This Break Is Just What The Doctor Ordered

Sydney Morning Herald

Tuesday March 28, 2006

ANNETTE SAMPSON

The strategy To get a bigger tax break on my private health insurance.

Can I do that? It depends on how old you are. Information service CCH says the Government has recently passed regulations increasing the private health insurance tax offset for older Australians. The higher offsets came into effect from April last year, but this financial year is the first full year in which they can be claimed and will help reduce the growing costs of health insurance for those eligible to claim them.

So how old do I have to be? We've all been able to claim a 30 per cent tax offset on our health insurance premiums since 1999 - and this will continue for people aged up to 65. But now people aged 65 to 69 can claim a 35 per cent tax offset and those aged 70 or more can claim an offset of 40 per cent of their premiums. So if they paid $1000 for health insurance, for example, they'd have a tax offset of $400. This could then be used to reduce their tax on other income.

What happens if I have a family policy? The good news is that eligibility for the offset is calculated on the age of the oldest person covered by the policy. So if your spouse is over 65 but you aren't, the premium should still attract the higher offset. Better still, the Tax Office says once a policy has been deemed eligible for the higher offset, it will remain eligible - even if the older person is later removed from the policy. If you (or your spouse) turn 65 or 70 during the year, the higher offset will apply for the number of days you were in the higher age group. So if you turn 65 mid year, for example, your premiums for half the year will attract the higher offset.

How do I claim the offset? In most cases, people choose to register with their health fund so that it automatically uses the offset to reduce their premium. You need to fill in an application form and lodge it with your health fund. If you've already registered with your health fund for the offset to be applied in this way, your health fund should automatically apply the higher offset when you become entitled to it. But it can't hurt to check. You can also claim the offset by lodging a claim for a direct payment with Medicare or completing the relevant sections in your tax return. If you don't have other income to apply the offset against, it will form part of your tax refund. Or you can do a combination of all three.

Does the rebate cover all types of health insurance? It covers both hospital and ancillary (or extras) cover with registered health funds. It doesn't matter whether you have basic cover or have opted for the Rolls-Royce version. But the people covered by the policy must be able to claim Medicare benefits.

What happens if I don't have private health insurance? For most people, all that means is that you don't pay premiums and so you don't get the rebate. But if your income (including reportable fringe benefits and trust distributions) is more than $50,000 for singles or $100,000 for couples, you may have to pay a 1 per cent Medicare levy surcharge if you don't have private patient hospital cover. The threshold for families rises to $101,500 if you have two dependent children and rises by $1500 for each additional dependent child. Health funds are also allowed to charge more for people who join a fund after the age of 30.

© 2006 Sydney Morning Herald

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