. Taxpayers are being urged to consider whether they need to take out private health insurance now, or risk being hit with an extra tax for every day they are uninsured. The Medicare Levy Surcharge is applied by the Australian Taxation Office (ATO) to those who earn over a certain amount and don't have hospital insurance. From July 1, the singles threshold will increase from $97,000 to $101,000, while the family threshold will go from $194,000 to $202,000. Tax Invest Accounting director Belinda Raso told Yahoo Finance the increase was 'good news' for taxpayers. The increase means singles will be able to earn an extra $4,000 a year before the surcharge is applied, while families will be able to make an extra $8,000. RELATED Biggest ATO tax return mistakes costing Aussies hundreds: 'Extra $1,000' ATO, Centrelink warning over $100 million Powerball lottery win Centrelink cash boost coming from July 1 for millions of Aussies 'They don't go up every year, but they have for the past three years,' Raso said. Raso said now was the time for taxpayers to consider whether they wanted to take out private health insurance to avoid the tax next financial year. 'These decisions can cost or save you thousands of dollars over the next financial year. We all know private health insurance keeps going up so now is the time to start deciding what will be best for you,' she said. The cost of health insurance will depend on factors like your age, the type of policy you take out and the coverage level. Finder found the average single Aussie pays $165 per month for health insurance, which works out to $1,980 a year. Basic policies, the lowest level of cover, cost $78.36 on average, or $940.32 a year. Raso said some people would not want to take out private health insurance, and that was fair enough, but it would mean you would have to pay an additional tax. 'So you're just paying a tax for no reason, you may as well pay for something,' she said. The Medicare Levy Surcharge is a tax applied to people who do not have private hospital cover and earn above a certain income. It is paid on top of the Medicare levy, which is 2 per cent. The tax is between 1 and 1.5 per cent, depending on your income. If you are a family or couple with a combined income over the threshold, you must hold hospital cover for you, your partner and your dependents to avoid the surcharge. The family threshold covers couples with no children, couples with children, and single-parent households. If you have reached the threshold for this financial year, the bad news is you can't take out a health insurance policy now to avoid the charge. 'You're going to be liable for the surcharge for the days that you were not covered by the private health insurance,' Raso explained. Raso said it was 'very hard' to avoid paying the surcharge if your income had hit the threshold. That's because the definition of income is broader than just your taxable income. 'A lot of people don't realise that reportable fringe benefits will get them in most cases, because they get grossed up,' Raso said. Income also includes investment losses added back in and salary sacrifice added back in. Raso said that was why it was important to consider your total income, consider the cost of taking out insurance and see whether it was worth getting insurance to avoid the charge next in retrieving data Sign in to access your portfolio Error in retrieving data
Yahoo
12-06-2025
- Business
- Yahoo
Common tax mistake costing Aussies $1,000 on ATO refund: 'Out of pocket'
The biggest mistakes Australians make "every single year" on their tax returns have been revealed. Tax time is just weeks away, and Aussies are being warned these easy mistakes could cost them hundreds on their refund. Tax Invest Accounting director Belinda Raso told Yahoo Finance she sees taxpayers getting caught out by these mistakes every year. This could be because they have rushed their tax return and done it as soon as July 1 hits, or simply because they don't have all the information at hand. 'A big one is that we automatically go for a shortcut and a shortcut is never in taxpayers' favour,' she said. RELATED Major ATO change just weeks away as taxpayers warned over new rules Centrelink cash boost coming from July 1 for millions of Aussies Aussie teen's job paying $300 per hour without a uni degree Here are the top five mistakes to watch out for. If you are claiming work from home deductions, most Aussies forget to work out both methods to ensure they get the biggest possible deduction. The fixed rate method lets you claim 70 cents for each hour worked from home. The actual cost method requires you to calculate the additional expenses you incur when working from home. It is more onerous, but could give you a better deduction. Raso said people who claimed the fixed rate method often forgot they could make separate claims for expenses the method doesn't cover. The method only covers internet, mobile, electricity, gas, stationery and printing costs. 'So all of your computer equipment, the hardware, the software, your cords, cables, extensions, powerboards, your furniture, everything in that home office is going to be claimable,' she said. 'People that are working from home, even if they are hybrid, are losing hundreds of dollars per year on this alone.' Taxpayers report to the ATO whether they are liable for the Medicare Levy Surcharge. The ATO will also change people's tax returns if they are liable and don't declare it. For the 2024-25 financial year, the threshold to pay the surcharge is $97,001 for singles and $194,001 for families. Raso said she sees mistakes with people saying they are liable for the surcharge, when they actually aren't. This is usually single parent households who think they are classified as singles, but are actually classified as families even if their child isn't living with them. 'The average person could end up paying an extra $1,000 by not actually understanding these rules,' Raso said. Taxpayers can amend their returns if they have made a mistake and they have up to two years less one day from the notice of assessment. The third biggest mistake is made by Aussies who get a reimbursement or allowance from their work. This is particularly for people who have a motor vehicle kilometre allowance. While you can't claim a deduction on reimbursements, your employer might call it a reimbursement when it is technically an allowance. 'A reimbursement when you give an employer a receipt for fuel and they pay that in full. But if they are paying you a kilometre allowance, even if they say it's a reimbursement, it's not, it's just to cover your kilometres,' Raso said. 'If that kilometres is seen on your income statement, you're paying tax on it, so then you should be claiming the deduction against it because otherwise you're going to be claiming tax and just be out of pocket. You can claim what you have actually spent. Other common examples include mobile phone allowances and laundry allowances. Another mistake is not claiming expenses that people use for both work and personal purposes, such as a laptop or computer. Raso said some people mistakenly thought they couldn't claim a tax deduction at all, when in reality, they can apportion the personal use. 'We apportion what percentage we use for personal use and what's work use, and we claim that,' she said. For example, you can state you use a laptop 60 per cent of the time for work and 40 per cent of the time for personal purposes. The final common mistake is not keeping a correct logbook if you use your car for work. If you are travelling over 5,000 kilometres for work, Raso said you should be keeping a logbook. The ATO has two ways to claim deductions for motor vehicle expenses: the logbook method and the cents per kilometre method. The cents per kilometre method allows you to claim up to 5,000 business kilometres per car, per year. The logbook method allows you to claim more than 5,000 kilometres. 'You need to have a valid logbook for 12 weeks straight, which covers all of your motor vehicle usage. Then you need to have all your running costs as well,' Raso said. This needs to be done in the financial year you are claiming, so if you haven't already started on your logbook it would be too late to do in retrieving data Sign in to access your portfolio Error in retrieving data
