‘Do I need Private Health Insurance to save on tax?’

A very common question I am asked, ‘why am I paying The Medicare levy when I have private health insurance?’

There are two levy’s Medicare levy and Medicare levy surcharge.

The Medicare levy helps fund some of the costs of Australia's public health system known as Medicare. The Medicare levy is 2% of your taxable income in addition to the tax you pay on your taxable income, most Australian tax payers pay this.

In 2021–22, you do not have to pay the Medicare levy if your taxable income is equal to or less than $23,365 ($36,925 for seniors and pensioners entitled to the seniors and pensioners tax offset (SAPTO)).

You may qualify for an exemption from paying the Medicare levy if you were in any of the following three exemption categories at any time in the financial year:

• Meet certain medical requirements

• Are a foreign resident

• Are not entitled to Medicare benefits

The Medicare levy Surcharge is an additional levy if you, your spouse and your dependent children do not have an appropriate level of private patient hospital cover and you earn above a certain income. For singles $90,000 and for families $180,000 (plus $1,500 for each dependent child)

The Medicare levy Surcharge rate is 1%, 1.25% or 1.5% this is levied on:

• Your taxable income

• Total reportable fringe benefits, and

• Any amount on which family trust distribution tax has been paid.

Your private health insurance statement you receive from your insurer includes information that relates to the Medicare levy surcharge. This will include the number of days that your policy provided the appropriate level of private health hospital cover, this needs to be for the full 365 days of the financial year to not be liable for the Medicare levy surcharge.

If you decide to take out private health insurance and you are over 30, you will pay a 2% loading on top of your hospital premium for every year you are aged over 30.