Hi guys, I do not have private health hospital cover and recently moved jobs, increasing my salary from $80k to $100k. With my leave paid out, I am going to cross the $90k threshold for the MLS this year. I was wondering whether anyone knows if it is worth me getting hospital cover now, to minimise the MLS due at tax time? I am unsure if they pro-rata the MLS or if the 1% rate is "all or nothing". Thanks in advance
Medicare Levy Surcharge - Salary Increase
nick484 on 16/02/2022 - 10:16
Comments
Sorry, I was more interested in the pro-rata for the time I am covered. If I get cover now, will I pay 1% of income / 365 days X days not covered? Thanks for the response
They do pro-rata that too. They ask you how many days in the period you had eligible cover. The 'days' will appear on the Tax Statement you receive from the health fund.
That's great. I guess the best thing I can do now is find some cover asap. Thanks again!
@nick484: not really,
work out how much tax you will owe and work out how might private health insurance is, if the private health is over 1k then it's still cheaper to not have private health
@redfox1200: But you'd still get the benefits of the private health cover, eg teeth clean or glasses if you need it. For healthy people, you pay for the expenses of the sick, that's how insurance works.
Try to find cover you can use.
@redfox1200: Yep, that's how I use my health cover, can't use the other stuff. I know I'm definitely paying into the pool instead of taking value out, which is fine with me, its good to be healthy
@techlead: Extras cover has no influence on avoiding the Medicare levy surcharge, which is the discussion at hand.
@redfox1200: Be aware if you're over 30yo. If you don't have cover from that point on you will pay a loading until you have had 10yrs continuous private cover. Thanks John Howard.
it's not pro rata'd if you cross the threshold you pay the tax
A single person with your own MLS income of:
$90,001 to $105,000, the rate is 1.0%Because it's based on "income" for the year and not "current salary", it is pro-rated.
For example,
If you earn $50K for the first 6 months and then $150K for the other 6 months, you're not paying 1% on $150K.
Total income for the year would be: $50K x 6/12 + $150K x 6/12 = $100K.
It'll be 1% of $100Kthats not what pro rata means.
pro rata would be "i was earning < 90,000 for 9 months, and > 90,000 for 3 months, therefore only 25% of the tax is due"
in this case the OP will earn over 90k for the year and is liable for 100% of the MLS, minus the time covered by private health
The moment you ATI is above $90k, you get whacked fully and wholly. The idea is not to let your ATI above $90k as at 30 June 2022.
I tell my employer to deduct it. Saves the headache of a payment at the end of the year if you do have to pay it. If not, great, some money in the tax return.
I don't have private health besides ambulance as it's just not worth it IMO
Yeah, Ambulance cover has been very helpful for my elderly mother recently…..
Note to all … ambulance cover works differently in different states. In some states you are automatically covered, in other states you need to buy coverage. In the latter cases, PHI includes ambulance cover.
https://compareclub.com.au/health-insurance/ambulance-cover/
The cost of ambulance services varies across Australia.
For example, South Australia doesn't offer any concessions, NSW gives residents a discount, while Queensland residents get free cover across Australia.
Married? Any kids?
Easy decision - 1% of 100k is 1k. If you find a basic hospital cover for less than 1k pa after MLS rebate, you gain.
However the gain might be minimal. E.g. if the cover is $900, you only save pro-rata of 1k-$900=$100pa.. with a 3rd of the financial year left you are looking at saving $30-$40.
But that just encourages crappy health insurance that covers nothing. I would rather give my money to the Government than an insurer who won't give me any benefit.
I'm the same but this is OzBargain.
The garbage tier policies insurers sell simply to allow people to avoid paying the MLS are worthless and just free money for insurers.
But that just encourages crappy health insurance that covers nothing
Believe it or not, that's the point of MLS, is to feed the insurers junk money in order to keep premiums low.
If most people taking out PHI claims more than their premium, where do insurer get the money to pay out claims? That's right, from other people paying premiums.
Without this forceful injection of waste money, PHI premiums become more and more unaffordable. So less and less people take it and less people going to private hospital. This putting pressure on public hospital even more.
MLS goes into consolidated revenue. Each $1 of MLS does not necessary get put into heath services.
Edit: what draksey said https://www.ozbargain.com.au/comment/11772925/redir
At that level you are just purchasing a junk policy.
Fortunately there are plenty of private health insurance companies prepared to sell you a junk policy to prevent any extra money going to public health systems.
Correct! It really pisses me off because I am paying these guys for nothing! It's just going straight to their bottom line. But it's less than the tax I would pay.
The govt needs to sort this shit out as I would rather this money go to consolidated govt revenue than greedy health insurance companies.
Agreed and did this myself for many years to simply minimise tax.
Thanks, that was really helpful (and hopefully accurate).
You're paying it if your gross pay is >$90k this year.
