Avoiding Medicare Surcharge Levy with Income Slightly over 90k

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?

Comments

  • +8

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

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

      • +1

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

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

    • 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...

      • But all those deductions would reduce your taxable income?

        • 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.

  • +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.

    • 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.

  • +7

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

  • -1

    chuck 2 grand in super, easy as anything.

    • its reportable unfortunatly

      • -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

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

        • See link below someone made

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

  • -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….

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

    Just an idea bud

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

      • +1

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

      • +1

        It’s a spouse for tax purposes.

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

    • 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.

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

        • +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.

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

  • 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.

    • -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.

      • -1

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

  • got a bonus of 2k.

    salary deferral arrangements.

    • -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.

      • +1

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

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

  • 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.

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

  • -1

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

    Smart people would salary sac into super.

  • +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...

  • -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

    • 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?

      • -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.

        • 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?

  • 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.

  • 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.

  • +1

    donate to RSPCA :)

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

  • +3

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

  • 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.

  • -1

    Join a union and claim your fees back.

  • 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.

  • +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

  • 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.

    • +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)

      • Thanks so much for your help.

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