Private health insurance rebate: FAQs

Transcription

1 Private health insurance rebate: FAQs By nw, mst peple wuld knw that the private health insurance rebate is being incme-tested effectively meaning that if yu have private health insurance, the rebate yu are entitled t receive depends n yur annual incme, yur age and the number f dependent children yu have. The table n page 2 summarises the threshlds, which are indexed annually. Incme threshlds aside, many peple remain cnfused n the finer aspects f the rebate. Belw is a questin-and-answer guide cvering a range f questins frm wh is eligible fr the rebate t hw t claim it. 1. Wh is eligible fr the rebate? T qualify, yu must: be eligible fr Medicare have an incme fr the Medicare levy surcharge purpses belw the tier 3 threshld (refer t tables n page 2), and have apprpriate health insurance that is cnsidered a cmplying health insurance prduct (CHIP) with a health insurer that is registered with the Private Health Insurance Administratin Cuncil (PHIAC). Even if yu dn t pay tax fr example, yu re a pensiner r student yu are still eligible fr the rebate which is available t anyne wh pays fr private health insurance. 2. What is the Medicare levy surcharge? Individuals and families n incme abve the Medicare levy surcharge threshlds, wh d nt have an apprpriate level f private patient hspital cver, may be required t pay the Medicare levy surcharge fr any perid during the year that they did nt have this cver. Depending CONTENTS n yur incme fr surcharge purpses, the rate can be up t 1.5% (in additin t the Medicare levy). 3. Hw d I claim the rebate? There are three ways: a. yu can receive the rebate as a premium reductin thrugh yur private health insurer, which means yu pay less upfrnt b. yu can claim the rebate in yur tax return as a refundable tax ffset (this ptin des nt require yu t nminate a tier), r c. yu can receive a direct payment frm the gvernment thrugh yur lcal Medicare ffice. If yu chse t claim the rebate as a premium reductin, yu shuld nminate a tier based n yur estimated incme (see tables verleaf). Yu can nminate yur tier by cntacting yur insurer r by filling ut the Medicare rebate claim frm. The amunt f the rebate is als dependent n yur age. Older taxpayers are entitled t a higher rebate (see tables belw). 4. Hw t calculate r estimate my incme tier? The tiers are based n yur incme fr Medicare levy surcharge purpses cnsult this ffice t wrk ut which tier yu are in. 5. My incme has changed - what d I d? If yur changed incme results in a different rebate entitlement, yu shuld cntact yur private health insurer and tell them which tier yu expect t be in fr the financial year. They will adjust yur rebate s yu can avid a ptential tax liability. If yu dn t nminate a tier and yu currently receive the rebate as a premium reductin, yu will cntinue t receive yur current rebate but may face a tax liability at the end f the financial year. February 2014

2 6. What if I nminate an incrrect tier? If yu nminate a tier that results in a lwer rebate than yur incme entitles yu t, yu will receive a tax ffset thrugh yur tax return at the end f the financial year. Cnversely, if yu nminate a tier that results in a higher rebate than yur incme entitles yu t, the Tax Office will claim back the excess rebate and yu will incur a tax liability thrugh yur tax return at the end f the financial year. This means yu culd have a tax debt. Dn t wrry hwever, as there are n additinal penalties fr incrrectly estimating yur incme tier. If yu get an excess private health insurance reductin r rebate reduced amunt n yur ntice f assessment, it is the amunt f verpaid private health insurance yu have received. This amunt will be shwn in the debit clumn f yur ntice f assessment. If yu are unsure f yur incme range r if yu d prefer t claim the rebate as a lump sum, yu can chse t pay the full premium and claim yur rebate entitlement thrugh yur tax return. Yur private insurer will give yu a statement at the end f the financial year t help yu cmplete yur tax return. 7. D I need t ldge a tax return t claim the rebate? Yu will need t ldge a tax return if yu think yu are eligible t claim the private health insurance rebate and yu have nt claimed any r all f yur rebate frm yur health insurer as a premium reductin. 8. Can I claim the rebate if I nly have private health insurance general treatment cver? Yes. Yu will receive a rebate unless yu earn mre than the tier 3 threshld (refer t tables). 