24 Jun 2014
Lifetime Health Cover Explained
Lifetime Health Cover (LHC) is a government initiative introduced on 1 July 2000. LHC is designed to encourage people to take out hospital insurance earlier in life and to maintain their cover. Under LHC health funds are required to levy a loading on the basic premium of a private health insurance hospital policy. The loading is dependant on the ages of the adult members of the policy when they purchase hospital cover with a registered health fund. The Private Health Insurance Act 2007 now includes a new provision requiring health insurers to cease including the loading to the basic premium after ten years continuous hospital cover. Effective 1st July 2013, the Private Health Insurance Act 2007 now includes a new provision requiring health insurers to cease applying the Australian Government Private Health Insurance Rebate to the Lifetime Health Cover loading component of the premium.
The key elements of LHC are:
Certified age of entry. – All members are given a ‘certified age at entry’ to enable their health fund to determine what premium should be paid. Under LHC a person’s certified age at entry is the age that the member is assigned for the purpose of establishing whether or not there would be a loading on their ‘base rate’ premiums.
Base rate premium
The base rate premium refers to the price of a policy excluding any rebate and/or LHC loading.
The system operates with a ‘threshold age’ of 30 years.
Loading for late entry
A loading of 2 per cent on top of a member’s base rate premium will apply for each year a member’s LHC age is above 30 yrs when they first take out hospital cover. This is called the loading for late entry.
For example, someone taking out hospital cover at the age of 30 is entitled to pay the base rate premium, provided they maintain their cover. Someone who first takes out cover at age 40 will pay an additional 20 per cent (40yrs-30yrs = 10yrs x 2% = 20%) on top of the base rate premium for the next 10 years. Once they’ve had continuous private hospital cover for 10 years, the loading will be removed from their premium.
The maximum loading allowed is 70 per cent. This translates to the maximum loading applying for a certified age at entry of 65 and applies to people who first take out hospital cover at age 65 or over.
Special provision for people born on or before 1 July 1934.
People born on or before 1 July 1934 are not affected by Lifetime Health Cover. If people in this age group take out hospital cover at any time in the future they will pay the base rate premium, with no loading for late entry.
Australians without private health insurance were given an introductory grace period commencing 1 July 1999 and ending on 15 July 2000 to join a health fund and lock in a certified age at entry of 30 prior to the commencement of Lifetime Health Cover.
Minimum period of membership
People who took out hospital cover during the introductory grace period (1 July 1999 to 15 July 2000), are required to maintain their cover for a minimum period of 366 days after 1 July 2000 in order to lock in a certified age at entry of 30.
Periods of absence
Under Lifetime Health Cover members are able to drop their cover for a cumulative period of 1094 days absence, without paying any additional loading on their premium.
Periods of suspension
Members may suspend their membership for a time, with the agreement of their fund. Periods of suspension do not count towards the ‘periods of absence’ that is allowed before a member’s certified age at entry is affected.
People who joined during the introductory grace period may be entitled to suspend their membership prior to the expiration of the minimum period of membership, but only with the agreement of their health fund.
If a member is over 31yrs. and has had continuous (12 months and over) health insurance prior to or since 1 July 2000, and has gone overseas – the member can cancel their hospital insurance when they leave the country. When they return they do not pay a loading for the period that they were overseas. However, they will be required to take out health insurance within 12 months of the day they return to Australia permanently.
People in this category can return to Australia for visits of less than 90 days, and they are still taken to be overseas.
Members are able to downgrade or upgrade their level of cover on their return without affecting their certified age at entry. However, any relevant qualifying periods for pre-existing conditions would apply. More so, members are also able to transfer between funds with no variation in their certified age at entry.
LHC does not apply to extras (ancillary) benefits or ambulance cover.
Members of the Australian Defence Force will retain base premium rates as if they had hospital cover.
08 Jun 2013
Employee or contractor?
Before your business engages a worker, you need to check whether they are an employee or contractor by examining the working arrangement.It is important you make the correct decision as you will need to meet different tax and super obligations depending on whether your worker is an employee or contractor.Many businesses are getting this decision wrong as they are basing it on incorrect information. Often workers who should be employees are being incorrectly treated as contractors.Just because a worker has an ABN or registered business name does not mean they will be a contractor for every job.The ATO provides a decision Tool that you can work through to ensure you are meeting your obligationsGo to www.ato.gov.au In the search engine type: Employee or contractor? Get the factsProtecting
07 Jun 2013
- Expenses: Look at bringing forward any expenses into the current financial year that you know you are going to incur within the next few months. Examples include subscriptions, advertising, printing & stationery, computers & other office equipment. New equipment cost-ing less than $6500 can be claimed in full. (Amounts over will need to be depreciated)
- Income: Similarly to paying your expenses before June 30, try to defer incoming payments. Keeping your business income minimal will reduce the tax bill therefore try to slow the income of revenue towards the end of the financial year & delay sending invoices to your clients until the next financial year
- Accelerated depreciation for Motor vehicle purchases. The deduction is $5,000 plus 15% of the remaining amount. (Note that the vehicle does not have to be new)
- Superannuation: Pay your employee’s super before June 30. Look at topping up your own super contributions (just make sure you don’t breach the contributions cap limit). You may also be eligible for the governments co-contribution. The government will pay 50c for every after tax $ to a max of $500 if your income is below $31920, and reduces by 3.33 cents per $ over that limit with nil payable once your income reaches $46920
- Stock: if your business has a turnover of less than $2million & your stock on hand value has not changed by more than $5000, you do not have to do a stocktake. If you do not fall into this category then you will need to do a stocktake.
- Consider prepaying interest. If you have an investment or business loan you may consider prepaying the interest for the 2014 year. Note that this strategy only defers tax & should be looked at inconjunction with future earnings.
- Car Expenses: If claiming actual expenses, check that your log book is current. NB a log-book is required for all vehicles other than utilities or panel vans with a carrying capacity of one tonne or more, or any other vehicle with a carrying capacity of nine or more passengers. Your logbook is valid for five years. The logbook must cover at least 12continuous weeks.