As the first day of April approaches, many are bracing for a variety of pranks and hoaxes for April Fool’s Day, but for 15 million Australians with private health insurance, the date marks no laughing matter. Instead, it heralds a significant price hike in their premiums, the largest since 2018, with an average increase of 3.73 per cent. This government-approved rise has prompted a wave of concern, leading some to contemplate whether to maintain their health insurance policies or not.
However, the Australian Taxation Office (ATO) has issued a stern warning to taxpayers, urging them to think twice before making any hasty decisions.
The ATO’s cautionary advice comes with a reminder of the potential tax implications that could arise from taxpayers cancelling their private health insurance.
The taxation office’s message is clear: ‘Hold on.’ Before you decide to drop your health insurance, consider the Medicare Levy Surcharge (MLS) that may apply if you’re without appropriate private health cover for the full income year and earn above a certain threshold.
For singles earning over $97,000 and families with incomes exceeding $194,000, the MLS can range from 1 to 1.5 per cent of your income. This surcharge is an additional charge on top of the standard Medicare levy and is not covered by the tax withheld from your pay throughout the year.
‘This means, if you need to pay it because you’ve cancelled your health insurance, you might end up with a bill at tax time,’ the ATO explained.
The ATO’s warning is timely, as research from Finder indicates that 16 per cent of Australians—roughly 3.3 million people—plan to cancel their health insurance policy by 2025. Meanwhile, only 41 per cent are committed to staying with their current insurer, and another 16 per cent are considering switching to a better deal.
The financial impact of the premium increase is not insignificant. For a single person on an average-priced gold hospital policy, the hike could mean an additional $110 annually, while families could see their premiums rise by an average of $217 per year.
The decision to forgo private health insurance and accept the MLS is one that nearly one in five Australians have made. But is it a wise choice? According to Mark Chapman, director of tax communications at H&R Block, the answer isn’t straightforward.
‘Obviously, private health insurance is quite expensive and the Medicare Levy Surcharge is quite expensive, so there isn’t an easy option. It depends on the quote you’ve been given by the health fund provider and it depends on whether you think you are likely to have something that will require you to claim,’ he said.
Chapman emphasises the importance of ‘work[ing] through the numbers’ to determine whether taking out private health coverage is financially beneficial or not.
As you navigate these changes, it’s crucial to stay informed and consider all factors before making any decisions regarding health insurance. The ATO’s alert serves as a reminder of the broader financial picture and the importance of understanding the tax implications of your choices.
We at YourLifeChoices encourage our readers to share their experiences and strategies for dealing with health insurance costs. Have you found ways to save on premiums, or have you decided to take the hit of the Medicare Levy Surcharge? Share them with the community in the comments below.
Also read: The ATO issued a $20,000 warning to some Australians. What does this mean for you?
My wife and I are with HCF, where our prtemium was , for Extras only, $45.48/ month. We have recently moved to Qld, and our new premium is $73.23, that is a jump of 61%!! We wouldn’t use ordinarily $878 per year on optical and denta without HCF rebate.l. We might compare, or drop the whole thing.