9. I have children. D I get extra assistance? If yu have dependent children, the family threshlds apply (again, refer t tables abve). If yu have ne dependent child, the threshld will nt be affected. Hwever, fr families with multiple children, the threshld will increase by $1,500 fr each child after the first. Fr instance, a tier 1 family with three children will have its incme threshld increased by $3,000. Family incme includes the cmbined incme f bth adults. Fr single parents, nly the adult s incme cunts twards the threshld. Incme f dependent children is nt included. 10. Are de fact cuples and single parents cnsidered a family? Yes, single parents and cuples including de fact cuples and thse with ne r mre dependents that d nt live permanently with them are subject t the family tiers. 11. My spuse (r de fact) and I have separate plicies. D family r single threshlds apply? The family threshlds apply regardless f whether the individual family members are n the same r different private health insurance plicies. Hwever, yu cannt claim a private health insurance rebate n behalf f yur spuse if yu hld separate private health insurance plicies. 12. I dn t have private health insurance but my dependent child des. Can I still claim the rebate? Yes. Prvided yu pay the dependent child s private health insurance, it des nt matter if yu are nt persnally cvered by the plicy. The size f the rebate will depend n yur incme. If yu are a tier 3 family, yu will nt receive a rebate. 13. Hw is ur family s age determined? The rebate is based n the ldest persn cvered by a plicy. Fr instance, if yu are 62 and yur partner is 65 yu will receive a 35% rebate if yu earn less than $176,000 (see table abve). 14. I separated frm my spuse during the year. What incme d I use t calculate my rebate? If yu remain single with n dependents as f June 30 that year, yur rebate entitlement is calculated nly n yur wn incme that is, the single incme threshlds apply. If yu separated frm yur spuse during the year but substantially maintain a dependent child, yu will be incmetested under the family incme threshlds. If yu separated frm yur spuse during the year and paid fr the full plicy fr the entire year, yu cannt claim the full rebate withut sharing because the plicy cvers bth yu and yur exspuse. Yu can nly claim a rebate fr yur share f the plicy. Likewise, yur spuse cannt claim fr yur plicy if they are nt n yur plicy. 15. I pre-paid my private health insurance fr the year in Will I still be incme-tested fr my payments? N. If the premiums fr yur plicy were pre-paid, yu cannt claim a rebate in yur tax return. Hwever, yu still need t cmplete the private health insurance plicy details sectin n yur tax return using $0 values s the Tax Office February

3 can cnfirm yu had an apprpriate level f private patient hspital cver fr the whle year. Otherwise, Medicare levy surcharge may be levied. 16. My emplyer pays my private health insurance. Wh is entitled t the rebate? Only the adult cvered by the plicy is entitled t claim the rebate. If yur emplyer pays yur health insurance, typically yu will receive the rebate as a reduced premium. Yur emplyer will pay the utstanding premium. If an incrrect rebate is claimed, the balance will be crrected thrugh yur tax return. 17. I am an Australian citizen living verseas. Can I claim the rebate fr the private health insurance I have purchased verseas? N. An verseas insurance plicy, r an insurance plicy which cvers things that happen utside Australia, is nt a cmplying CHIP. Cnsult this ffice if yu have any ther queries abut the private health insurance rebate. Table 1: Private health insurance rebate incme threshlds fr Incme threshlds Singles $84,000 r less $84,001-$97,000 $97,001-$130,000 $130,001 r mre Families $168,000 r less $168,001-$194,000 $194,001-$260,000 $260,001 r mre Private health insurance rebate entitlement Base tier (n change) Tier 1 Tier 2 Tier 3 Under 65 years ld 30% 20% 10% 0% years ld 35% 25% 15% 0% 70 years ld r ver 40% 30% 20% 0% Table 2: Private health insurance rebate incme threshlds fr Incme threshlds Singles $88,000 r less $88,001-$102,000 $102,001-$136,000 $136,001 r mre Families $176,000 r less $176,001-$204,000 $204,001-$272,000 $272,001 r mre Private health insurance rebate entitlement Base tier (n change) Tier 1 Tier 2 Tier 3 Under 65 years ld 30% 20% 10% 0% years ld 35% 25% 15% 0% 70 years ld r ver 40% 30% 20% 0% Nte: Fr bth tables, single parents and cuples (including de fact cuples) are subject t family tiers. Fr February

