Medicare Levy for NG

Discussion in 'Accounting & Tax' started by JohnPropChat, 25th Nov, 2015.

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  1. JohnPropChat

    JohnPropChat Well-Known Member

    10th Sep, 2015
    Am I right in my understanding that Medicare levy applies on taxable income and MLS applies on adjusted income?

    So, if I am in 37% tax bracket, for NG purposes I get 37%+2% back on expenses right?
  2. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Member

    18th Jun, 2015
    Your marginal tax rate is 39% (including medicare). Each extra dollar of deductions or outgoings for the IP would result in a refund of 39cents. Of course since tax applies in a progressive manner deductions apply in a regressive manner when these deductions cause taxable income to fall below $80,001. The benefit becomes 34.5%

    Adjusted taxable income is used for calculating Medicare Levy Surcharge not Medicate levy. So lets say you do bring taxable income down to $80,001 (ie $10K of repairs costs lets say) the ATI calculation would add back the increased IP loss onto $80,001 so that ATI is $90,001. A single person has a threshold of $90K. So you would become liable for MLS.

    Ramping up rental deductions is a problem. Other tax deductions may not affect ATI.

    All these issues affect salalry packaging too.Income for Medicare levy surcharge, thresholds and rates | Australian Taxation Office
    JohnPropChat likes this.