Private Health and Tax Help

[Tinsel]

I need some advice, information, whatever you can give me.

DH and I are late 30's and decided not to get private health insurance and just save the money in our account for health appointments. This has worked well so far but now we have two kids and I'm thinking we might need private health insurance. DD1 has just had months of physio and we are making an appointment to see a hand surgeon for her.

A friend of mine told me we need basic private health insurance so we don't pay so much at tax time. I never thought we paid that much anyway. What actually is the difference?

I am now a stay at home mum so we will only be on one income anyway so we wouldn't be paying Medicare Levy (?) but my friend told me that we are taxed in our pay.

I find this whole thing confusing. I did an online quote the other day and the minimum was something like $1900 per year (that included physio, optical) but there is no way that we would pay that much in full fees per year or with medicare levy.

Sigh, I don't know. I think I need someone who knows what they are talking about to give me a 'dummies' fact sheet on this stuff. Help!

[M D]

If you earn over a certain amount and don't have Private health insurance the. You get charged and extra 1%Medicare levy and it is normally cheaper to have private hospital cover than being charged the Extra levy with the benefit of having the cover. The amount you have to earn as a family is quite high well over $100k just google it and I'm sure you'll find the figure.(I'm on my phone otherwise I would). Then there is extras cover which covers things like physio, you can have extras without having hospital.

[briggsy's girl]

there is the generic medicare levy, which we all pay (well, most) - then there is the medicare levy which is an additional 1.5% (i think) if you're over a certain income bracket and don't have hospital cover

[anney]

go to a site called iselect. they have a calculator on how much extra medicare levy you will pay if you don't have private health insurance. Your friend is correct, I am fairly sure all taxpayers pay a medicare levy but then those that don't have private health insurance pay an extra levy.
when I was young and single, I did what you are doing ie. put money away in a separate account in case I needed it for health reasons. but after having a child, I got health insurance.

[Pandora]

The Medicare levy is paid by everyone (most people, in some circumstances you can get an exemption)
It is not related to PHI

The Medicare levy surcharge is and additional 1.5% again which you pay if your combined income exceeds a certain amount and you don't have PHI. For 2010-2011 this was $154,000

If your income after tax deductions was 154,000 and you had no health insurance your Medicare surcharge would be $2310

If your combined income was less than that, you wouldn't have to pay the surcharge

[Mildez]

Don't you get a certain percentage back at tax taime also? Like 30%. I think thats what happened to me last year it reduced my taxable income so I ended up getting a little extra back in my tax return.

[LizLemon]

^^^ Pretty much what Pandora said.

Don't you get a certain percentage back at tax taime also? Like 30%. I think thats what happened to me last year it reduced my taxable income so I ended up getting a little extra back in my tax return.

You do, UNLESS you have already taken the 30% rebate as a reduction in premiums, which a lot of people do. The health funds like to quote you "after rebate" as it makes the premium lower and thus more attractive.

[Floweryfields]

there is the generic medicare levy, which we all pay (well, most) - then there is the medicare levy which is an additional 1.5% (i think) if you're over a certain income bracket and don't have hospital cover

I think the income is $80 000 for a single, so not sure what it is for a couple. In the end you really do have to weigh up how much you will use versus the cost of PHI versus any savings at tax time.
You also need to be aware that most PHI has limits for how much you can claim for each 'area' in a year. So you might only be allowed $1000 (eg) for physio per year and still have to pay full price for anything over that. PHI also doesn't cover all costs - so when I go to the chiro, I pay $20 instead of the $45 full fee.
For the hand surgery, it will be deemed an existing illness, so you will have to wait 12 months to be covered for that (can you wait 12 mths to have it done?) and depending on the PHI you may have a hospital excess and also the surgeon may charge above the scheduled fee and therefore still have a gap for him.
There's a lot to consider.

As for your friend saying you are taxed for the medicare levy in your pay, that's not right, it's added on at the end of the financial year when you do your tax return and is calculated on your taxable income (so after any allowable deductions).

[LizLemon]

As for your friend saying you are taxed for the medicare levy in your pay, that's not right, it's added on at the end of the financial year when you do your tax return and is calculated on your taxable income (so after any allowable deductions).

The tax tables - ie the basis for what your employer takes out of your pay on a weekly/fortnightly/monthly basis will usually include the medicare levy (the one that most people pay). It will not include anything for the medicare levy surcharge. Perhaps that is where your friend is confused.

When you do your tax return at the end of the year any deductions that you may have are taken into account and the correct tax, medicare levy and any applicable surcharge are calculated (plus any rebates etc) and that is what generally results in a tax payable or refund at tax time.

But Ausgirl makes a really good point - it's not only any tax consequences that you need to consider, it is also how much you will get back, any excesses on claims and waiting periods.

[Tinsel]

Thank you everyone. It makes a little more sense to me now and I will look into it further.

[Astrid]

Most people are pretty close, but here is what is says about the Medicare Levy from the ATO:
Guide to Medicare levy

Guide to Medicare levy

Overview
Medicare is the scheme that gives Australian residents access to health care. To help fund the scheme, most taxpayers pay a Medicare levy of 1.5% of their taxable income.

We will work out your Medicare levy, including any Medicare levy reduction, from the information you provide on your tax return. If you want to work out your Medicare levy, you can use the Medicare levy calculator.

Reduction for people on low incomes
Your Medicare levy is reduced if your income is below a certain threshold. For 2009-10, your levy is reduced if your taxable income is $21,750 or less, and you don't have to pay the levy at all if your taxable income is $18,488 or less. The thresholds are higher for seniors. If your income is above the thresholds, you may still qualify for a reduction based on your family taxable income.

Medicare levy exemption
You may be exempt from paying the Medicare levy if you're a foreign resident, a resident of Norfolk Island, not entitled to Medicare benefits, or you meet certain medical requirements. If you're entitled to an exemption you need to tell us on your tax return.

Medicare levy surcharge
You have to pay the Medicare levy surcharge (MLS) if your income is above a certain threshold and you - or any of your dependants - don't have appropriate private patient hospital cover. In 2009-10 the surcharge may apply if your income for MLS purposes is more than:
$73,000 for a single person with no dependants
$146,000 for a couple with no children or one dependent child, plus $1,500 for each additional dependent child.

To work out your income for Medicare levy surcharge purposes, refer to our Income for (Medicare levy) surcharge purposes calculator.
The surcharge is in addition to the 1.5% Medicare levy. The Medicare levy surcharge is 1% of:
your taxable income
your reportable fringe benefits, and
any amount on which family trust distribution tax has been paid.