4 Senir Australians and Pensiner Tax Offset explained After wrking (and paying taxes) fr mst f yur life, it can be a gd feeling t get t that stage f yur life where it s time t get sme pay-back frm the taxman. Yur glden years can be given an extra glw by claiming the Senir Australians and Pensiner Tax Offset (SAPTO), if yu qualify. What is a tax ffset? Generally speaking, a tax ffset can reduce yur tax bill, but desn t lessen taxable incme, just the tax wing n it. S a tax ffset can reduce tax t zer in thery, but will never in itself result in a refund. And since receiving an ffset can make yu liable fr less tax, yu can earn mre incme befre paying any tax (and the Medicare levy). What is the SAPTO? The SAPTO is an amalgamatin f tw previus ffsets, the Senir Australian Tax Offset (SATO) and Pensiner Tax Offset (PTO). The previus ffsets were last able t be claimed in the incme year. The new SAPTO can be claimed frm the incme year nward. Generally, due t the merging f the previus tw ffsets, taxpayers able t access the SAPTO cncessin, accrding t the Tax Office, are either f the fllwing tw types f taxpayers: 1. a taxpayer wh during the incme year: received a gvernment pensin, allwance r benefit frm Centrelink r Veterans Affairs has reached pensin age, and is nt in gal (yes, the Tax Office actually stipulates this), OR 2. a taxpayer wh during the incme year: became eligible fr a gvernment pensin r benefit but did nt receive ne, and is nt in gal. This definitin means veterans wh were eligible fr a pensin but did nt receive ne (perhaps due t nt meeting the incme r asset requirements) and persns nt meeting the residency requirements fr an aged pensin, but were eligible fr that pensin using an alternate test, culd be able t access this ffset. TIP: The Lw Incme Tax Offset (LITO) f up t $445 (frm ) may als apply in cnjunctin with SAPTO, depending n persnal circumstances. Ask this ffice if yu think this may apply. The table belw details the ffset threshlds and maximum ffset rates. Hwever it shuld be nted that calculating the SAPTO can be finicky and cmplex, especially where taxpayers are part f a cuple where bth partners are eligible. The difficulty lies in wrking ut the amunt f unused SAPTO transferred between the cuple. The reasn this may cause cnfusin is because this part f the calculatin may be based n rates and threshlds frm previus financial years. There are SAPTO calculatrs n the Tax Office website. Als ask this ffice fr guidance r fr mre infrmatin. SAPTO Rebate incme Eligibility cnditin Threshld maximum tax ffset applies Abve threshld n lnger eligible Maximum rebate amunt Yu did nt have a spuse and yur rebate incme was less than Yu had a spuse and the cmbined rebate incme f yu and yur spuse was less than At any time during the year yu and yur spuse had t live apart due t illness r because ne f yu was in a nursing hme and cmbined rebate incme f yu and yur spuse was less than $32,279 $50,119 $2,230 $57,948 $83,580 $1,602 $62,558 $95,198 $2,040 NOTE: N change t the maximum tax ffset values r the reductin rate 12.5 cents applied fr every $1 ver the maximum rate threshld up t the cut ff threshld. February

5 Timely tip fr SMSFs: Audit yur fund befre annual return deadline Many f yu may just be getting back int yur regular rutine, but ne thing t take nte f if yu are a self-managed superannuatin fund (SMSF) trustee is that the SMSF annual return deadline is fast appraching. Ldgement dates Fr the annual return, the deadline fr SMSFs that are wise enugh t use a tax agent is May 15, This is in cntrast t thse trustees f SMSFs wh are self-preparers, where the relevant dates fr the annual return are: Octber 31, fr new registrants that prepare their wn annual return (nte that this date has nw passed), and February 28, fr SMSFs that are nt new registrants. Nte that earlier ldgement dates may apply where the fund has previusly failed t ldge n time r have mre than ne return verdue. Purpse f SMSF annual return All SMSFs need t ldge an SMSF annual return each year in rder t: reprt incme tax reprt super regulatry infrmatin reprt member cntributins, and pay the supervisry levy (currently $321 made up f the $191 SMSF supervisry levy fr the financial year and 50% f the SMSF supervisry levy fr the financial year i.e. 50% f $259 runded up). Appinting an SMSF auditr While May 15 may seem a little way ff, yu cannt ldge yur SMSF annual return until yu have had yur SMSF audited. This is because yu need infrmatin frm the audit reprt t cmplete the regulatry infrmatin in the return. Even thugh there may be n rush as such t cmplete the audit, bear in mind that if any cmpliance cntraventins are identified, the auditr can alert yu t thse cntraventins. This will give yu a chance fr rectificatin befre the audit is finalised and the annual return ldged. This way, yu can avid being penalised by the Tax Office, r wrse still, have yur SMSF