Medicare Levy Surcharge (MLS) - Non Student Dependant

jmal4580 on 07/07/2020 - 09:57

Hi OZB Brains Trust,

A quick question in relation to the Medicare Levy Surcharge (MLS).

My situation summarised below;
•After deductions my taxable income is over $90k and the MLS is therefore applicable.
•I am still living at home (23) and am listed as a non-student dependant on my parents private health insurance policy. (I pay my share of the cost to Parents)

Has anyone experienced a similar situation before? Will I be able to avoid the MLS as I am listed as a non-student dependant on a private health insurance policy?

I met with my accountant yesterday evening to finalise my tax return for FY19/20 and he was unsure.

Thanks in advance.
J

Financial

Comments

  • Okayy on 07/07/2020 - 10:00
    +22

    Change your accountant.

  • T-BARHQ on 07/07/2020 - 10:29
    +2

    You are classified as a dependent on your parents policy if your:

    1. Under 21
    2. A student 21-24 Studying Full-time

    You don't qualify as a 'dependent' and have a taxable income greater than $90,000 therefore liable for the medicare levy surcharge.

    https://www.ato.gov.au/Individuals/Tax-Return/2020/Tax-return/Medicare-levy-questions-M1-M2/M2-Medicare-levy-surcharge-(MLS)-2020/?=redirected_M2-MedicareLevySurcharge-redirect

    • CaptainHoltisDad on 07/07/2020 - 11:25

      Further down that page it states:

      If you fit in one of the following categories, you are exempt from MLS for the whole of 2019–20.

      Surcharge exemption categories
      ~ For the whole of 2019–20, you and all of your dependants (if you had any) either had an appropriate level of private patient hospital cover (…)

      I believe OP falls into this category, as long as you can obtain proof you were listed on the policy from the insurer.

      • T-BARHQ on 07/07/2020 - 11:36

        Yes again that emphasises the same point… it comes down to whether or not he is in fact considered a 'dependent.' Based on the Dependents test, he is not. Regardless if listed on the policy.

        • CaptainHoltisDad on 07/07/2020 - 17:31
          -1

          Really? I wouldn't have the clause about dependants was relevant to OP?

          ~ For the whole of 2019–20, you and all of your dependants (if you had any) either had an appropriate level of private patient hospital cover (…)

          Since the OP him/herself did not have dependants that part of this category is not relevant here. So asking the question, did OP have an appropriate level of PHI cover? Then yes

  • mskeggs on 07/07/2020 - 11:00
    +4

    If your parents PHI will give you a tax statement, you are covered for MLS purposes.

    • T-BARHQ on 07/07/2020 - 11:09
      -3

      haha How? He doesn't meet the dependents test? having a copy of parents PHI Tax statement (even if he's listed on policy) doesn't make a difference on eligibility. (PS. don't seek OZBargain for Tax Advice as above… get a new accountant)

      • mskeggs on 07/07/2020 - 17:58

        If the health insurer is providing cover to this adult as part of the policy they will provide a tax record to that effect.
        If the op is in fact, not covered because they are not included in the cover, there will be no tax statement issued.

        I think the claim to dependent status is a red herring, and the real question is whether the health fund are insuring OP at all. If they are, they will issue a tax record and all will be fine.

    • jmal4580 on 07/07/2020 - 11:23

      This was my initial thought. If CBHS will provide me with a tax statement I don't understand why I wouldn't be covered for MLS purposes.

      • T-BARHQ on 07/07/2020 - 11:55
        -1

        It's 1% ($900) The fact is, if you don't meet the ATO tests regarding being a dependent and you earn over $90,000 as an individual you are liable. (Your parents health fund should be ensuring that dependents details are updated) There's always a chance that you'll 'fly under the radar,' but it's dodgy. If audited you may be penalised.

        • Lj09 on 08/07/2020 - 11:10

          Actually, if the OP lives at home and is not in a defacto relationship, you CAN stay on your family health insurance (there is an additional charge) and so, I would say that in fact they ARE covered - and should be able to get the appropriate form from the insurer to state this.

      • peter05 on 07/07/2020 - 11:56

        are you even listed as being covered under these policies? I believe those policies still have the same requirements that you are full time study. Some I have heard of can cover you until 25 but you need to be studying full time to be covered under those policies, technically

        • jmal4580 on 07/07/2020 - 12:08

          When I stopped studying full time at the end of 2018 I had to be listed as a non student dependant on the policy. The policy went up by ~$60 a fortnight. I am individually listed on the policy as a non student dependant.

          • T-BARHQ on 07/07/2020 - 12:13
            +1

            @jmal4580: 2018 you would have been 21 right? and although not studying full time you met the dependency AGE test. Turning 22 and not studying full time your parents health fund should have removed you as a dependent on their policy. As an accountant myself, I would not be comfortable lodging your return as a 'dependent.' It's up to you what you decide to do… some Tax Interpretations can be grey. I believe this is pretty clear.

  • seraphim2017 on 07/07/2020 - 12:26
    +1

    "After deductions my taxable income is over $90k and the MLS is therefore applicable."

    I thought the requirement was to meet ALL the tests to be ineligible for payment?

    Sounds like you meet the criteria for paying the MLS, unless your accountant can find a legitimate way to reduce your taxable income below the threshold? (how much over the threshold are you?) Otherwise you would only be exempt if you meet ALL the criteria, and you said you don't. And like other said, sounds more like you need a better tax accountant!

