As the financial year during draws to a close, financial research group CANSTAR warns that some high income families could be in for a nasty tax bill if they have not manually reduced the private health insurance tax offset that they are claiming.
“This is the first financial year in which the Government’s private health insurance rebate has been means tested,” says CANSTAR Research Manager, Mitchell Watson.
“While some consumers claim their 30% rebate when they submit their tax return, many people claim the rebate in the form of reduced monthly premiums. If they haven’t realized that they will be caught by the new means testing – and haven’t reduced the amount of rebate they are receiving – they could be in for a tax bill.”
Means testing
The income test threshold kicks in for families at $168,001 and is applied at progressive rates up to $260,001. The amount of rebate a family is entitled to depends on age as follows:
Based on CANSTAR’s research of average annual premiums for a family package (hospital plus extras) policy on a state-by-state basis, CANSTAR calculates that high earning families who were previously receiving a 30% rebate and have not manually reduced this amount could be in for the following liability at tax time:
Traps
Mr Watson observes that the income test for the private health insurance rebate involves more than just taxable income.
“Some families could get caught out, assuming that they won’t trigger the reduction in rebate because their combined taxable incomes are less than $168,000,” he says.
“The income test that applies for this rebate is more comprehensive though – it also includes reportable fringe benefits, net investment losses and reportable superannuation contributions. When those items are all added in, families might discover thattheir total earnings are higher than they thought!”
Tips
CANSTAR urges consumers to check their likely income levels. “The tax office has some excellent information on their website to help taxpayers calculate their income in relation to the rebate,” says Mr Watson.
“It’s worth checking this out because the rebate is a sudden death thing: one dollar of income over the threshold and you could suddenly be looking at several hundred dollars-worth of tax liability.”
Mr Watson also encourages consumers not to drop their cover. “The median waiting times for elective surgery in public hospitals can significantly impact on patients’ quality of life,” he says.
“There are several thousand unfortunate people who stay on the waiting list for over a year. Our public system is great if you have a life threatening emergency – but you do not want to be uninsured when it comes to elective procedures.”
For savvy shoppers there is money to be saved.
“Each year we undertake an annual comparison of health insurers around the country; our most recent analysis compared over 10,000 quotes from 1,200 products and compared them against 11 profiles across seven states and territories,” says Mr Watson.
“There is no one-size-fits-all policy and consumers will all have different insurance needs. Premiums for the same level of cover do vary between providers though – it is worth doing some research.”
Consumers can download the CANSTAR health insurance star ratings report on www.canstar.com.au. The report is an immensely valuable resource for those who are serious about comparing health funds and products to determine the best value for their health insurance dollar.
