Simple reason Aussies waste up to $17,000 at tax time

More than 150,000 Australians throw away money at tax time each year. This is how to save all that cash.

More than 150,000 Australians throw away money at tax time each year by paying the Medicare Levy Surcharge rather than taking out hospital cover for the same price or less.

The median MLS was $1027, according to the latest Australian Taxation Office data, but some people have been slugged more than $17,000 for their complacency.

Canstar group executive for financial services Steve Mickenbecker said he often shook his head over what people will pay.

“Why would you not get (hospital cover)?” he said.

“Surely you would pay the premium and at least get something, rather than pay the government.”

The Medicare Levy Surcharge is a payment of 1 to 1.5 per cent of taxable income applied to individuals who earned more than $90,000 and couples who earned more than $180,000, and who did not have private hospital cover over the previous financial year.

It is paid pro-rata, so taxpayers who have cover for half the year are exempt from half the surcharge.

The Medicare Levy Surcharge adds at least $900 to an eligible taxpayer’s bill. Picture: NCA NewsWire/Joel Carrett

In 2018-19, the MLS was applied to 328,574 people with half paying more than $1027.

The most hefty surcharges were paid in Marion Bay, Tasmania, where two residents shelled out $35,671 between them – an average of $17,800 just for not having health insurance.

Meanwhile in New South Wales, a Sutherland resident wasted more than $14,820 and someone in Boggabilla paid in excess of $5300.

Other money wasters were in Paracombe, South Australia ($4883 surcharge), Melbourne, Victoria ($4256) and near Winton, Queensland (more than $3810).

All of these people could have avoided this bill if they had hospital cover.

Canstar analysis revealed a 37 year old (the median age in Australia) living in NSW and earning a gross annual income of $90,001 could pick up basic health cover from just $952 a year, including the 16 per cent Australian Government Private Health Insurance Rebate for under 65s.

This figure is $1014 in Victoria, $837 in Queensland, $961 in South Australia, $989 in Tasmania, and $414.60 in The Northern territory.

Aside from avoiding the MLS, Mr Mickenbecker said it was often worth having basic hospital cover to avoid Lifetime Health Cover (LHC) loading.

Australians who have not taken out and maintained private patient hospital cover from the financial year they turn 31 pay a 2 per cent LHC loading on top of their premium for every year they are aged over 30.

For example, if they start their policy at age 40, it is an extra 20 per cent each year.

This loading applies until the policyholder has held continuous cover for 10 years.

Canstar's Steve Mickenbecker says basic cover doesn’t cover much but it’s worth having for other reasons. Picture: Supplied

“The claims you can actually make (with basic hospital cover) are very restricted, so if you were to go to a private hospital for treatment, you would be up for massive out-of-pocket expenses,” Mr Mickenbecker said.

“But it starts the clock ticking so you won’t be up for Lifetime Health Cover loading.

“That's one of the main benefits in taking out basic cover rather than paying the Medicare Levy Surcharge.”

The Federal Government has raked in more than $5 billion from taxpayers with the Medicare Levy Surcharge since it was introduced in 1997.

NSW’s HIGHEST-PAYING POSTCODES

1499 (SUTHERLAND PO BOXES)

3 PEOPLE PAID AN AVERAGE OF $14,824

2409 (BOGGABILLA, BOONAL)

2 PEOPLE PAID AN AVERAGE OF $5304

2641 (HAMILTON VALLEY, LAVINGTON, SPRINGDALE HEIGHTS)

91 PEOPLE PAID AN AVERAGE OF $3562

VIC’s HIGHEST-PAYING POSTCODES

3001 (MELBOURNE)

6 PEOPLE PAID AN AVERAGE OF $4256

3944 (PORTSEA)

6 PEOPLE PAID AN AVERAGE OF $3162

3235 (BENWERRIN, BOONAH, DEANS MARSH, PENNYROYAL)

10 PEOPLE PAID AN AVERAGE OF $2949

QLD’s HIGHEST-PAYING POSTCODES

4735 (DIAMANTINA LAKES, MIDDLETON, OPALTON, WINTON)

17 PEOPLE PAID AN AVERAGE OF $3815

4373 (KILLARNEY, THE FALLS, THE HEAD)

4 PEOPLE PAID AN AVERAGE OF $3173

4728 (DUNROBIN, GARFIELD, JERICHO, MEXICO)

1 PERSON PAID $3010

SA’s HIGHEST-PAYING POSTCODES

5132 (PARACOMBE)

1 PERSON PAID $4883

5263 (COONAWARRA)

1 PERSON PAID $3527

5580 (CURRAMULKA, PORT JULIA)

1 PERSON PAID $3223

TAS’s HIGHEST-PAYING POSTCODES

7175 (BREAM CREEK, MARION BAY)

2 PEOPLE PAID AN AVERAGE OF $17,835

7184 (CAPE RAOUL, NUBEENA, STORMLEA, WHITE BEACH)

1 PERSON PAID $4328

7177 (BOOMER BAY, DUNALLEY)

3 PEOPLE PAID AN AVERAGE OF $2431

NT’s HIGHEST-PAYING POSTCODES

852 (ARNOLD, BAINES, BARUNGA, BESWICK, BESWICK CREEK, BINJARI, BIRDUM, BRADSHAW, BUCHANAN, BULMAN WEEMOL, CRESWELL, DAGURAGU, DALY WATERS, DELAMERE, DUNMARRA, EDITH, EDITH RIVER, ELSEY, ELSEY STATION, FLORINA, FLYING FOX, GREGORY, GULUNG MARDRULK, GURINDJI, HELEN SPRINGS STATION, JILKMINGGAN, KALKARINDJI, KALKARINGI, KATHERINE, LAJAMANU, LARRIMAH, LIMMEN, MANBULLOO, MARANBOY, MATARANKA, MCARTHUR, MINIYERI, NGUKURR, NITMILUK, NUMBULWAR, PELLEW ISLANDS, PIGEON HOLE, ROBINSON RIVER, STURT PLATEAU, TANAMI EAST, TIMBER CREEK, TOP SPRINGS, URALLA, VENN, VICTORIA RIVER, VICTORIA RIVER DOWNS, WARUMUNGU, WAVE HILL, WILTON, YARRALIN)

43 PEOPLE PAID AN AVERAGE OF $2434

846 (ADELAIDE RIVER)

10 PEOPLE PAID AN AVERAGE OF $2286

828 (BERRIMAH, KNUCKEY LAGOON)

34 PEOPLE PAID AN AVERAGE OF $1732

SOURCE: Australian Bureau of Statistics, 2018-19