JULY saw the introduction of means testing for private health insurance rebates, and it's important to check the rebate you're receiving on premiums to avoid an unwanted bill at tax time next year.
Prior to 1 July, the private health insurance rebate was worth a flat 30% for anyone with health insurance. Under the new system, the rebate is reduced progressively over several tiers of income starting at $84,001 for singles or $168,001 for couples (more if you have kids).
The rebate cuts out altogether if you're a single earning more than $130,000 annually or part of a couple with combining annual income over $260,000.
It's estimated that around 200,000 health fund members prepaid their premiums ahead of these changes to avoid missing out on the full rebate for the current financial year. If you didn't take this approach and you're paying premiums by the week or month, you need to let your health fund know what your rebate should be.
This involves estimating your income for the current financial year and deciding which rebate tier you fall into. The government's Private Health website (www.privatehealth.gov.au) has more information - or ask your health fund for details.
If you don't update your rebate entitlement, you could end up owing the government money when your tax return is lodged next year. That makes it worth a call to your fund to update any details that could affect the rebate you're receiving.
Along with means testing the rebate on health insurance premiums, the government has also upped the Medicare Levy Surcharge (MLS).
The MLS is an extra cost on top of the normal Medicare Levy of 1.5%. It's designed to encourage high income earners to have private cover so it only applies if you don't have health insurance. The MLS starts as an extra 1% of taxable income if you're a single earning over $84,000 annually, or $168,000 for couples, it then rises to 1.5% over several income bands.
Between the rebates and the MLS you could be forgiven for thinking health insurance is all too complicated. But you could save money by having private health cover in place.
Research group Canstar crunched the numbers and found a single without health cover earning $92,000 annually could be slugged with a MLS of $920. Yet there are a number of policies available costing less than $70 a month, or $840 annually. That's a yearly saving of $80 by having private cover.
The decision to have health insurance shouldn't just be about avoiding government charges. One of the main advantages is being able to jump the queues for elective surgery, which can be lengthy in the public system.
According to the Australian Institute of Health and Welfare the median waiting time for elective surgery in public hospitals is around 36 days. It can be as long as 74 days for eye surgery or 63 days for an orthopaedic operation. In some cases the wait can be much longer than these.
The key is to choose a health policy that suits your needs as well as your budget.
Paul Clitheroe is a founding director of financial planning firm ipac, chairman of the Australian Government Financial Literacy Board and chief commentator for Money magazine. Visit www.paulsmoney.com.au for more information.