Health Funds and Tax Savings

The question has been raised ^hk1^ times, do I need to be in a well being fund in order to save on tax. These days, the answer is not always clear cut.

The way the program works, if you are single and earn over $70,000 per year, and do not have Hospital Cover via a Health Fund, then you will be taxed an extra 1% of your taxable income. The cost of ^hk1^ in a well being fund, and you only need Hospital cover to three^} the Medicare Levy Surcharge, can be four^} than $1.00 per week, or around $500 per annum. This can be worth the effort to save over $700 in extra tax.

If you are married, or ^hk16^ half of a couple, then the total partnership income ^hk17^ be four^} than $140,000 to three^} the 1% Medicare levy surcharge.

1 anomaly with this is if you are in a fund and earn $150,000 per annum, then no Medicare Levy Surcharge applies. Nevertheless, if you get married and your new spouse is not in a fund, and, if your spouse lodges a tax return and indicates that they are not in a well being fund then, unless you have already changed the fund cover from single to Family, you could be hit with an extra $1,500 tax bill simply because the tax return contains the following words: "For the entire period 1 July 20## to 30 June 20## were you and all your dependants (including your spouse) - if you had any - covered by private HOSPITAL cover?"

This means that unless you have family cover, or each member of the family has single cover, you will be liable for the 1% surcharge.

In addition to this, when you join a well being fund, you can agree to pay an excess on admission to Hospital. This excess can be any quantity agreed to by the fund, however the Tax Office takes a dim view of any excess deemed too big.

To quote the Tax Office website, "Private patient hospital cover is cover supplied by an insurance policy issued by a registered well being insurer for some or all hospital treatment supplied in an Australian hospital or day hospital facility. Nevertheless, an insurance policy for hospital cover taken out after 24 May 2000 that has an 'annual front-end deductible' quantity or excess of much more than $500 in the case of a policy covering only ^hk16^ person, or much more than $1,000 for all other policies, does not provide private patient hospital cover for Medicare Levy Surcharge purposes.

So if you agree to pay an upfront fee on admission to Hospital, and that fee exceeds the $500 (single) or $1,000 (family) threshold, then you are deemed by the tax office to not be in a well being fund and will be liable to the 1% surcharge.

Les Coulcher is the principal owner of Coulcher's Personal Accounting &amp Taxation Services, the Premier accounting firm in Camden and he believes his staff offer the finest individual accounting and taxation services in the region. The business consists of five qualified accountants and support staff.

"We pride ourselves on providing a individual service which consists of home visits as essential and bookkeeping services at the client's premises. Apart from giving the client the most appropriate advice regarding their taxation affairs we also provide support via the provision of financial planning, bank and business loans and a supportive ^hk17^er to lean on in tough times. We are all great listeners, something that appears to be missing in most professions at the moment."