deemed nncmpliant and lsing yur tax cncessins. The first step is t appint an SMSF auditr. What yu need t d is: check the auditr yu intend t appint is registered with the Australian Securities and Investments Cmmissin (ASIC). ASIC will issue apprved SMSF auditrs with an SMSF auditr number therwise knwn as SAN which yu will need t fill ut yur annual return. Even thugh yu may have previusly used the same auditr, duble check that they are registered cntact the auditr early t allw sufficient time t cnduct the audit and fr this ffice t have enugh time t ldge the SMSF annual return n time n yur behalf, and appint yur auditr n later than 45 days (this recently changed frm 30 days as f July 1, 2013) befre May 15. Sme f the criteria that must be satisfied by an auditr are that they: must be independent and shw freedm frm bias, persnal interest and assciatin must nt be a trustee r member f the fund must nt have prepared accunts and statements fr the SMSF must nt be a relative r clse assciate. Befre an SMSF auditr can start an audit hwever, yu (r this ffice) must prvide infrmatin abut yur accunts and transactins fr the previus financial year as well as statements and frms. Any additinal infrmatin requested by yur SMSF auditr must be prvided within 14 days. Belw are examples f what yu shuld have n hand in case yur auditr wants t have a lk: minutes f all meetings fr a minimum f 10 years r since the establishment f the fund (if the fund is less than 10 years ld) with details f all majr decisins made including: asset purchases cmmencement f pensins appintment f new members, and review f investment strategy accunting recrds fr a minimum f five years (r since the establishment f the fund if the fund is less than five years ld) signed trustee declaratins fr trustees wh became members f the fund after July 1, 2007 prper accunting recrds such as statement f financial psitin and an perating statement February

6 cpy f trust deed electin r ntice t be a regulated fund trustee representatin letter which is a statement by the trustees that t the best f their knwledge, they have apprved and taken respnsibility fr the crrect presentatin f the financial statements investment strategy that gives cnsideratin t risk, return, liquidity and diversificatin financial reprt n the fund, and wrking papers including cpies f all relevant dcuments that are imprtant in prviding evidence that supprt yur findings and pinin. Once they have all the relevant dcumentatin, sme f the cmpliance issues that yur auditr will keep an eye ut fr are: was the fund maintained fr the sle purpse f prviding benefits t either members n retirement r dependants (in the case f a member s death)? des the fund meet the definitin f an SMSF and has it chsen t be a regulated fund? des the trust deed and character f investments reflect this? des the fund have an investment strategy that cmplies with investment restrictins? did the fund give financial assistance t a fund member r relative? are the fund s SMSF assets separate frm thse held by trustees persnally? d trustees adhere t cntributin and benefit payment standards? were any assets sld, and was this at market value? d trustees carry ut administrative bligatins? Mre bradly, yur auditr is required t: examine yur fund s financial statements assess yur fund s verall cmpliance with the super law prvide yu with an audit reprt by the day befre yu are required t ldge yur SMSF annual return, and prvide yu with their SAN as it will be required t be disclsed n the 2013 SMSF annual return and in subsequent returns if apprpriate. After the prcess is finalised, be sure that yur auditr prvides yu with the fllwing dcuments: a letter f audit engagement cnfirms the appintment f the auditr by yu and the scpe f the audit t be cnducted audit wrking papers dcuments that recrd the planning, nature, timing and extent f the prcedures f the audit prcess a management letter r audit finalisatin reprt prvides a summary f the audit findings a cpy f the final, signed financial reprt f the fund and relevant accunting recrds that supprt the statements fr the incme year under review, and a cpy f the audit reprt n the apprved frm this includes the auditr s pinin and qualifying remarks if any (yu shuld keep cpies f this fr at least seven years). Nte that an audit is required even if n cntributins r payments are made in the incme year. It is wrth nting hwever that when it cmes t an annual return, the Tax Office s system will nt accept ne if at the end f the financial year the SMSF has n assets r n members; unless that is the year the fund is wund up. Failure t ldge Failure t ldge yur SMSF annual