Tax trap of suspending your Private Health Insurance whilst travelling overseas
If you are travelling overseas, you can suspend your Private Health Insurance policy for up to two years.
This may lead to additional tax costs which could offset the savings on your health cover premiums.
HOW DOES IT AFFECT YOUR TAX?
Cancelling or suspending your Private Health Insurance while travelling overseas means you may be liable for the Medicare Levy Surcharge. If your adjusted taxable income is above the threshold (currently $90,000 for individuals and $180,000 for families - 2015/16 financial year) then you, and your spouse, will be liable for between 1% and 1.5% additional tax on your income.
WHAT ARE THE CONSEQUENCES?
We have a client who recently suspended their cover while they went on an extended holiday overseas. They may have saved a few hundred dollars in health insurance premiums, but they ended up having to pay over $4,000 in Medicare Levy Surcharge as they were deemed not to be covered for the entire year.
It was an unfortunate lesson to be learnt, but highlights the importance of considering how not having private health insurance for a full year may affect your tax.
If you are planning an extended overseas trip, consider the savings you will make on your premiums compared to the potential tax you may have to pay.
Please contact KK Partners Group to discuss your situation if you think this may affect you.