Person A has a taxable income of $109,000. He has appropriate health insurance to avoid paying the surchage.
In November, he marries. His partner's income is very low and so the family threshold is below the surcharge. The partner is not covered by any health insurance.
Will Person A be liable for the surcharge at any stage?
Hi @SusanC1,
I've spoken to our technical area and hopefully I can clarify any misunderstanding.
Person A will not be liable for Medicare Levy Surcharge at any stage. Where a taxpayer’s spouse circumstances change, liability for the surcharge is tested for the period in the year before the change and for the period in the year after the change as two separate tests. The single and the family surcharge thresholds will apply to you for different periods depending on whether you are single or married (or have other dependants) for that period in the year as explained in Medicare levy surcharge.
From the facts you have provided in your scenario, Person A is not liable for Medicare Levy Surcharge, for the period 1 July to November (single period), as he has the appropriate level of private health insurance. For the period November to 30 June (married period) Person A is not liable for Medicare Levy Surcharge as his income of $109,000 is below the family threshold of $180,000.
It is agreed that the Alice and Adam Example (Spouse for the second part of the year) at M2 Medicare Levy Surcharge 2020 is relevant. The answer from BlakeATO provides a similar outcome, however, the reasoning was not clear and the particular section that BlakeATO has extracted from the website was not as directly relevant to your question.
We apologies for any misunderstanding. Thank again @macfanboy for your invaluable contributions on this forum - I didn't know that you teach. That's awesome, and makes sense. :)
Based on info provided no.
Hi @SusanC1,
@macfanboy is right - Person A will not be liable for Medicare Levy Surcharge based on the given scenario.
This is because, for Medicare levy surcharge (MLS) purposes, you are considered to be a member of a family if, during any period of the year, you had a spouse who was an Australian resident.
Remember that a spouse does not just mean someone you're in a legally recognised relationship with - it can be someone you live with on a genuine domestic basis, too. This means if the two people lived together before being married, they would still be spouses for MLS purposes.
Because Person A is therefore in a family for MLS purposes, the family income thresholds and rates apply. The Medicare Levy Surcharge is not payable until the family base threshold of $180,000 is reached, which you've stated is not passed. This is why neither Person A nor their spouse would be liable for MLS.
Thank you, Blake, I had thought the same but I am puzzled by what is on the ATO website.
Please refer to this following example taken from the site, yesterday.
"
Alice and Adam were single for the period 1 July 2019 to 16 January 2020 (200 days), so the single person MLS threshold of $90,000 applies to each of them for that period. This means:
Alice and Adam are considered to be a family for the period 17 January to 30 June 2020 (166 days), so the family MLS threshold of $180,000 applies to each of them for that period. However, they will only be liable for MLS if their own income for surcharge purposes is more than the family MLS threshold of $180,000. This means:
You are correct.
I'm sorry but I don't know what you mean. I'm correct to be puzzled?
The page is correct is has to be a ratio bewteen the two conditions, people and time.
Well, that contradicts what Blake from the ATO said.
Blake is mistaken.
Hi @macfanboy and @SusanC1, We're going to look into this further. BlakeATO's information also comes from the website, so we're going to speak to the relevant team to get clarification on this topic. Please hold tight, and watch this space. Thanks for your patience!
Thank you.
It will be interesting if it is different as this is what I use to teach classes with....:)
Yes, of course, it isn't exactly the situation I outlined but it will be good to have clarification.
To return to the situation I raised:
a person over the single threshold for MLS is in a health fund to an adequate degree.
He marries someone who isn't in a PHI during the year.
The family income after the marriage is below the MLS surcharge.
I believe that he is not liable for MLS at any stage. However, another person has argued that as there is no example of this situation on the ATO website, the following should apply:
As the answer to the question were all family members covered is 'no', then the person is liable for the surcharge for the entire year even if the number of days input onto the tax return as not liable is '366' days (for a leap year).
This disregards his membership of the PHI when single and also the family income when married.
a person over the single threshold for MLS is in a health fund to an adequate degree.
Not liable for MLS for the number of days when in a health fund WITH hospital cover when single.
He marries someone who isn't in a PHI during the year.
The family income after the marriage is below the MLS surcharge.
Again he is not liable for the number of days, when married and under the family threshold.
She may be for the number of days before marriage if over the threshlod.
Note: You do not need to be married, living together as defacto is ok.
This is how I instruct my students...so if it is wrong, ATO please explain why...and show me where in the Medicare levy Act 1986 or the Income Tax Assesment it suggests otherwise.
Hi @SusanC1,
I've spoken to our technical area and hopefully I can clarify any misunderstanding.
Person A will not be liable for Medicare Levy Surcharge at any stage. Where a taxpayer’s spouse circumstances change, liability for the surcharge is tested for the period in the year before the change and for the period in the year after the change as two separate tests. The single and the family surcharge thresholds will apply to you for different periods depending on whether you are single or married (or have other dependants) for that period in the year as explained in Medicare levy surcharge.
From the facts you have provided in your scenario, Person A is not liable for Medicare Levy Surcharge, for the period 1 July to November (single period), as he has the appropriate level of private health insurance. For the period November to 30 June (married period) Person A is not liable for Medicare Levy Surcharge as his income of $109,000 is below the family threshold of $180,000.
It is agreed that the Alice and Adam Example (Spouse for the second part of the year) at M2 Medicare Levy Surcharge 2020 is relevant. The answer from BlakeATO provides a similar outcome, however, the reasoning was not clear and the particular section that BlakeATO has extracted from the website was not as directly relevant to your question.
We apologies for any misunderstanding. Thank again @macfanboy for your invaluable contributions on this forum - I didn't know that you teach. That's awesome, and makes sense. :)
Thanks, Josh. That is excellent.
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