Avoiding Medicare Surcharge Levy with Income Slightly over 90k

LJohnTurner on 04/06/2018 - 21:14
Last edited 05/06/2018 - 08:59 by 1 other user

With tax return time around the corner, I’m looking for some ways to reduce my income for MLS purposes.

My annual salary is 90k this tax year (2017-2018) and I don’t hold private medicare since I didn’t expect my income to change this tax year. However in Feb 2018, our company announced that they will be giving out bonuses to those who met their targets. I was one of them and got a bonus of 2k.

This now means that my income for this tax year now exceeds the threshold and will have to pay the 1% of the medicare levy surcharge ($920). Since it’s now too late to buy healthcare, I am looking for ways to reduce my income for medicare surcharge purposes to dip me below the threshold and avoid the MLS. Would I have to pay the full 1% amount ($920) or would this be prorated for the months over i.e. Feb-Jun ($383)

Having looked through what is deductible on the ATO website i am struggling to find things to claim. Since I work in a office where we don’t have a company uniform, don’t travel for work and use public transports to travel too and from work. I will be looking to claim for mobile/laptop costs but this won’t be enough to reduce the amount.

Are there any legal tax efficient ways I can reduce my income to below the 90k threshold?

Financial

Comments

  • mskeggs on 04/06/2018 - 21:17
    +8

    Charity deduction.
    Pre-pay interest on any investment loans.
    Tax preparation costs
    Investment advice

    • Rosace on 05/06/2018 - 00:45

      How to prepay interest on an investment loan? Thought this was deducted monthly or weekly depending on the setup. Thanks.

      • mskeggs on 05/06/2018 - 07:34
        +1

        Talk to your lender, but it is a fairly common thing to do, so they shouldn’t be surprised.

        • flux on 08/02/2019 - 21:51

          Wow didn't know you can do this, lol sounds very much against accrual accounting though.

    • FirstWizard on 06/06/2018 - 22:14

      If I recall correctly, MLS threshold is a special income test and cannot be lowered by most of the normal deductions, including all of the above.

      https://www.ato.gov.au/individuals/medicare-levy/medicare-le…

      • mskeggs on 06/06/2018 - 22:46

        But all those deductions would reduce your taxable income?

        • FirstWizard on 07/06/2018 - 02:15

          Yes, I guess so, OP still has to pay the surcharge, but a lower amount, not the full $920.

          It's not an easy/beneficial way to avoid paying it altogether, which is his question.

  • smuggler on 04/06/2018 - 21:19
    +1

    I will be looking to claim for mobile/laptop costs but this won’t be enough to reduce the amount.

    Salary sacrifice?

    I was wondering how you plan on claiming a deduction for your phone? I have a work phone that I purchased for $1250.

    • JohnTurner on 05/06/2018 - 07:06

      Salary sacrifice is only available for employees in our company on vehicles. As I already have a car and unable to afford a second this isn't an option unfortunately.

  • MarsTitan on 04/06/2018 - 21:19
    +7

    If your work place allows it, take an annual leave without payment (or some number of hours).

  • Donaldhump on 04/06/2018 - 21:33
    -1

    chuck 2 grand in super, easy as anything.

    • taoz on 04/06/2018 - 22:05

      its reportable unfortunatly

      • Donaldhump on 04/06/2018 - 22:54
        -1

        Ask ur work to delay a pay maybe

        Claim some kms can claim up to 5000kms and books up to 300

        Goto a conference on a Saturday maybe

        I'm sure it would only be on the amount above 90k anyway

      • liamisred on 04/06/2018 - 22:55

        Hey @taoz, I'm not having a go at you because I genuinely have no idea but what do you mean by reportable?

        • Donaldhump on 04/06/2018 - 23:40

          See link below someone made

    • JohnTurner on 05/06/2018 - 07:09

      Isn't voluntary contributions into super taxed at 15% and reportable?

  • JimmyF on 04/06/2018 - 21:38
    -2

    Gift deduction will help bring that down, or put money into super.

    Or just pay it. Really its not the end of the world….

  • BensonP on 04/06/2018 - 21:47

    Joint tax return with your partner?
    90k for singles, or 180k for couples.

    Just an idea bud

    • JohnTurner on 05/06/2018 - 07:07

      I will be single in this tax year and getting married to my partner before the tax years isn't possible haha

      • bemybubble on 05/06/2018 - 08:44
        +1

        Don't have to be married to be classed as a defacto couple…

      • whooah1979 on 05/06/2018 - 17:46
        +1

        It’s a spouse for tax purposes.

    • Brainwhacker on 05/06/2018 - 09:53

      OP, is this limit applied only if you lodge a joint return?