Just get one that costs less than the surcharge ($900)For this year you could try to reduce your taxable income as it sounds it'll be really close to the $90k.
It would involve closely working out what your taxable income is going to be though, if you wind up a dollar over you're up for $900.
No prorata, government designed this to catch you out. One option is to get married before the end of the tax year and the family threshold applies even if you get married at end of the tax year.
My wife and I are 37. If I get a promotion at work we get tipped in to the household income of over $180k so have to pay the MLS. But because we havent had Private cover before, the LHC added on top does not make financial sense just to have basic health care. The cheapest policy I can find is $2100 a year but MLS is $1800. Honestly, can someone explain the logic here? I would have thought there would be incentive to get people ON to private care.
The insurance companies know this and price their policies accordingly.
Bit dodgy when one of their questions is "do you earn over $90k" and suddenly it adds another $150 to the price to bring it only slightly cheaper than the MLS.
Basically the government's way of getting middle to high income people to prop up the inefficient and over weight private health industry (subsidising the older generation's costs).
Yet another transfer of wealth from the young to the old.
Premiums are also priced differently based on your income due to the tier of government rebate you fall into.
Ahhh that makes sense
So we pay tax so the government can pay the private health company so we can pay more tax@Drakesy: Well you know what they say - There are only two things certain in life.
Which is quite fitting given the topic lol.
That's why you claim the highest rebate but of course that means you pay back the rebate at tax time.
At the very least, you won't be charged extra lol
If you are paying $2,100 just for Hospital Cover then yes, it would have been better to just to get hit with MLS but if you have an extra cover and you are using them, you can get the benefit mostly back.
As an example, MBP has this cover where each insurer has $1,500 benefit regardless of what they spend it on provided they are allied services. This cover costs about $7k a year (ignore Govt subsidy) and if you have 2 kids and each of you use $1,500 then $6k out $7k was effectively "returned".
Another way of looking at this is with MLS, the money is gone for nothing extra. At least with PHI, you get something even if you are less likely to use them.
Assuming your income is constantly increasing, eventually you'll be paying more a lot more in MLS than the lowest basic cover of PHI.
you could adopt a child or get a spouse. That makes you part of a family and you therefore get the benefit of the familly threshold. However, kids (and spouses) are expensive!!
They will surely cost you more than the $900+ that MLS will!
I was wondering whether anyone knows if it is worth me getting hospital cover now, to minimise the MLS due at tax time?
Yes, your accountant should know…
are you single or have a spouse?
if single, you get hit with MLS
if couple and your partner doesn't make 90k+ so your total combined is under 180k, you wont be hit with MLS. Make sure your declare spouse on tax return
Can u salary sacrifice into your super for the remainder of the fin year to bring your taxable income down? Someone smarter than me on here might be able to confirm if that works. Then the money is being saved rather than wasted on hosp cover u prop wont use.
as long as it's under the concessional cap for the year - i think it should be as last time i checked that was 20 or 25K pa - around 7k so far and then 10k extra into super. I guess you could maybe stream the leave payout into super as a lump sum? You'd have to check with an accountant, tax lawyer or the ATO though.
It doesn’t work like that. Your Income for Medicare Levy Surcharge Purposes includes salary sacrificed to super.
https://www.ato.gov.au/Individuals/Medicare-and-private-heal…
Can u salary sacrifice into your super for the remainder of the fin year to bring your taxable income down? Someone smarter than me on here might be able to confirm if that works. Then the money is being saved rather than wasted on hosp cover u prop wont use. Then get cover next yr?
No
Just go to https://paycalculator.com.au/ and play around with the Medicare options and numbers. It's pretty accurate.
It also depends a lot on where you live and what sort of hospital system you have. Even if you are young and healthy things happen. My son for instance didn't find it necessary for health insurance and on a morning run rolled his ankle and tore tendons a grade 2 and grade 3 tear which needs surgery. Just even getting an appointment at the public hospital is months away and private won't even give him an appointment unless he has private insurance although they did quote if he could get someone to do it user pay he would be looking at $15,000. If though you live in a city with MUCH better infrastructure something like this would be done through the public system a lot quicker. He is just over the $90,000 threshold so now looking and an old ladies personal opinion whose only experience is life is to get something worthwhile and think of the tax break as a discount. A very useful cover for him is around $1,600/year because of LHC etc but in reality it is only $700 after the tax break.(I do have other examples I won't bore you with)
After all that waffle what I am trying to say is that if you live regional where the public system sucks and you are going to get health insurance get something decent that you can use because the odds are you will use it.
Your age is relevant too. You'll pay an extra 2% in Lifetime Health Cover loading for every year after your 30th birthday where you didn't pay for private health even if you were on $25k/pa at the time. This money that the government forces the insurer to collect by law goes straight into the insurer's pockets. It's not even a bloody tax!
It's based on your "taxable income" for the year (as oppposed to it being % of your 'current income'), so in effect, it is pro-rata'd.