Australia: Private health insurance - Tax penalty losing bite
Source: Asia Insurance Review | Sep 2017
The financial incentive to take out private health insurance is diminishing for thousands of Australians, as rising premiums and bracket creep make it cheaper to pay the Medicare Levy Surcharge than to invest in basic health cover.
The Surcharge has long acted as a “stick” to compel people to take out hospital cover rather than pay extra tax. Individuals earning A$80,000 (US$63,000) or more, and families on A$180,000 or more, face being levied up to 1.5% extra tax if they remain uninsured.
Actuary Jamie Reid, Principal of Finity Consulting, considered the minimum tax penalty of A$900 and could find only two hospital cover policies in Victoria costing less than that, compared with six last year, and only six in New South Wales; previously there were 12, reported The Australian.
He said a form of bracket creep was at play and “over time, this pushes more people into the lower rebate, higher Medicare Levy Surcharge tiers”.
“While there are many good reasons to take out private health insurance, the pure tax benefit of insurance is becoming smaller, and will reduce each year due to changes to the rebate and premium increases,” Mr Reid said.
Health Minister Greg Hunt has vowed to address the high costs in private health but has yet to announce any major reforms. A