    • kelkel108 on 05/06/2018 - 11:48

      What's the difference when doing my tax return with my partner.
      I'm in a similar situation with OP, but I'm married.

      I earn just above 90k but combined with my partner we are no where near 180k.

      • MarsTitan on 05/06/2018 - 21:01

        No Medicare levy applies to you. Still confirm with your accountant/ tax agent.

        • FirstWizard on 07/06/2018 - 02:32
          +1

          Medicare levy surcharge may not apply depending on the combined income. You still have to pay the Medicare levy, unless you have an exemption. Should not get the two levies confused ;)

          AFAIK, there's no such thing as jointly filing taxes in Australia. Each person individually has to fill their own tax returns. Just that for some income tests, e.g. MLS, you can include that you're partnered to get an exemption.
          In the US you usually only fill one return when they say joint filing for the 2 people.

          I've never had to include a partner with my return, so please check with more sources to confirm.

        • MarsTitan on 08/06/2018 - 00:27

          @FirstWizard:
          Agreed, I meant the Medicare levy surcharge. Thanks for the clarification.

  • loropy9 on 04/06/2018 - 21:57

    If only our sold-out, money grabbing, greedy, people-hating politicians would force every one of us to pay more towards Medicare and not force us into the nets of their shark friends in the insurance industry… we could stand a chance of not becoming the America where people are duying in hospital hallways and sell their houses to get a heart surgery done.

    • Almost Banned on 04/06/2018 - 23:10
      -1

      It is easy to criticise the American medical industry - yet it also happens to be the place with the most cutting-edge (boom-tish) medical research and best surgeons.
      Coincidence? Not likely.

      • Speckled Jim on 05/06/2018 - 09:32
        -1

        Another who hasn't heard the Nixon tapes. Still.

  • whooah1979 on 04/06/2018 - 22:15

    got a bonus of 2k.

    salary deferral arrangements.

    • JohnTurner on 05/06/2018 - 07:10
      -2

      I can't, I work for a large organisation where the payroll is automatic so deferral of bonus/salary isn't a option here.

      • Quantumcat on 05/06/2018 - 09:41
        +1

        Have you tried talking to Payroll or HR? Or are you just assuming?

        • JohnTurner on 05/06/2018 - 20:26

          I've checked with HR already, they said this isn't possible.

  • whooah1979 on 04/06/2018 - 22:21

    you could also start an online store. build up an inventory before july 1 to take advantage of the lvt. the $20000 instant asset write off is still on the table, but it to expires on june 30.

    • sabracad on 05/06/2018 - 20:41

      Two slight problems with that…

      1. You need to add back stock on hand when calculating your profit.
      2. If you managed to create a loss Non-commercial loss rules would prevent a claim against other income.
  • CheapskateQueen on 04/06/2018 - 22:28

    You can now deduct after tax super contributions. That are charity donation are best ways to get big deductions

  • Ninja9 on 04/06/2018 - 22:55
    -1

    Easy get a Surface Book 2 and an iPhone X. :)

    Smart people would salary sac into super.

  • toniyellow on 04/06/2018 - 23:03
    +7

    Can't salary sacrifice into super, the ATO include that in income for Medicare levy purposes

    https://www.ato.gov.au/Individuals/Medicare-levy/Medicare-le…

  • Smulder on 04/06/2018 - 23:21
    -1

    Enrol in some kind of self-education that is related to your work before 30 June, and pay up front. You will be improving your employability, and the costs will be deductible for tax, including course fees, books & stationery, travel to the course etc.

    If you don't want to actually do any study, find a course that allows you to quit and get a refund post 30 June :p

    • JohnTurner on 05/06/2018 - 07:34

      I was looking to go to a work-related conference later this year. The conference fees are in US dollars and is in America. Can I still claim this as a work related/self study expense even though it is outside of Australia/not paid for in Aussie dollars?

      • Lastchancetosee on 05/06/2018 - 08:30
        -1

        Check with your accountant and work, but academics do this all the time. Pay registration, flights, etc. pre-EFY. Must be explicitly work-related,and extra leave days must be less than no. of working days, or you'll have to pay FBT. Working days includes travel time, public holidays (in Australia), and the day prior to the conference. This can also apply to workshops.

        • JohnTurner on 07/06/2018 - 13:52

          How does this work with conferences based on a non-AU Card? I.e. if I pay with my US credit card. I assume I would have to apply some FX rate or with the ATO automatically apply a rate when logging my return?

  • dufflover on 04/06/2018 - 23:40

    I had a similar situation a few years ago too. Unexpectedly hit over $90k (or whatever the border was) and suddenly had to fork out for the MLS. Luckily this was at the start of tax return process not the end so I did have some things to deduct anyway to bring me under but it was silly how it went from forking out quite a bit (certainly enough to buy some decent bargains people post here!) to basically being on par.

