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Tax filing time is approaching, if you want to maximize your tax filing rate, you may want to look at your private health insurance, or not.
By paying for private hospital insurance, lower- and middle-income Australians can save on taxes-those with an annual income of more than $90,000 may save the most.
“There are many arguments for and against private health insurance. But one thing most people agree on is that paying for private hospital insurance can save most Australians some tax,” explains Kent Griffin from an etax accountant.
“This is because the Australian government has designed a system that uses taxation to’encourage’ everyone to obtain private insurance, even if we have a national healthcare system-medical insurance.
“If you don’t have private insurance, then as your income increases over time, the extra taxes you pay to the government will increase so fast that it may be cheaper to get private insurance than to pay additional taxes.”
Health insurance means you can avoid Medicare Levy Surcharge
If you do not have private health insurance, you will be referred to as an additional tax on the medical insurance surcharge (MLS), which is an additional tax in addition to the medical insurance tax.
Almost all Australians pay 2% of their taxable income as medical insurance tax. The money will be used to fund part of the public health care system.
Vince Scully, founder of Life Sherpa, an online financial planner, explained: “If your income exceeds a certain threshold, that is, $90,000 for a single person and $180,000 for a couple, then buying private health insurance is one thing. A great way to save taxes.”
“The surcharge can vary from 1% to 1.5% depending on your situation. Basic hospital insurance can be purchased at a lower cost than MLS without it,” he added.
You will be entitled to a private health insurance rebate
Private health insurance rebates are the amount the government pays for your health insurance premiums based on your income. The tax refund can be paid to you as part of your tax return, or it can be used to reduce insurance premiums throughout the year.
Eligibility for health insurance rebates depends on income and age. Individuals whose single income does not exceed $140,000 or whose household income does not exceed $280,000 and are entitled to Medicare can apply.
If you are entitled to it, it is important to understand that if the average premium increase of all health insurance companies is higher than the consumer price index, your annual rebate will be reduced.
Based on your income, this year’s rebate is up to 24.6% of health insurance under 65 years of age.
related: Budget healthcare reform could save Australians millions of dollars
If you are 31 years of age or older, you can avoid lifelong health insurance loading
If you fail to purchase (or keep) private hospital insurance before your 31st birthday, the Lifetime Health Insurance Surcharge (LHC) is a financial burden paid on the basis of the policy. For each year you are over 30, this is equivalent to 2% of the annual policy cost, up to 70%.
Jessie Petterd, a spokesperson for the insurance comparison website iSelect, explained: “There are currently about 1 million Australians paying higher premiums due to the LHC burden of hospital insurance policies.”
“Because of the LHC compound, the longer you wait, the harder it will be to afford it in later life.”
related: The main warning for caring for your teeth
Why switch health insurance before the end of the fiscal year?
At this time of year, switching health insurance seems to require a lot of effort. For some people, it may not be worth it, but for others, simply walking around can mean saving up to hundreds of dollars a year.
Ms. Petterd explained: “EOFY is a good time for everyone to review their financial situation and find ways to save money or maximize tax returns in the coming year.”
“It’s time to do a’financial health check’ for yourself, by checking all bills and expenses (including health insurance) to make sure you start the new fiscal year in the right way.
“Many health funds currently also offer discounts and introductory offers, such as waivers of waiting periods or months of free periods, so now is a good time to shop around.”
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