ML, MLS, PHIR, WTF…
Warning – there are some tax terms and definitions early in the piece, but stay tuned for a head bumping story.
During tax time, there is often the debate of health insurance coverage and whether this is a worthy line for your budget. Let’s look at some of the key terms to minimise confusion:
Medicare Levy – this is the amount payable by EVERY taxpayer, once their income reaches the threshold. Reductions are available for income below $27,475, above this income, a 2% Medicare Levy is payable *exemptions and other thresholds may apply.
Medicare Levy Surcharge – in addition to the Medicare Levy (“ML”), the Medicare Levy Surcharge (“MLS”) is payable by Australians who do not have appropriate Private Hospital Insurance and earn above $90,000 for singles and $180,000 for families **family threshold is increased by $1,500 for each child after the first.
Private Health Insurance Rebate – (“PHIR”) is the amount the Government contributes to the cost of your Private Hospital Insurance Premiums. The amount of rebate you are entitled to is income tested, and reduced as your income exceeds each threshold level. Receiving more or less of the rebate for your income threshold, will be paid for or reimbursed to you with your tax return.
So how do these terms affect the bottom line of your budget, and the refund on your tax return? Let’s look into these in a little more detail:
Medicare Levy – this is generally included when the Pay As You Go Withholding (“PAYGW”) is calculated with each of your pays. Basically, this amount should already be taken care of with your pays, and you don’t really have to think about how to pay for this.
Medicare Levy Surcharge – this is where things can get tricky, as most payroll systems do not withhold the additional amount to cover MLS.
- If you have appropriate level of Private Hospital Cover for the FULL year, you do not have to pay MLS, so nothing is required from you.
- If you are below the income thresholds for MLS, you do not have to pay MLS, so nothing is required from you.
- If you do not have hospital cover for the full year and are above the income thresholds, you need to do some maths. Your options include,
- request your payroll officer to withhold an extra amount in your PAYGW to cover the MLS that will be payable,
- assume that you will not receive a refund when your tax return is completed and just pay the MLS at the end of the year,
- obtain appropriate Hospital cover.
Private Health Insurance Rebate – speak with your provider to ensure that you are receiving the correct level of rebate for your income. Otherwise you may end up with a tax bill instead of a refund.
On another note, Ambulance Cover
Ambulance cover can be included with your Private Health Insurance Provider, or direct through St John Ambulance. I would definitely recommend this coverage to not only support a fantastic public service, but to also give you peace of mind, here’s why…
Sorry for the delay
This weeks blog was delayed as there was a small visit to the hospital for one of my kids, this child was mucking around with some mates at school and fell off a brick wall (height varies from ½ metre to 2 metres depending on who is telling the story) and bumped his head on the ground.
After being told by the school nurse that he was dazed and confused, my initial thoughts were, ‘where do I get one of those helmets that Mrs Brayshaw puts on her son Angus when he steps on the grounds for the Melbourne Demons’.
In the hospital…
Now this child bumping his head is unfortunately not new to me, nearly 12 months ago, he was knocked out cold at soccer training, resulting in my first ride in an ambulance. This time, thankfully no ambulance was required as he was very responsive, so the school nurse helped load him in the family bus and off we went to emergency.
Again finding myself at the local hospital, watching the nurse complete regular ob’s on my son, I was thinking how lucky we are to have this great type of care. Because he had bumped his head, we were taken straight in, with thorough attention given, and regular updates on his progress. Gratefully, we only needed to spend a couple of hours as this time, any concussion he may have had was very mild, but were instructed to monitor him thoroughly for the next 24 hours.
How is this story even related to tax, accounting or budgets?
Was rambling on a bit there, but stay with me.
While all of this was going on, not once was I concerned about the cost if he required any further treatment. Ambulance is fully covered by my private health insurance coverage, I discovered this at the last and definitely worse head bump, and with hospital coverage we would have been taken care of.
Here is another experience from a fellow worker:
Son heroically attempted to jump a fence with an epic fail – Ambulance called to take him the 800m to hospital in the wee hours of the morning – bill came in just under $1,000, and within 2 years another call out but that was a bargain at $880 (all of which was covered by Private Health Insurance Ambulance Cover), – he is now no longer covered on his parents policy, but he gets an annual ambulance cover from his mum every birthday – peace of mind is the key.
In a nutshell…
Being the numbers geek that I am, private health insurance would often come down to the maths, if the MLS I would pay is more than the cost of Private Health Insurance, then I might as well get coverage to ‘receive something back’.
ML, MLS and PHIR are more than just extra lines on your budget and tax return. Payment for these ensures that every Australian can receive excellent medical care, especially in an emergency. This type of care costs money, and we each need to do our share to help pay for this. However, you still need to look after your own to some degree:
- Check your private health insurance coverage is sufficient for what YOU need
- Check that the correct amount to cover any MLS or PHIR is included in your PAYGW
- Shop around to ensure you are using what you pay for, particularly with extras
- Stop whinging about paying for health coverage through the Medicare system or through Health Insurance, and be grateful that you live in a country where public health is a priority.
– Karen Patterson