    Sounds like your a fair way over if claiming mobile/laptop costs isn't enough though.
    I work for a big company with quite streamlined (aka automated and/or outsourced) pay and HR departments but if it was a smaller company that deferred pay idea isn't a bad idea.

  • spal on 05/06/2018 - 05:22

    You could consider buying income protection insurance, but only if you consider it useful to your needs. Premiums can be high but it will get you protection and a instant deduction this year.

  • FW190 on 05/06/2018 - 05:44
    +1

    donate to RSPCA :)

  • jsb on 05/06/2018 - 07:46

    If your job allows and you do work from home sometimes, you can claim it along with calculated utility bills for those days.

  • mogy1808 on 05/06/2018 - 09:03
    +3

    Contribute to Medicare, you may need it one day :)

  • jhmtaylor on 05/06/2018 - 09:22
    -4

    Suggestions;
    Financial planning/investment advice.
    Prepay private health insurance.
    Salary sacrifice superannuation contributions. Your employer should go for this because it reduces their payroll tax.

    • Smulder on 05/06/2018 - 19:23

      Upfront financial planning advice is not deductible for tax.
      Private health premiums are not deductible for tax.

      • jhmtaylor on 07/06/2018 - 09:02

        Agree my mistake.

    • sabracad on 05/06/2018 - 20:55

      Smulder has covered the other two and I'll take the third. The lack of benefits medicare wise have already been raised re super but superannuation contributions are included for payroll tax purposes anyway - whether SG conts or salary sacrifice.

    • spal on 05/06/2018 - 21:37

      Your advice on payroll tax is incorrect. Employer will have to pay payroll tax on employer superannuation contributions, including the salary sacrifice super payments.

  • megamilinda on 05/06/2018 - 12:21

    Contribute into super via personal contribution:
    https://www.ato.gov.au/Individuals/Super/In-detail/Growing/C…

    Edit: Just read that gets added back, so no help.

  • imagele90 on 06/06/2018 - 07:17
    -1

    Join a union and claim your fees back.

  • 1devk on 08/02/2019 - 15:33

    I hope it's not too late to ask question in this thread but people's expertise to clarify a few things.

    I know that Medicare levy surcharge (MLS) is paid as tax when we do not have an appropriate level of private hospital insurance and earn above a certain income.

    The "family" base income is over Medicare Levy Surcharge (MLS) and if one partner income for MLS purposes was $21,980 or less, then as per https://www.ato.gov.au/individuals/medicare-levy/medicare-le… low income partner doesn't have to pay the MLS. Based on this my questions are -

    • higher income earner still pays for MLS? (guessing yes but want to check)
    • higher income earner pays for MLS of "total family income" or "own taxable income" earned?
    • what if higher income partner had the private health insurance (as individual cover) and low income partner had 'no' cover. In this case is higher income partner still pays for MLS?
    • what is if higher income partner had the private health insurance only part of the financial year
    • for MLS purpose, is the private covered required for Financial Year or Calendar Year.

    Thanks in advance.

  • SnoozeAndLose on 08/02/2019 - 15:50
    +1

    higher income earner still pays for MLS? (guessing yes but want to check) Yes

    higher income earner pays for MLS of "total family income" or "own taxable income" earned? "own taxable income"
    what if higher income partner had the private health insurance (as individual cover) and low income partner had 'no' cover. In this case is higher income partner still pays for MLS?it is individual taxed so no MLS if you have PHI for 365 days
    what is if higher income partner had the private health insurance only part of the financial year
    for MLS purpose, is the private covered required for Financial Year or Calendar Year.The tax will be prorate, calculated by days-365

  • 1devk on 08/02/2019 - 18:14

    Thanks @SnoozeAndLose, one question if you can clarify, for MLS purpose, is the private insurance coverage counted in a Financial Year OR Calendar Year. Say if I take private insurance now in Feb 2019, then in FY18-19, only Feb-to-June 5 months will be considered out of 365 days of FY. Thanks in advance.

    • SnoozeAndLose on 08/02/2019 - 21:54
      +1

      Thanks @SnoozeAndLose, one question if you can clarify, for MLS purpose, is the private insurance coverage counted in a Financial Year OR Calendar Year. **Financial Year **

      Say if I take private insurance now in Feb 2019, then in FY18-19, only Feb-to-June 5 months will be considered out of 365 days of FY. Thanks in advance.
      You are right,the number of date you held MLS within the FY - 365(01/07/2018 - 30/06/2019)

      • 1devk on 08/02/2019 - 22:42

        Thanks so much for your help.

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