It is getting close to 30 June, and advertisements will flood the airwaves regarding getting private health insurance to avoid a large tax bill – but is this really true?
The first thing to note is that outside of any tax considerations, private health insurance can provide important benefits for people. It allows you to choose your hospital and doctor and can cover stays at private hospitals as well as helping fund optical, dental and other medical fees (assuming extras cover is taken out).
However many clients want to know how private health insurance impacts their tax. Private health insurance can help taxpayers avoid paying a 1% Medicare levy surcharge if their income is above $90,000 (or $180,000 for couples). This tax is avoided if the taxpayer and their dependents (i.e. spouse and children who are still dependents) have hospital cover. This tax is also pro-rated, so if you are not covered for part of the year, you will be liable for the surcharge for that period of the year. So depending on your personal or joint incomes, having private health insurance might save you $900 or $1,800 in taxes or above.
However if your incomes are below these thresholds, having private health insurance does not save you tax as you would not be eligible for the surcharge. It also does not help you avoid paying the 2% Medicare levy that is payable by most taxpayers.
As such, although tax considerations are there, the most important factor is whether private health insurance will provide you with the non-tax benefits that you need. Crucially, it is cheaper to take out the younger you are, so it something everyone should consider when they start working.