What you need to know about health cover, June 30 and turning 31
As the end of the financial year draws closer, many of us are so busy digging up old receipts and getting our finances in order that we often forget about the Medicare Levy Surcharge (MLS).
You've probably heard MLS mentioned on ads or by the media, particularly around tax time. But if the term is leaving you scratching your head, you're not alone. In a recent study by health insurance comparison service, iSelect, 26% of Aussies surveyed said they didn't know what the MLS was.
So, let's break down exactly what the MLS is and what private health has to do with the end of the financial year in general.
High-income earners and the Medicare Levy Surcharge
If your taxable income is more than $90,000 a year (or $180,000 for families) and don't have private hospital cover then you'll have to pay a minimum of $900 in extra taxes for the MLS.
So if you're earning above the MLS income threshold and don't have private hospital cover, you won't be able to avoid the MLS this financial year. However, this June might be the perfect time to consider taking out cover to help reduce the risk of being slapped with extra tax next financial year.
Under 30s and Lifetime Health Cover loading
If you don't have hospital cover and you've recently blown out the candles on your 31st birthday cake, you'll pay more for your hospital premiums if you do decide to take it out down the track due to Lifetime Health Cover (LHC) loading.
The longer you wait to take out cover, the more expensive it can become. For example, if you wait until you're 40 to take out hospital cover, you'll pay an extra 20% for your premiums.
So, if you turned 31 during the past year (or are about to) and don't have private health insurance, now is the time to think about taking out hospital cover to avoid paying higher premiums later in life.
Don't set and forget
If you're an existing private health insurance member, you won't be subject to the MLS if you have hospital cover, however, you could end up paying the lazy tax if you haven't reviewed your cover in a few years.
The lazy tax is the money we waste simply because we haven't bothered to shop around.
The end of the financial year is a timely reminder to check you still have a suitable level of cover and are getting good value for money. For example, are you still paying top dollar for pregnancy cover even though you've closed the book on your baby-making days? Or perhaps you got Extras just sitting there that you don't use or plan to use.
While reviewing your policy will allow you to confirm you're covered for what you need, it could also end up saving you money.
June is also a great time to shop around as some funds are offering deals and incentives to new customers such as several weeks free, eGift cards and waiving waiting periods.
So this EOFY, while you're crunching numbers on your tax claim, don't forget to consider private health insurance. While it may seem tedious now, it could be well worth it, especially if you end up saving yourself some extra cash.
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