How to avoid that sickening tax feeling
DON'T get caught out at tax time. Health insurance rebate tiers have changed, but many Aussies don't know how this affects them.
HEALTH insurance rebate tiers have changed, but many Australians are failing to call their fund if it affects them.
The controversial income-tested rebate changes, brought in from July last year, have been altered again this financial year, with the rebate tiers affecting singles earning more than $88,000 (up from $84,000) or families earning $176,000 (up from $168,000).
However, Australians are remaining complacent about contacting their health fund to let them know if they fall within one of the payment tiers - leaving them worse off at tax time.
Spokeswoman for Medibank Private Sarah Chibnall says while some members are contacting the health fund to inform them that they are affected by the changes, a large majority are failing to do so.
"A large proportion of our membership is still yet to nominate a tier,'' she says.
"Just a little over 50,000 memberships were prepaid (prior to July 2012) to avoid the rebate changes.
"While members have been nominating their tiers throughout the year, we have seen a small rise since July 2013, which most likely coincides with the tax return period.''
To avoid tax liabilities, people can call their health insurer if they have private health cover and inform them of which tier they fall in to so their rebate level can be adjusted.
Bupa spokesman Matt Allison says it is important for consumers to make an informed decision of how they want to tackle their rebates from a tax perspective.
"Thinking about the changes in advance can help you avoid a nasty surprise at tax time,'' he says.
"We don't have visibility of our members' incomes, so unless they contact us and nominate a lower rebate tier, they'll continue to receive the same rebate.
"However, if these members exceed the relevant income threshold, they may well incur a tax liability, which will have to be repaid to the Australian Taxation Office.'' It is not compulsory for members to contact their fund, and they can choose to incur the costs of failing to nominate a correct fund come tax time.
Allison says some members may not be aware of what income bracket they may fall into so that can make it difficult to nominate a tier.
"If you're unsure of your income range, or if you'd prefer to claim the rebate as a lump sum, you can also choose to pay the full premium and claim your rebate entitlement through your tax return,'' he says.
"We encourage all of our members to speak to either their accountant or financial adviser so that they can make an informed decision about a policy that is tailored to their individual circumstances."