The lead up to June 30 means doing a lot of things you wouldn’t normally do. You rummage for receipts, you use a calculator for the first time since year 12 and for one in five uninsured Australians, you start to think about the tax benefits of private health insurance.
Hospital picture from Shutterstock
This is even truer of younger Australians, with over a third of 18-31 years old Australians looking to secure a policy before June 30, according to a recent iSelect/Ipsos survey.
But what is the real reason for this mad rush? Why does the mere mention of the phrase “End of Financial Year” turn us into the equivalent of fashionistas at a Boxing Day sale, madly scrambling for purchases like the world is about to end?
The reason is tax benefits. The federal government encourages Australians to take up private health insurance by effectively taxing those without it through the Medicare Levy Surcharge (MLS) and Lifetime Health Cover (LHC) loading.
The Medicare Levy Surcharge (MLS) is an additional tax levied on those who don’t have health insurance and earn above $90,000 for singles or $180,000 for families and couples. The Lifetime Health Cover (LHC) loading is a two per cent loading payable on top of your premium for every year you are aged over 30 and do not hold private health insurance.
Basically, LHC loading means that if you’re 31 or older and wait until after June 30 to take out private health insurance for the first time, you’ll pay two per cent more than if you had taken it out before you turned 31. A forty year old taking out private health insurance for the first time will pay 20 per cent more.
For those of you who are uninsured, there is no need to “panic-buy” a policy… even if you are about to turn 31 (happy birthday by the way). But given there are over 34,000 different policies currently available in Australia, where should you start?
Instead of trying to go it alone, run through this checklist to help you secure the best value policy to suit your own unique circumstances.
Only hospital cover delivers tax benefits Taking out an extras only policy will not deliver any tax benefits, such as excluding you from the Medicare Levy Surcharge. If you are looking to save on tax, make sure your private health insurance includes hospital cover.
Think about your current and future health needs Speak to a private health insurance expert to discuss your life stage. This ensures you take out the right policy that covers you for everything you need and so you are not paying for things you don’t need. For example, you wouldn’t want to be a 25 year old covered for dentures or a grandmother insured for IVF.
Opt for an excess or co-payment If you don’t think you’ll require hospital admission in the near future, choosing a co-payment option or an excess (such as a $500 excess) will bring down your monthly/annual premium.
Review the extras If you don’t think you’ll use them, why pay for them? Also consider flexible extras products that combine your separate extras limits into a single annual limit for you to use across different services.
Make sure ambulance is covered Not all private health insurance policies include ambulance cover and it can also vary by state. Make sure your policy includes ambulance cover or you could be left thousands out-of-pocket in the unfortunate case that you require an emergency ambulance ride.
Look for payment discounts Some providers offer a discount for paying by direct-debit. Similarly, paying 12 months of premiums upfront can see you avoid the annual premium increase.
At the end of the day, choosing a private health insurance policy is one of the most important things to get right. After all, it’s about more than just saving money — it’s about insuring your most valuable asset of all, your health.
Reminder: For specific tax advice relating to your individual situation, consult a registered professional.
Matt Cuming is head of corporate affairs for product comparison service iSelect.