IF you're among the two million Australians affected by the Federal Government's new laws that raise private health insurance costs for higher income earners, think before you rush for the exit door.
Ditching health cover could cost you more than paying higher premiums as there's a big tax slug for quitters.
Last week's new law to means test the 30 per cent private health insurance rebate comes with an increase in the Medicare Levy surcharge, from 1 per cent today to up to 1.5 per cent from July 1, for big earners.
The means testing won't affect families earning less than $166,000 a year and singles on less than $83,000, but higher earners will pay hundreds of dollars a year extra for their cover, depending on incomes and number of children.
But walking out of private health because of the changes could cost thousands. The Medicare levy surcharge rise means a person earning $125,000 a year would be hit with an extra tax bill of $1875 if they drop out of the correct private hospital cover.
A family earning $200,000 would have to pay a $2500 surcharge if they quit.
Forecasts of how many people will walk away vary wildly. The Government says 27,000, the health insurance sector suggests more than 1.5 million. Someone's clearly wrong.
There's a good argument that lower-income families should not be subsidising the private health cover of wealthy Australians, as they have been doing for more than a decade.
Whatever your view, it's vital to do your sums before you make your move.
Read more: http://www.news.com.au/money/cost-of-living/healthy-solutions-to-bitter-pills/story-fnagkbpv-1226275582390#ixzz1mtl2c3Bu
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Private Health Cover, Big Tax Slug For Quitters (Read 790 times)
