Earn above $90k but I want to pay the medicare levy - Do I really need health insurance?

Lthesigness on 24/03/2017 - 22:54
Last edited 24/03/2017 - 22:57

Hi all,

I'm a single 25 year old male with no dependents. I live with my parents who don't ask for rent but I chip in for bills/groceries/shout lunches and dinners. I'm very fortunate to have landed a job that is now paying me over $90k from $55k. Not trying to humblebrag but I feel like I need to explain a bit of context about my situation.

I have noticed a increase in tax but I'm still living like I was on 55k so I just bank the rest for a down payment on a house.

Everyone has told me to get health insurance to reduce tax largely due to the medicare surcharge. I've used the public health care system and have never had an issue with it (apart from wait times).

I'm more than happy to pay the medicare surcharge because I feel that every extra penny would be a benefit to the system, while I'm young and healthy with no dependents I feel like this is one way I can contribute towards society.

Is this stupid? Do I need health insurance anyway? I understand we're discussing on a website that helps us save money but I feel like in my situation I can get away with paying the medicare surcharge.

Don't want any validation or anything, just some advice.

Financial

Comments

  • 0p on 24/03/2017 - 23:11
    +10

    This a weird question but can i borrow $10 for lunch tomorow?

    • thesigness on 25/03/2017 - 01:07
      +4

      You can have $20

      • 0p on 25/03/2017 - 01:12
        +3

        Really?

  • Steptoe on 24/03/2017 - 23:12
    +2

    Posted on behalf of Kerry from Sydney

    You may need the Psychiatry Services offered by Private Health Care

    • lupiter on 25/03/2017 - 07:30

      But that won't be covered in the cheap tax-reducing insurance. You need the expensive insurance for that, it's usually only in the top tier. :(

  • kywst on 24/03/2017 - 23:13
    +4

    If you need help justifying not paying it to yourself I can think of a couple of quick ones:

    • You'll get better coverage/benefits going private and probably pay less (net).
    • Just because it's called the Medicare Levy doesn't mean the government won't use it to buy guns or blow it on dole bludgers.
  • tio on 25/03/2017 - 00:10
    +7

    Up to you really, but I'd do it just to minimise tax. MLS is minimum of 1%, in your case that translates to $900+ in levy.

    Take the cheapest single hospital, no extra, policy that I can find in my quick search, the annual premium is $614.55 (rebate, yearly discount applied). That translates to $975.47 pre-taxed (conversion required since MLS is also pre-taxed). So if your taxable income is $97,547, then it would look you break even, your take home pay is the same either you have PHI or not, but if you're income is > $97,547, then you'll save on MLS by having the cheapest PHI policy.

    Plus having a PHI policy let you have access to some member perks, such as discount movies/events ticket, discount rate for online shops. Though I've never used my perks.

    So if you are not doing it for peace of mind, at least work out if PHI saves you in MLS.

  • slosh on 25/03/2017 - 00:11
    +2

    Just quickly, what sector of work are you in?

    • subywagon on 25/03/2017 - 00:24
      +1

      +1 to this ^ I need a career change…

    • thesigness on 25/03/2017 - 01:33
      +1

      IT FIFO Bogan

  • bobbified on 25/03/2017 - 04:00
    +5

    The question is, how much over $90K are you going to get paid?
    I'm assuming it's $90-100k and this is your only income.

    If that's the case then:

    You won't need to pay the medicare levy surcharge for 2016/17 year because there's only 3 months left of the tax year and your income for medicare levy purposes will be less than the threshold.

    After that, if you're salary isn't over the $90K by all that much and you have enough tax deductions for your role to bring your income under the threshold, then you still won't need to pay. That's going to depend on your actual role/income and the type of deductions you can claim.

    This is the definition of income for MLS purposes:
    https://www.ato.gov.au/Individuals/Medicare-levy/Medicare-le…

    Once you determine whether or not you'd have to pay MLS, you can go from there and decide whether you really need the health insurance or not.

