Private Health Insurance 

High earners might consider whether health insurance can save tax. 

High income earners can be charged an extra 1% tax known as Medicare Levy Surcharge.

The Surcharge is payable by singles without dependents who earn more than $50,000 and families without dependents that earn more than $100,000 in a tax year that they do not have adequate private patient hospital insurance.

The income threshold increases by $1,500 for each child (but not the first child).  The income calculation adds any fringe benefits received.

The levy was introduced in 1997 and is equal to 1 per cent of a person??s taxable income.  It is paid in addition to the 1.5 per cent Medicare Levy.

Changing circumstances such as a pay rise or higher-paying job, a large bonus, a higher dividend or reduction in allowable deductions can result in people suddenly falling into an income bracket that exposes them to the Surcharge.

Until recently, fringe benefits received were not reported on tax summaries from employers ?? this is one of the reasons for their disclosure.  They are part of this calculation.  One component of taxable income is the imputation credits on a franked dividend.  It is also included in the surcharge calculation.

In the case of an individual with a taxable income of $60,000 a year it is possible to buy a basic level of cover for about $500 with a $250 excess ?? assuming the Government 30% rebate is used to reduce the premium.  Reducing the premium, rather than taking it as a tax refund, will obtain the saving earlier.  This is personal preference ?? some taxpayers prefer to pay earlier and receive a larger refund.

This would lead to an annual tax saving of $100 on the $500 investment ?? a 20% pa return in this example.

Even greater savings can be made by choosing cover with a higher excess or shopping around for a cheaper insurance provider.

The saving will also be greater for people on higher incomes.

Savings increase by $100 for every $10,000 increase in income.  So, in this case, someone earning $90,000 would save $400 a year.

Your tax agent can help with the tax calculation ?? you need to assess the differences between funds.  And after this saving, there is also the extra reimbursement of any hospital expenses.

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