return by the due date can result in penalties and the lss f tax cncessins fr yur SMSF. Be sure t cnsult this ffice fr help n hw t appint an apprved auditr and ldge yur annual return in time. Tax guide n the Natinal Disability Insurance Scheme The Natinal Disability Insurance Scheme (NDIS) came int effect n July 1, Under the new system, disability supprt will be prvided t eligible participants r their representatives n their behalf. The incme tax and GST implicatins shuld nt be verlked. If yu are a supplier f disability supprt t participants, have yu cnsidered whether GST applies t yur supplies? Fr participants r representatives wh receive NDIS payments, have yu cnsidered whether the payment received is incme tax exempt? We run thrugh the GST and incme tax treatment affecting the relevant parties belw. GST treatment f supplies made t participants Frm July 1, 2013, any supplies made by an entity February

7 (the supplier) t an NDIS participant (r representative) are GST-free subject t certain cnditins being satisfied. Supplies that may be GST-free include sales f equipment, hiring f equipment, and services. In particular, the fllwing cnditins must be met fr a supply t be GST-free. The supply must be: t a participant fr whm a plan is in effect under Sectin 37 f the Natinal Disability Insurance Scheme Act 2013 (NDIS Act) f ne r mre f the reasnable and necessary supprts specified in the statement f supprts in the plan made under a written agreement between the supplier and the participant (r anther persn) between the supplier and the participant (r anther persn) that bth: identifies the participant states that the supply is ne r mre f the reasnable and necessary supprts specified in the statement f supprts in the plan f a kind determined in a legislative instrument by the minister respnsible fr disability services. The supplier will need t keep recrds that explain all transactins fr its supplies, including a cpy f the written agreement. Generally, the supplier will need t keep these recrds fr a perid f five years after cmpletin f the relevant transactin. The case study that fllws illuminates the imprtance f a written agreement: Dmitri requires five hurs f supprt n a weekly basis that is specified as reasnable and necessary in his plan. He requests XYZ C t supply him with the supprt fr a perid f three mnths based n the NDIS published price. Dmitri prvides XYZ with a letter identifying that he is a participant and the relevant part f his plan that specifies the type f supprt required. XYZ writes t Dmitri t cnfirm its agreement t prvide the supprt, including the start date, and signs the letter. Outcme: If all the ther requirements (see abve) are met, the supplies that XYZ makes t Dmitri as specified in Dmitri s plan are GST-free. Tax treatment fr receipt f NDIS payments (i) Participants NDIS amunts received directly frm the Natinal Disability Insurance Agency (NDIA) fr apprved reasnable and necessary supprts are exempt frm incme tax. Such participants are als exempt frm incme tax n NDIS amunts received when they are paid t anther persn n the participant s behalf, such as a nminated representative, r a registered plan management prvider (RPMP). A. Deductins A participant cannt claim a deductin fr assets purchased r expenditure incurred that are funded using NDIS amunts. This includes deductins fr depreciatin f capital assets r certain ther capital expenditure. This is the case even if the participant uses the asset r incurred the expenditure in the curse f gaining r prducing assessable incme. B. Net medical expenses tax ffset (NMETO) A participant cannt claim the NMETO fr medical expenses incurred t the extent that thse medical expenses have been funded by NDIS amunts. Hwever, if the participant uses their wn funds then, depending n their persnal circumstances, they may be eligible t claim the NMETO if they have eligible ut-f-pcket medical expenses fr instance, t pay fr medical expenses nt cvered by yur NDIS amunts. The case study belw helps elucidate where and when the NMETO can be claimed. Andrea is a participant under the NDIS wh has elected t self-manage her plan. Under Andrea s plan, she receives $8,000 that is allcated fr the purchase f a prsthetic limb, an eligible medical expense fr the purpses f NMETO. Hwever, Andrea wants t purchase a new mre expensive mdel, which csts $12,000. Upn review, NDIA des nt cnsider the additinal cst f $4,000 fr the newer mdel t be reasnable r necessary. Hwever, Andrea decides t prceed with the mre expensive purchase, and pays fr the newer mdel using $4,000 frm her wn savings. Outcme: Andrea is nt entitled t the NMETO fr $8,000 f the purchase price f her prsthetic limb because it is an amunt that she is paid fr the medical expense by gvernment. Hwever, because Andrea paid fr the remaining $4,000 ut f her persnal savings, and it is an eligible medical expense, she may be able t claim the NMETO fr this amunt. C. Participants wh engage care prviders emplyer bligatins If a participant engages an attendant carer r a February