  • slix_88 on 25/03/2017 - 06:17
    +5

    Your approach to paying the MLS is the equivalent of saying you're happy to pay extra taxes. It's all well and good earning $90k but you will soon realise it's plain silly to contribute an extra $1k of tax which is extremely immaterial in the scheme of government spend. Also, after turning 30 you will start to incur a 2% loading on top of your premium for every year. Pretty silly, right? Basically the government will be penalising you for your charitable donation to general tax revenue.

    What if you went ahead and took out PHI and then used that extra $1k to invest in your community directly as you wish. Alternatively, you can donate it to your favourite charities. You will certainly receive much more moral satisfaction and general praise from doing so.

    Just my 2 cents

  • AddNinja on 25/03/2017 - 07:15
    +3

    I was in your position and decided to pay the levy and remain on public. When I looked into private insurance I found that in the event I needed it, it would have to be very expensive insurance to match what I get free from public.

    Finally - when I told my workmates about this - I received many negative comments like you've received. The commenters all sounded smart and considered my paying the levy a bad move, treating me like I was naive. Yet in the 7 years that have passed, I've had the chance to see them live their lives and in the end I don't think that they should be so sure of their understanding of the world - including finance.

    • grasstown on 26/03/2017 - 17:48

      Interesting choice of words "understanding of the world". I would associate it with altruism rather than how out of pocket I am. There is not enough funding allocated to health care for everyone to do what you do. Private patients save the hospirals money so it can be used by others

      • AddNinja on 26/03/2017 - 21:48

        That's fine - but please remember that public health care was implemented as "universal healthcare" and voted for by both parties. And until a party brave enough passes an act of parliament - it remains as such. So while I really do appreciate your altruism and I think well of you for it, if public health care is underfunded because people use it, that's because of governmental spending priorities- not because of people using it who could pay for private.

  • Mad Max on 25/03/2017 - 10:00
    +1

    "I am not evading tax in any way, shape or form. Now of course I am minimizing my tax and if anybody in this country doesn't minimize their tax they want their heads read because as a government I can tell you you're not spending it that well that we should be donating extra."
    Kerry Packer.
    I am sure he earned a few $ more than $90k… ;-)

  • Stewardo on 25/03/2017 - 10:45

    Yeah you should get financial advice, there are ways of reducing your taxable income thru investments.

    • kipps on 25/03/2017 - 17:21

      Just don't invest solely to get tax benefits. The people who "invested" in Great Southern and Timbercorp, amongst others, learnt the hard way after being sold on tax benefits.

  • Sweet3st on 25/03/2017 - 14:44

    I would say no. My mother had private insurance for years. Some time after she was diagnosed with cancer she dropped it, because it was cheaper with none.

    • grasstown on 26/03/2017 - 17:24

      This is true. I know cancer patients who have elected private even though it costs more as the hospitals asked kindly. The hospital also organized for them to be put on a trial so that it was a fraction of the cost.

  • wildbill on 26/03/2017 - 09:30

    My daughter worked in the hospital for 2 years (Dr)and said to me "Dad you are mad paying all that health insurance".
    Her reason was that you get admitted if an emergency and questions asked later etc.
    Plus all the latest equipment and the local specialists do some work there as well - i.e. you may well see them for nil cost as it is not in their surgery.
    The local private hospital also has a sign as you walk in which basically tells you to go to the public emergency anyway.
    HOWEVER as I now need a knee op I'm glad I am not waiting 3years like one of my friends and 5 years the other one.

  • whatif on 26/03/2017 - 14:57

    I think you should get private cover and whatever you save in tax you can donate it to charity of your choice.

  • grasstown on 26/03/2017 - 17:16

    It is cheaper on the health system if you have a hospital admission with private health insurance.

    Hospitals often ask patients who have private health insurance to elect to use their health insurance even though they get exactly same treatment as a public patient. It can even be more expensive on private health care I think). That way the health fund pays for the treatment and the hospital can use that money elsewhere.

    You are young to need an admission, but people your age still go to hospital.

  • LakeVostok on 26/03/2017 - 21:30

    Everyone earning over $18,200 is required to pay medicare levy. however, if you earn over 90K you are required to pay medicare levy subcharge (MLS) in the absence of private health insurance. MLS is payable in addition to the Medicare levy. Whether you want/need private health insurance is a personal preference.
    https://www.ato.gov.au/individuals/medicare-levy/medicare-le…

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