As a High income earner it is often suggested that you take out private hospital cover in order to reduce the burden on the public system. If you don’t do this, then the Medicare levy can cost you a large amount of money.
The Medicare Levy Surcharge.
People earning $90,000 or more ($180,000 or above for families) are required to pay an additional 1-1.5% of their annual income to the government (over the top of the existing 2% Medicare contribution that you already pay).
Medicare Levy Surcharge Rates (sourced from the ATO)
* The family income threshold increases by $1,500 for each Medicare levy surcharge dependent child after the first child.
As an example:
Sam is 29, lives in Victoria and earns $160,000 a year, and without private hospital cover she will pay 1.5% ($2,400) of her taxable income to the government because of the Medicare Levy Surcharge.
Sam decides to take out a good private hospital cover plan costing her $1,500 for the year and also eligible for the Australian Government Private Health Insurance Rebate (8.93% of his hospital cover). As Sam has private hospital cover, she does not have to pay the Medicare Levy Surcharge.
This rebate brings down the cost of private hospital cover to $1,366 total cost to Sam for the year and means that instead of paying $2,400 for the Medicare Levy, Sam pays $1,366 for a good hospital cover policy and saves $1,033 per year ($2,400-$1,366).
If you make a good income and can afford a good private plan with minimal gap costs and good benefits then maybe this is a good way to go to get better service and also pay less.
We suggest that you do some research and find out what plan works for you. Please find some links below that have useful interactive tools that can help you decide if private health makes sense for you.
When choosing your private health cover option, we suggest it’s good to take your time and concentrate on getting yourself and your family an affordable policy that provides everything that you need.
ATO: Medicare Levy
Guardian: Interactive health insurance calculator
Health Insurance Comparison: Choosing a health fund
PrivateHealth.gov.au: Lifetime Health Cover Loading calculator
PrivateHealth.gov.au: Health Insurance Explained