TWO-THIRDS OF SOUTH AUSTRALIANS CONFUSED BY PRIVATE HEALTH & TAX
300,000 SA policy holders at risk of hundreds of dollars in 'lazy tax' this EOFY
The end of financial year is a crucial time for private health insurance but over two-thirds (67%) of South Australians are confused about how private health relates to tax, new research released today by health insurance experts iSelecthas revealed. [1]
June 30 is an important deadline for private health insurance with higher income earners looking to avoid paying extra tax next financial year due to the Medicare Levy Surcharge (MLS) and younger Australians under the age of 31 seeking to avoid being stung with higher premiums later in life due to Lifetime Health Cover (LHC) loading.
The YouGov Galaxy Research study commissioned by iSelect revealed that over two-thirds (69%) of South Australians don't understand the Medicare Levy Surcharge (MLS), with 34% confusing the MLS with the Medicare Levy paid by all taxpayers.
Less than a third (31%) of South Australians correctly understand that the MLS is an additional tax paid by higher income earners who don't have private hospital cover.
Laura Crowden, spokesperson for iSelect, said it was important South Australians understand how the MLS works to ensure they don't get caught out at tax time.
"If you earn more than $90,000 a year and don't have private hospital cover by June 30, then you will have to pay a minimum $900 in extra tax next financial year due to the MLS," Laura explained.
"Exactly how much extra tax you'll pay depends on how much you earn and for most higher income earners, taking out a basic hospital policy will generally cost less than paying the extra tax via the MLS."
The research study revealed high levels of confusion around private health insurance and tax including:
· Two-thirds (66%) of South Australians don't realise that having an extras-only policy won't exempt you from either the MLS or LHC
· Only 13% of South Australians correctly understand that LHC is not a tax. 18% think LHC is a tax, while the majority (68%) admitted they simply didn't know
Around 900,000 Australians currently pay higher premiums due to a Lifetime Health Cover (LHC) loading on their policy as a result of taking out hospital cover after the age of 31.[2] Almost half of South Australian policy holders surveyed (46%) didn't know whether or not they are paying a LHC loading.
"Unlike the MLS, LHC is not a tax. However because the deadline to avoid LHC is June 30 following your 31st birthday, LHC also gets talked during EOFY so its understandable many Australians are confused," Laura said.
The YouGov Galaxy research also suggested that 43% South Australian policy holders or almost 300,000 South Australians could be paying a 'lazy tax' on their private health insurance premiums.
Laura said only 56 percent of South Australian policy holders surveyed were confident they were currently getting a good deal on their health insurance. 28 per cent suspect they 'could probably find a better deal', with further 15 per cent not sure whether or not they are paying more than they need to.
"The lazy tax is one tax we can all avoid this end of financial year simply by taking the time to compare your options and make sure you aren't paying more than you need to."
Laura said many people were put off shopping around because they didn't think it would be worth the hassle but that recent iSelect customer data proved otherwise.
"We asked customers who had recently switched health insurance via iSelect whether or not they had saved and 70 per cent said that they had, with over half of those saving more than $300 a year and a third saving more than $500!"[3]
Laura said the end of financial year is great time to think about private health insurance as many funds are offering generous incentives to attract new customers, such as months free or waiving waiting periods.
"If you already have cover, EOFY should be a reminder to review your cover and make sure you are still getting good value for money. For those without cover, now is the time to think about whether or not you should take it out, particularly if you are a higher income earner or about to turn 31," Laura said.
Laura said South Australians confused about MLS, LHC or private health insurance in general should speak to iSelect before June 30.
"Our private health insurance experts can help you understand how private health relates to tax and explain whether or not you'll be impacted by either MLS or LHC. They can help you compare your options and select a suitable policy from our range of available policies.[4]"
| iSelect's top tips for getting better value on your private health insurance |
1. Opt for a higher excess & save – increasing your excess from $1000 to $1500 will save a family up to $350 a year on their premiums[5] |
2. Look for discounts & freebies – many funds offer discounts for paying via direct debit while others offer free dental check-ups or waive excesses for kids going into hospital |
3. Don't set & forget – not regularly reviewing your policy means you could be paying for things you don't use or not be covered for what you actually need. |
4. Waiting periods are protected – any hospital benefit waiting periods you have already served are protected by law as long as you switch to an equal or lower level of cover |
5. Review your extras – if you don't use them, why pay for them? Consider a flexible extra product that gives you a single annual limit which allows you to get more back on the services you use the most. |
[1] In May 2019 iSelect commissioned a nationally representative consumer research study with YouGov Galaxy Research to assess the attitudes of over 1,000 Australians towards private health insurance.
[3] iSelect Internal Research utilising the Qualtrics Platform. Online interviews conducted among 1022 Australians in March 2019 who had switched health insurance via iSelect.
[4] iSelect does not compare all providers in the market or all the policies offered by its partners. Some policies are only available from iSelect's call centre and others are available only from iSelect's website. Click here to view iSelect's range of providers.
