Join our investing community

PHI and tax rebate

Discussion in 'Accounting, Tax & Legal' started by Primm, 15th Jul, 2010.

  1. Primm

    Primm New Member

    Joined:
    26th Jun, 2010
    Posts:
    2
    Location:
    Brisbane, Australia
    My understanding (please correct me if I'm wrong) is that you can either claim the total cost of your private health insurance as a tax rebate, or get the 30% directly taken off your fees by the fund.

    As a non-mathematically minded person, can someone help me work out at what marginal tax rate this is going to benefit me? I'm currently getting the 30% taken off by the PHI company, but there must be an income level/marginal tax rate where it is more beneficial to pay the entire cost up front and then claim it as a rebate? Is this when your total tax owed is more than the 30% that they refund?

    I'm getting confused. Thanks for your help in advance.
     
  2. MattR

    MattR Well-Known Member

    Joined:
    23rd May, 2007
    Posts:
    229
    Location:
    Sydney
    You have 2 Options
    1. Most common - health insurer applies Offset to your premium and you pay the lesser amount.
    2. You pay the full premium and then claim any Offset through your Tax Return.

    One is not meant to be better than the other, they come out the same.

    Having said that, if the proposed changes come through as per the budget, the policing of this just got a lot more difficult.
     
  3. Rob G.

    Rob G. Well-Known Member

    Joined:
    6th Jun, 2007
    Posts:
    717
    Location:
    Melbourne, VIC
    The rebate is the same value to all ... regardless of marginal tax rate.

    It comes straight off your tax liability.

    However, why would you make an interest-free loan to the Government from the time you pay the insurance until you claim the rebate in the tax return ? You must have some lazy cash lying around.

    Much better to tick the little box on your insurance form and pay less money up-front and invest what you just saved.

    Cheers,

    Rob
     
  4. Primm

    Primm New Member

    Joined:
    26th Jun, 2010
    Posts:
    2
    Location:
    Brisbane, Australia
    So it's 30% either way. Thanks for that.

    Rob, I do pay the reduced amount at the moment. But I recently started a job that's bumped me into a higher marginal tax bracket, and I was wondering about the possibility of changing that and getting more back. Appears that isn't an option though.

    Thanks for your help!