Tax time myths busted!

Confused by all the private health insurance 'tax time' adverts on air at the moment? Don't panic, we're here to help and we promise to explain it in plain simple English (no jargon here!)

Read on to learn more about the tax implications of private health insurance and find out whether you really need health cover before June 30 or not. 

Tax Time Myths Busted

#1: "Join before June 30 to make a tax saving!"

You’re no doubt being bombarded by this message on TV and radio at the moment, right? Unfortunately, the ‘make a tax saving’ message is a rather ambiguous tactic that many health funds promote, even though it confuses many consumers and isn’t technically true – for this financial year, at least. In reality, if you’re already earning more than the Medicare Levy Surcharge (MLS) income thresholds for the current financial year (2014/15) and choose to purchase private hospital cover before June 30, you are still going to be taxed the MLS in this year’s tax return. The tax saving you’ll make by taking out hospital cover this week will count towards your 2015/16 tax return, so that’s when the tax benefits of your hospital insurance policy will come into play. Essentially, you’re not making a tax saving right now by purchasing hospital cover, but you WILL thank yourself next year. Forward thinking is key!

To find out more about the Medicare Levy Surcharge, view the income thresholds for 2015/16 and learn how you may (or may not be affected), visit our Make a Tax Saving page.


#2: "Crunch time is coming! Take out Hospital AND Extras before June 30 to save tax."

Simply put? Not true. This is another message that some funds use at this time of year in order to promote their combined covers and encourage you to purchase Extras cover in addition to hospital. While naturally, we believe that it is always useful to be covered for Extras services (also referred to as ancillary or essentials in some instances), it is important to note that the Medicare Levy Surcharge (MLS) only applies to private hospital cover. So, if you’re an individual who will be earning over $90,000 in 2015/16 (or a couple or family earning over $180,000) and you intend to join a health fund before June 30 purely to avoid the MLS, private hospital cover should be your priority right now.

To find out more about the Medicare Levy Surcharge, view the income thresholds for 2015/16 and learn how you may (or may not be affected), visit our Make a Tax Saving page.


#3: "Purchase health cover before June 30 to avoid Lifetime Health Cover loading!"

Confused about Lifetime Health Cover (LHC) loading? Don’t worry, you’re not the only one. So firstly, let’s set the record straight. You will only incur LHC if you are aged 31+ and don’t hold private hospital cover in the next financial year. 
The Federal Government introduced the Lifetime Health Cover loading to encourage Australians to take out private hospital cover at a younger age. Basically, it recognises the length of time you’ve had hospital cover and rewards that loyalty by offering lower premiums – so the earlier you take out hospital cover, the cheaper your premiums will be. For every year over the age of 30 that you don’t have private hospital cover, a 2% loading is applied to the cost of your insurance (and increases each year until it reaches 70%). For example, a 37 year old individual purchasing hospital cover for the first time would pay 14% LHC loading. 
For couples and families, your loading is initially calculated based on your respective dates of birth and then halved. For example, a couple aged 33 and 36 years would generate a combined loading of 18% initially (6% + 12%), so the final loading that is applied to their joint policy is 9%. It’s also important to note that LHC only applies to private hospital cover, so if you take out Extras cover after age 31, LHC won’t be applied to that component of your policy.

For more information about LHC and how you may (or may not) be affected, visit our Lifetime Health Cover loading page.


Not sure if you'll incur the Medicare Levy Surcharge?

Try our MLS calculator.

If you would like any further information on hospital cover, the Medicare Levy Surcharge, or Lifetime Health Cover loading, please call us on 1300 13 40 60Alternatively, email us