    (Disclaimer, not tax advice, but if you don't meet the criteria, seems like a legitimate tax cost, pretty cheap really)

    • T-BARHQ on 07/07/2020 - 12:34

      Agree, the only way to avoid the liability is if your taxable income fell below $90,000 with legitimate tax deductions.(For future Years Maybe look into a policy for yourself (weighing up value compared to MLS), or consider Deductible super contributions/salary sacrifice arrangements etc. Please discuss with a good accountant.

      • jmal4580 on 07/07/2020 - 17:08
        -3

        How about this then Mr know it all??????????

        "Dependent children do not get their own statement, because they cannot claim the rebate and are not subject to the income test. As a dependent child covered on a private health insurance policy, you will need to complete this section so we can verify your insurance coverage. This will ensure you are not charged the Medicare levy surcharge (if your income is above the threshold)."

        https://www.ato.gov.au/Individuals/myTax/2019/In-detail/Priv…

        • T-BARHQ on 07/07/2020 - 17:30

          Hey mate, don't need to be rude, was just trying to be helpful. As I've described above there are tests you must meet to be considered a dependent. Based on the information you've given (Age & Study Status) you are no longer considered a dependent on your parents policy and earn over $90,000 and are liable for MLS. (The above would be applicable if you were a dependent AKA under AGE 21 or under 24 studying full time and earning over $90,000) Like I said, It's up to you what you do please go see an accountant who can help guide you through it in person.

          • jmal4580 on 07/07/2020 - 17:41
            -3

            @T-BARHQ: “Dependent child

            For this section, a dependent child is either:

            a person who is under 18 years old, or
            a dependent child under the rules of the private health insurer who is under 25 years of age and does not have a partner”

  • Timbo94 on 07/07/2020 - 17:33
    +2

    Anyone else wanting to ask the question what job OP has to earn $90k after deductions and only be 23?

    • jmal4580 on 07/07/2020 - 17:43
      +1

      Construction engineer :)

      • Timbo94 on 07/07/2020 - 17:48

        I clearly did the wrong type of engineering then haha. Hats off to you, well done.

        • jmal4580 on 07/07/2020 - 19:36

          Thanks!!!!

          I’m guessing you did Civil? Services? My advice would be to target a role with one of the tier 1 building companies. If you have have a civil background, you can manage the substructure/civil trades etc. If a services background, the service trades (Elec, mech, vertical transport,hydr etc.)

          Goodluck!

  • CaptainHoltisDad on 07/07/2020 - 17:46
    +2

    What would be point of health insurers allowing you to buy health insurance off them but for tax purposes you would effectively not have private health insurance? My understanding is that being on your family policy as an adult dependent (paying the requisite extra premium charged) would be the same as purchasing a single standalone policy for yourself.

    The ATO's definition of dependent is someone who is on the policy and does not have to pay their share of the policy (i.e. the price of the policy remains unchanged). As OP is an adult dependant or what CBHS calls a "Non-Student Dependant" on their website, is equivalent to simply paying for your own policy. In that regard the situation would be identical to if OP had purchased their own standalone insurance policy. Otherwise, what has OP been paying for?

    • jmal4580 on 07/07/2020 - 17:50

      This is also my understanding. P.S - I had an inbox similar to your response refuting the above claims from TBAR. Thanks! Thanks! (X2)

      • Lj09 on 08/07/2020 - 11:44
        +1

        Agree with above - my kids are covered as non-student dependents even though they live at home still - the policy has an additional charge covering any number of NSDs (one plus for health insurance!)
        Good for you for studying, getting a great job, saving and getting ahead in this environment!

        • jmal4580 on 08/07/2020 - 12:55

          Thank you!

      • peter05 on 09/07/2020 - 23:57

        The only requirement to avoid the Medicare Levy Surcharge is that for the entire year you are covered under a private health insurance product.

        As you have answered that you are covered under a private health insurance product, you will not or should not be charged the MLS

        Much of the confusion is due to the above where new products appear to have been offered since (at least myself) last looked at insurance products, surrounding the "typical" legibility requirements.

        Thanks for bringing my attention to this new ability to list under adult dependents as it's not a product I typically would look for as a feature, but it seems only certain insurance policies allow for.

        My initial skepticism is due to when these products weren't available, a few people I know of chose to stay on their parents policies even though they didn't meet the criteria. For claiming products that may have been fine but as I expect the ATO to take a closer look at eligibility requirements that's why i thought that same "method" wouldn't fly in this scenario.

  • trankillity on 08/07/2020 - 08:44
    -2

    I would hope that you're still living at home due to either:

    • Caring for a parent
    • Have a disability
    • Saving for a house deposit

    If not - at 90k a year, and 23 years old - you really, really need to move out.

    • jmal4580 on 08/07/2020 - 09:56
      +1

      Bought a house last year before the election, sold it last week and made a humble gain before prices drop at the end of this year; at that point I’ll buy again and move out for good :)

    • peter05 on 10/07/2020 - 00:03
      +1

      I don't agree with your comment here, sure it may not work for you but Australia has many cultures and certainly a lot of different "systems" that families use that may or may not work for them, but regardless we don't need society dictating what is "ok" or not, especially in these sorts of situations where it really is no matter for anyone elses' concern.

      Many students stay with family well past what would be considered "ok" in the last 30-40 years anyway simply because it makes the best financial sense.

      You could argue there are life skills to gain that trump the money saved but that's a different discussion and I don't think it's fair for you to list the "conditions" where you think it's ok for someone to still be at home….

      • trankillity on 10/07/2020 - 08:55
        -1

        Many students stay with family well past what would be considered "ok" in the last 30-40 years anyway simply because it makes the best financial sense.

        Yes, which is where the third condition comes in. OP is on $90k a year. There's no "financial sense" in mooching off your parents when you earn that much.

        And as OP has already stated, it's temporary until they buy their next house.

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