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Tax implications for having a private health insurance cover

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Australia enjoys one of the best health systems in the world. Australian government has taken several initiatives to encourage its citizens to have a private health insurance. 

Australian government encourages its high-income earners to have a private health insurance as well as to pay the 2% levy to raise a fund for Medicare and National Disability Insurance Scheme. If any one of them will not take a private health insurance, he or she has to pay a tax penalty called Medicare Levy Surcharge. Most of the Australians commonly take out private health insurance to avoid this financial penalty.

Lifetime Health Cover (LHC) is another initiative of Australian government. The aim of LHC is to encourage Australians to take out private hospital cover earlier in life, and maintain that cover through their lifetime. In Australia people under-31-year-olds take out private health insurance to avoid paying a lifetime health cover loading. Because lifetime health cover loading takes effect by July 1 following their 31st birthday and if they don’t take out private insurance before 30, they have to pay an extra 2% for every year.

Another initiative is Australian Government Private Health Insurance Rebate. Most Australians with private health insurance currently receive a rebate from the Australian Government to help cover the cost of their premiums and the main advantage is that the private health insurance rebate is income tested. Which means the level of your rebate depends on your annual taxable income and the number of dependent children you have. All the Australian Citizen or Permanent Resident is able to have this facility if they take out private health insurance cover with a registered fund.

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