22.18% effective tax rate and Health care in New Zealand.

So my effective tax rate is currently sitting at around 22.18%. And we have a goods and service tax on almost everything we buy of 15% (housing is exempt). Those taxes cover a lot of services.

That is life in New Zealand.

After reading about so many people worrying about what they are going to do for healthcare after they retire I feel absolutely lucky to live in a country where healthcare is relatively affordable. Healthcare is largely covered by the government. (Via taxes of course.)

If you have an accident and need to see a doctor the cost is almost nothing and all the treatment thereafter is mostly covered. Accident insurance is included in the taxes that come out of your wages and if the accident is so bad that you can’t work you can get 80% of you previous salary in compensation until you are either rehabilitated or retrained for work. Accident bad enough that you need hospital care? No problem its covered. The accident can be at home, work, doing sport or whatever, you’re still covered.

A doctor visit for a medical reason ranges from free (under 13yrs are free) to about $80. (You’ll pay more for seeing a doctor after hours or on the weekend and cost varies a lot by location, e.g poor areas have cheaper fees). Most medicines are subsidised and cost around $5 per prescription.

Referrals to specialists are triaged on need. If its urgent you will get seen quickly, if not you may have to wait a while.

Likewise with any surgery in the public system. You get seen according to need. There’s not a lot wrong with that. Most New Zealander’s are fairly accepting of this kind of system. We love fairness! We don’t like seeing people get special treatment because of “who” they are or because of how much money the have. Now granted, the system aint perfect, a lot of people wait longer than they want. But its the best we can do with what we have.  It could definitely do with more funding of course! Those funds have to come from taxes and the country has to bear the cost a the end of the day. There has to be balance.


Now I also have private health insurance ($21.01 a fortnight for surgical and specialist care, cheap as! It a not for profit organisation) but I only have it because I might want a private room in a fancy private hospital. Or I might want to be seen by doctor ASAP if I’m freaking out over something. It doesn’t let me skip the queue in the public system, rather there are some doctors that operate outside the public system and I can pay to see one of them privately. My money doesn’t disadvantage anyone in the public system, rather it benefits them, because I am one less person the that they would have had to queue up with for treatment. The government has considered incentivising private health insurance to reduce the pressure on the public system, but so far nothing has changed.

I’m considering dropping the insurance. The older I get, the more costly it is and is it really that necessary? I’ve started a small savings fund for health, and every five hundred dollars I save I add that as an excess (I think Americans call it a deductible) to the insurance and so my fortnightly fee drops. Eventually I hope to have enough in the fund to cover the costs of anything I might want to have done privately.

One school of thought is that if you have the money, you should pay for private treatment and ease the burden on the public system. Or even if you have the money why would you even put yourself at the mercy of the public system? To be honest, the public system has some fantastic doctors. I work in a little non specialty of healthcare and even I see specialists (earning very big dollars!) are having hip replacements on the waiting list via the public system. The care is just as good or in some cases better than private. You may not get a private room or the fanciest food but you get great surgeons and nurses.


So I have to make a call, yes I can afford private healthcare insurance, but public is just as good. Private will be faster and public I’ll have to wait my turn. Its for the good of the country if I pay for private insurance, but I pay my share of taxes so why not go public…… What’s a responsible citizen with dreams of financial independence to do?

2 thoughts on “22.18% effective tax rate and Health care in New Zealand.”

  1. You hear a lot of people complain about the NZ health system but compared to many other countries it’s pretty bloody good. Whenever I’ve needed hospital treatment, sure the wait can be pretty lengthy but as you say, it’s triaged so highest needs come first.

    When you also consider the small population of NZ, the funds for all this have to come from our taxes which, compared with many other countries, are fairly low.

    I do think that many people who can afford it do have medical insurance but many of them will be totally over-insured and wasting their money on benefits they’ll never use.

    Your plan covering the most serious and costly procedures sounds like a good one. Low cost, relatively, and will ensure that you get work done reasonably quickly as we know the public health waiting lists can stretch years into the distance.

    Great idea saving the excess to reduce the premiums. That’s a smart move for any insurance policy.

    Great post and reminds me of how good life in NZ is.

  2. Big FIRE questions eh? 🙂
    I’ll go on a bit of a tangent here & say that wow we both live in awesome countries, NZ & Aus. I feel very lucky to be born in such a great place..

    Tough decision though I must say!

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