Private Health Cover: Could Your Kids Trigger an Extra Tax Bill?

If you have private health insurance to avoid the Medicare Levy Surcharge (MLS), there’s an important detail that can easily be missed – your dependants need to be appropriately covered too.

The MLS is an additional tax of between 1% and 1.5% that can apply to higher-income taxpayers who don’t have appropriate private hospital cover. And having cover just for yourself may not be enough.

Watch out for older children

This is particularly important as children get older.

Your private health insurer may have rules about when children stop qualifying under your family policy or need to be registered as a student or adult dependant. If their circumstances change and they are no longer appropriately covered, it could affect your exemption from the Medicare Levy Surcharge.

That can mean an unexpected tax bill at tax time, even though you thought your private health insurance had you covered.

A few things worth checking

If your income may put you above the MLS threshold, check that:

• You, your spouse and relevant dependants have appropriate hospital cover

• Older children are still correctly included on your policy

• There haven't been any gaps in cover during the year

• Your policy qualifies for Medicare Levy Surcharge purposes – extras-only cover doesn't count

The surcharge can be significant, particularly for higher-income families, so it pays to check your cover before tax time rather than discovering the problem when your tax return is prepared.

Not sure whether your family is properly covered? Speak to your private health insurer and contact us if you'd like to discuss how the Medicare Levy Surcharge could affect your tax position.