Get better health cover – or pay extra

GETTING a pay rise and getting older are two of the biggest private health insurance issues that can sting Australians at the end of the financial year.

June is one of the busiest months of the year for private health, and financial experts say strict government rules mean that decisions may need to be made before June 30.

The Medicare Levy Surcharge is an extra tax of up to 1.5 per cent on the entire annual income of a person earning more than $ 90,000 a year or a couple earning more than $ 180,000 if they don’t have hospital cover.

For high income earners, this can make it cheaper to pay health insurance premiums rather than the extra tax.

You need hospital cover for the entire year to avoid the surcharge, and you can’t try to lower your income through taxdeductible super contributions or negative gearing rental property losses, because these get added to taxable income when assessing the surcharge.

“Taking out hospital cover by June 30 will enable a higher income earner to avoid paying the Medicare Levy Surcharge next financial year,” said iSelect spokeswoman Laura Crowden.

The other June 30 deadline – for Lifetime Health Cover – affects people from their early 30s with a 2 per cent loading on health insurance premiums for every year they are over 30.

Ms Crowden said the maximum loading was 70 per cent, and it was removed after 10 years of continuous cover.

“That is a hard deadline. If you miss it, there’s no way around it,” she said.

“Take time to review your options ahead of June 30.”

Consumer group Choice spokeswoman Nicky Breen said the end of the financial year could be a confusing time for people aged over 31 who were considering health insurance.

“It pays to look past the marketing spin and hype, and consider whether or not you really need health cover,” she said. Ms Breen said top level hospital cover with an increased excess was often better value than a reduced level of cover.