8 supprt persn directly under a self-management plan, depending n the nature f the arrangement (vlunteer, emplyee, r independent cntractr), they may be required t undertake the respnsibilities that an emplyer has, such as withhlding amunts under the pay-as-yu-g (PAYG) withhlding system. (ii) Representatives f participants The incme tax treatment fr an NDIS amunt received by a representative f a participant depends n the capacity in which they receive that amunt. The varius capacities are utlined belw: A. Nminated representative Fr a representative (such as a nminee, parent r guardian) nminated t manage a participant s plan, an NDIS amunt received: n behalf f the participant as their agent r trustee is nt rdinary incme in their hands fr their wn benefit fr services they will r have prvided t the participant under an arrangement with the participant may be assessable in their hands as rdinary incme. The case study belw explains the incme tax treatment f an NDIS amunt if it is received by a guardian n behalf f a participant: Sam is a participant under the NDIS wh requires carer supprt as part f his plan. Sam has elected fr the NDIA t pay $10,000 as per his plan directly t his guardian wh will then use the entire NDIS amunt t pay his care prvider. Outcme: Sam s guardian will nt have t pay incme tax n this $10,000 payment as it is received in the capacity f an agent/trustee. B. Registered plan management prvider (RPMP) If, as an RPMP, a participant s NDIS amunt is received: as an agent/trustee, it is nt received by an RPMP as payment fr any services it prvides s the amunt will nt be rdinary incme in its hands as payment fr any services it prvides, it may be assessable as rdinary incme. The case study belw describes the incme tax treatment f an NDIS amunt if received by an RPMP n behalf f a participant. Fabi is an NDIS participant wh has arranged fr an RPMP t manage his funding n his behalf. Under his plan, $5,000 is allcated fr the purchase f a prsthetic limb and care services. The $5,000 is depsited int Fabi s RPMP s nminated trust accunt. Fabi s RPMP then apprpriates fr its wn benefit $400 frm the $5,000 depsited int the trust accunt fr the care services and uses the balance ($4,600) t purchase Fabi s prsthetic limb. Outcme: The $5,000 depsited int the RPMP s trust accunt is nt incme f the RPMP as it was received in the capacity f an agent/trustee. Hwever, nce the RPMP becmes entitled t its fee f $400, that fee is assessable incme as it is a cmmercial prvider. A representative that purchases equipment r services n behalf f a participant using the participant s NDIS amunts is nt entitled t: a deductin fr the purchase price f that equipment r service, and a depreciatin deductin fr that equipment. Hwever, the case study belw an extraplatin f Fabi s situatin abve highlights exceptins: Fabi s RPMP used the $400 it apprpriated t cver its fees t pay the wages f its emplyees wh prvide services t participants, including Fabi. Outcme: As the RPMP is a cmmercial prvider that is nt exempt frm incme tax, it is entitled t a deductin fr the wages it has paid using the $400 it has apprpriated t cver its fees. Similarly, if an RPMP incurs expenses r purchases assets n its wn accunt, it shuld treat thse expenses and assets in its accunts fr accunting purpses in the way it nrmally wuld. Cnsult this ffice t find ut mre abut the GST and incme tax implicatins in respect f the NDIS. DISCLAIMER: All infrmatin prvided in this publicatin is f a general nature nly and is nt persnal financial r investment advice. It des nt take int accunt yur particular bjectives and circumstances. N persn shuld act n the basis f this infrmatin withut first btaining and fllwing the advice f a suitably qualified prfessinal advisr. T the fullest extent permitted by law, n persn invlved in prducing, distributing r prviding the infrmatin in this publicatin (including Taxpayers Australia Incrprated, each f its directrs, cuncillrs, emplyees and cntractrs and the editrs r authrs f the infrmatin) will be liable in any way fr any lss r damage suffered by any persn thrugh the use f r access t this infrmatin. The Cpyright is wned exclusively by Taxpayers Australia Inc (ABN ) February