ATO warning for 15 million Aussies ahead of price hike just days away: ‘Hold on'
The Australian Taxation Office (ATO) is warning taxpayers to think twice before cancelling their private health insurance. Millions of Aussies are considering ditching their health insurance policy as prices rise but it can have expensive consequences for your tax return.
Around 15 million Aussies with private health insurance will see their premiums rise on April 1, after the government approved an average hike of 3.73 per cent. This marks the biggest increase since 2018 and has led many to consider cancelling their policy.
The ATO has urged people to 'hold on' and consider the potential tax hit that could apply if they don't have health insurance.
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'You may need to pay the Medicare levy surcharge (MLS) if you and your family didn't have appropriate private health cover for the full income year, and you earned over a certain amount,' the ATO said.
The MLS is between 1 and 1.5 per cent of your income and applies to singles earning over $97,000 and families earning $194,000 who don't have an appropriate level of hospital cover.
'The MLS is not the same as the Medicare levy. It's an additional amount you may need to pay,' the ATO explained.
'It's not covered by the tax your employer withholds from your pay throughout the year. This means, if you need to pay it because you've cancelled your health insurance, you might end up with a bill at tax time.'
Finder research found 16 per cent of people - equivalent to 3.3 million Aussies - planned to cancel their health insurance policy in 2025.
Only 41 per cent thought they would stay with their insurer, while 16 per cent said they planned to switch if they could find a better deal.
For a single person on an average-priced gold hospital policy, the average 3.73 per cent premium increase could see their premiums increase by $110.
Families could face an average annual hike of $217.
Almost one in five Aussies have opted to go without private health insurance and cop the Medicare Levy Surcharge. So, is it worth it?
H&R Block director of tax communications Mark Chapman told Yahoo Finance there wasn't a "straightforward" answer to this question, and it would all depend on your personal circumstances and risk threshold.
'Obviously, private health insurance is quite expensive and the Medicare Levy Surcharge is quite expensive, so there isn't an easy option,' he said.
'It depends on the quote you've been given by the health fund provider and it depends on whether you think you are likely to have something that will require you to claim.
'You do need to work through the numbers and work out whether it's actually going to be in your favour to take out private health cover or not.'
If you decide to keep your health insurance, Compare the Market economic director David Koch has shared his savings hacks here.Sign in to access your portfolio
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