Tax slash: Aussies earning $93k have 3 weeks to cut their bill

There are just three weeks left of the 2022/23 tax year. (Source: Supplied/Getty) (Samantha Menzies)

This is part one of a two-part series on getting top health cover for the lowest cost and slashing your tax in the process. You can read part two here.

The countdown to June 30 is on and, once the tax year ends, so too do the opportunities to slash your tax bill. One of the easiest ways to reduce your tax bill is by sidestepping the Medicare levy surcharge.

What is the Medicare levy surcharge?

The Medicare levy surcharge is a penalty applied to Aussies who earn over a certain level of income but don’t have private health insurance. The penalty is between 1 per cent and 1.5 per cent of your taxable income, your total reportable fringe benefits, and any amount on which family trust distribution tax has been paid. This is on top of the standard 2 per cent Medicare levy.

Read more from Nicole Pedersen-McKinnon:

• 55 days or more: The credit cards with the longest interest-free periods

• Don’t drop private health, lock in cheaper premiums instead. Here's how

• Simple tax hack that could save you $540

It’s a steep and unnecessary fee. The surcharge exists to try to get you to buy private health insurance, and take pressure off the super-strained public health system. On the government’s part, it’s a solid strategy because you can get good private cover for the same amount of money as the penalty would cost.

Any single Aussies with an income over $93,000 or couples with a combined income over $186,000 - although the threshold also goes up by $1,500 for each dependent child after the first child - should consider getting private health insurance in place before the end of the financial year.

See the table below for what it could cost you.

(Source: Supplied)

How and when you save

All you need to do to avoid the surcharge is hold private hospital cover for you, and your dependants, with a couple of features. The hospital cover must be with a registered health insurer - health.gov.au will give a definitive list of providers - and it needs to have an excess below $750 for singles and $1,500 for couples. Note, the excess is only payable once per year, regardless of the number of hospital visits, and is never applied to children.

What’s more, a private health insurance rebate – again, something designed to encourage people to take it out – will help defray your cost. And don’t forget the added advantage of having private health insurance: a wider range of medical treatment options, and the ability to skip public hospital waiting lists. I know, from first-hand experience, it could prove priceless.

You can also choose to save by adding ancillaries or extras cover on top of your hospital cover, such as non-hospital health services like physiotherapy, dental and optical, and canny claiming on this part of your policy could entirely cancel out the cost of your premium.

Note though, that to avoid the Medicare levy surcharge, you need to have held hospital cover for 365 days of a tax year. However, it’s not too late to cut costs because a partial exemption applies to those who have held cover for part of the year.

So if you’re in the surcharge zone, act quickly and get your insurance in place by the end of the financial year to skip the surcharge from next year onwards.

In my next column, I discuss the age-based discounts now available on private health, and the big premium pain if you don’t buy cover by age 31.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.

Follow Yahoo Finance on Facebook, LinkedIn, Instagram and Twitter, and subscribe to our free daily newsletter.