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Re: Medicare Levy Surcharge - defacto split

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Newbie

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Hi

I have a client who split from their defacto partner in November 2019. They have one dependent child together. Their combined income is over the family Medicare Levy Surcharge threshold (he earns around $175K a year and the ex-partner is around $12K). Does my client need to pay the MLS for the period they were together i.e. July 19 - Nov 19?

 

The example on the ATO website suggests that they use their own individual income (not combined) and compare it to the family MLS threshold for the period they were together.

 

EXAMPLE FROM THE ATO WEBSITE: Michael's income for MLS purposes was $69,000 and Michelle's was $95,000. In previous years, they used their combined income to assess their MLS liability. They now have to use their individual income for MLS purposes and compare that with:

  • family MLS threshold to calculate whether or not they will have to pay MLS for the number of days they were living together as a couple
  • single person MLS threshold to calculate whether or not they will have to pay MLS for the number of days they were single.

Michael and Michelle are considered to be a family for the period 1 July to 12 October 2019 (104 days), so the family MLS threshold of $180,000 applies to each of them for that period. This means:

  • Michelle is not liable for MLS for this period because her $95,000 income for MLS purposes was less than $180,000.

* Michael is not liable for MLS for this period because his $69,000 income for MLS purposes was less than $180,000.

 

From the above example I would assume my client does not need to pay the MLS as he only needs to compare his taxable income of $175K to the family threshold amount when they were together as a family. Is this correct?

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Taxicorn

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@KateH19 

 

A liability to pay MLS for July 19 to Nov 19 as the family threshold is used and it is exceeded (remember both incomes are used), both will have to pay it.

 

There will not be a liability to pay MLS from Dec 19 to Jun 20 as his income does not exceed the family threshold (he has a dependant child - assuming he is paying child support). 

1 REPLY 1
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Best answer

Taxicorn

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@KateH19 

 

A liability to pay MLS for July 19 to Nov 19 as the family threshold is used and it is exceeded (remember both incomes are used), both will have to pay it.

 

There will not be a liability to pay MLS from Dec 19 to Jun 20 as his income does not exceed the family threshold (he has a dependant child - assuming he is paying child support).