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Medicare vs Private Health Cover

my tax refund today - medicare

Medicare is Australian government funded way to take care the health of all Australians. It covers the Australians’ medical treatments in public hospitals like different tests, scans and emergency situations and usually no bill is charged to the patient. However, looking towards the other side of the coin, patients might have to wait long hours or long waiting appointments for their treatments.

In the ATO regime, Australians currently pays 2% of their taxable income as Medicare levy.

However, people who earn above a certain level, they are encouraged to take private health cover to reduce the burden on the public health system.

Private health cover can be either from Hospital Cover or General Cover (Extras) or the combination of both.

Hospital covers for doctors, overnights room stay, theatre cost and other treatments where extras are for the other services such as physio, dental or optical.

Most of the private health cover polices are the combination of both services.

Where the income of an individual exceeds $90,000 and in case of families $180,000, an additional 1-1.5% Medicare levy surcharge is applied on the annual income. Below is the income threshold and the respective applicable rates for the calculation of Medicare levy surcharge.

* The family income threshold increases by $1,500 for each Medicare levy surcharge dependent child after the first child.

Medicare Levy Surcharge rates (sourced from the ATO)

Where a person is earning good income, a high value comprehensive private plan which covers both the hospital and extras is usually more suitable to generate tax savings. On the other hand, a tax payer earns an average or lower income, a hospital cover private health can result in a bigger tax refunds.

In conclusion, the selection of private health cover is a complicated decision. The pros and cons to be considered in this selection comprises the following:

  • Out of pocket financial cost to the service
  • Possible tax gains
  • Access to better private facilities and services

Range of strategies that can be applied in selecting the private health cover are

  • Doing proper research
  • Seeking advice or opinion from colleagues, friends and family
  • Discusses with health professionals

Make a checklist of your requirements and match it with the offers of different private health cover.

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