Medicare Levy tax slug
Tassie couple with no cover hit with $35,671 bill
MORE than 150,000 Australians throw away money at tax time each year by paying the Medicare Levy Surcharge, rather than taking out hospital cover for the same price or less.
The average surcharge in Hobart (postcode 7000) and Launceston (postcode 7250) was $1953 and $1203, respectively, according to latest Australian Taxation Office data, but some Tasmanians have been slugged more than $17,000 for their complacency.
Canstar group executive for financial services Steve Mickenbecker said he often shook his head. “Why would you not get it (hospital cover)?” he said.
“Surely you would pay the premium and at least get something, rather than pay the government.”
The Medicare Levy Surcharge is a payment of 1 per cent to 1.5 per cent of taxable income applied to individuals who earned more than $90,000 and couples who earned more than $180,000, and who did not have private hospital cover over the previous financial year.
It is calculated pro-rata so taxpayers who have cover for half the year are exempt from half the surcharge.
In 2018-19, the surcharge was applied to 328,574 Australians with a median value of $1027, meaning half paid more than that.
The most hefty surcharges were paid in Marion Bay, Tasmania, where two residents shelled out $35,671 between them – an average of $17,800 just for not having health insurance.
Meanwhile, in New South Wales, a Sutherland resident wasted more than $14,820 and someone in Boggabilla paid in excess of $5300.
Other money wasters were in Paracombe, South Australia ($4883 surcharge), Melbourne, Victoria ($4256) and near Winton, Queensland (more than $3810). All of these people could have avoided this bill if they had hospital cover.
Canstar analysis revealed a 37-year-old (the median age in Australia) living in Queensland and earning a gross annual income of $90,001 could pick up basic health cover from just $837.12 a year, including the 16 per cent Australian Government Private Health Insurance Rebate for under-65s.
Aside from avoiding the surcharge, Mr Mickenbecker said it was often worth having basic hospital cover to avoid or to lock in the start date on Lifetime Health Cover (LHC) loading.
Australians who have not taken out and maintained private patient hospital cover from the financial year they turn 31 pay a 2 per cent LHC loading on top of their premium for every year they are aged over 30. For example, if they start their policy at age 40, it is an extra 20 per cent each year.
This loading applies until the policyholder has held continuous cover for 10 years.
“The claims you can actually make (with basic hospital cover) are very restricted so if you were to go to a private hospital for treatment, you would be up for massive outof-pocket expenses,” Mr Mickenbecker said.
The federal government has raked in more than $5bn from taxpayers with the Medicare Levy Surcharge since 1997.