As part of the 2012 Federal Budget, the Federal Government proposes to means test the government rebate on private health insurance payments paid on or after 1 July 2012. For those adversely affected, prepaying your private health insurance before 1 July 2012 could save you real money! The Federal Government also propose to means test the Medicare Levy Surcharge levied on individuals without private insurance hospital cover. These measures and what you should do is discussed below.
Private Health Insurance Rebate
For payments of private health insurance from 1 July 2012, the rebate will depend on the age and “adjusted taxable incomes” (see below) of singles and families.
The changes will adversely impact:
- Singles aged under 70 years of age with an adjusted taxable income of more than $84,000
- Singles aged 70 and over with an adjusted taxable income of more than $97,000
- Family members aged under 70 years of age with a family adjusted taxable income of more than $168,000
- Family members aged 70 and over with a family adjusted taxable income of more than $194,000
For these purposes adjusted taxable income is calculated as your taxable income, adjusted to include fringe benefits, tax free pensions, tax exempt foreign income, reportable super contributions and total net investment losses, less any deductible child support expenditure.
The tables below show the revised rebate rates.
Singles (single on the last day of the year and have no dependants)
| Adjusted Taxable Income | ||||
| Age | Up to $84,000 | $84,001 – $97,000 | $97,001 – $130,000 | $130,001 or more |
| Under 65: | 30% | 20% | 10% | 0% |
| 65-69 years: | 35% | 25% | 15% | 0% |
| 70 and over: | 40% | 30% | 20% | 0% |
Families (if you have a spouse on the last day of the income year, or are a single parent with one or more dependants)
| Adjusted Taxable Income | ||||
| Age | Up to $168,000 | $168,001 – $194,000 | $194,001 – $260,000 | $260,001 or more |
| Under 65: | 30% | 20% | 10% | 0% |
| 65-69 years: | 35% | 25% | 15% | 0% |
| 70 and over: | 40% | 30% | 20% | 0% |
Note: The family income thresholds are increased by $1,500 for every dependant child after the first child.
Medicare Levy Surcharge
The same adjusted taxable income criteria will also be used to determine an individual or family’s exposure to the Medicare Levy Surcharge from 1 July 2012. The rate of the Medicare Levy Surcharge will be means tested and taxed up to a maximum of 1.5% as per the tables below.
The changes will adversely impact:
- Singles with an adjusted taxable income of more than $97,000
- Family members with a family adjusted taxable income of more than $194,000
Singles (single on the last day of the year and have no dependants)
| Adjusted Taxable Income | ||||
| Up to $84,000 | $84,001 – $97,000 | $97,001 – $130,000 | $130,001 or more | |
| All ages: | 0% | 1.0% | 1.25% | 1.5% |
Families (if you have a spouse on the last day of the income year, or are a single parent with one or more dependants)
| Adjusted Taxable Income | ||||
| Up to $168,000 | $168,001 – $194,000 | $194,001 – $260,000 | $260,001 or more | |
| All ages: | 0% | 1.0% | 1.25% | 1.5% |
Note: The family income thresholds are increased by $1,500 for every dependant child after the first child.
What can you do? What should you do?
If you would be adversely affected by these measures, you should consider:
- Prepaying your annual private health insurance before 1 July 2012 to maximise the private health insurance rebate available to you (on a $4,000 policy, the saving could be up to $1,200); and
- Taking up private health insurance hospital cover to avoid the Medicare Levy Surcharge (if applicable).
If you are unsure whether you might be adversely impacted by these measures or would like to talk about the implications/opportunities, contact me or your Prosperity Adviser for advice.
