Health cover’s tax jab

AVERAGE earners are facing a tax hike of $450 because health fund premiums have risen so fast they have counteracted a tax penalty that forces people to buy health insurance.

Instead of working to get their premiums under control to keep insurance attractive health funds are asking the government to increase the base rate of the penalty from $900 to over $1350 in the May Budget to force people to insure.

To encourage people to buy private health insurance, the Government applies a 1 to 1.5 per cent Medicare levy surcharge on individuals earning more than $90,000 and families earning more than $180,000 if they don’t take out private cover.

The penalty, introduced by John Howard, was originally designed to hit the rich but it’s now affecting average earners, with the average male wage now $90,000 a year.

Premiums have been rising by more than twice the inflation rate for years and Finder.com says the cheapest policy available in NSW, Victoria, South Australia, Queensland and Tasmania costs $962 a year.

This means it’s cheaper for many people hit by the government tax penalty to pay the $900 a year than buy a health fund policy to avoid it.

To fix the problem health funds want the penalty raised by 0.5 per cent or at least $450.

More than one in three people with private health insurance report that minimising their exposure to the tax penalty is an important reason they buy health insurance.