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AU Tax- Ability to calculate the number of days not liable for the medicare levy surcharge

Xero Tax(AU) | Worksheet to calulate number of days not liable for M2 (Medicare levy surcharge)

When some client has more than 1 health insurance policy and the period of the same are diffrent and sometime overlapping we need the work out this manually which can sometime be wrongly caluclated and can impact the tax estimates.

Xero should have a worksheet where we can enter policy details along with perioid of coverage to that it can calculae the days acurately. Similar feature is avaialble in MYOB AO and comes in very handy.

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KUSHAL VATNANI shared this idea  ·   ·  Report…  ·  Admin →
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  • Steven Podlich commented  ·   ·  Report

    Xero tax, Incorrect Medicare Levy Surcharge Estimate calculation when didn't have spouse for full year. Please correct this. 2023-2024. I have a situation where my client was single for part of the year, and then moved in with his defacto spouse for the remainder of the financial year. The husband's income was more than the $93,000 threshold, but their combined income was less than the family threshold of $186,000. Neither have private health insurance hospital cover. This means, the husband is charged MLS for the period that he was single.
    Even though I entered that the client was not liable for MLS for 266 days, at M2, Xero Tax still calculates as if the husband does not have to pay any MLS. The ATO's calculation of my client's refund is correct. It has come back as less than Xero's tax estimate.
    https://www.ato.gov.au/individuals-and-families/medicare-and-private-health-insurance/medicare-levy-surcharge/paying-the-medicare-levy-surcharge

  • Asshwni Shhelgaonkar commented  ·   ·  Report

    To keep everyone on one page. anyone may calculate in a different way. its important to keep records in one guideline or sequence

  • Vikram Teva Raj commented  ·   ·  Report

    The medicare levy surcharge is already estimated in the Estimate page of the Individual Tax Return. However, if the client receives a high reportable fringe benefit in one year, it is currently extremely easy to end up having the client sign for a significantly lower tax bill than after the Medicare Levy Surcharge is tacked on by the ATO. I feel having the medicare levy surcharge be automatically applied based on the calculated Income for Surcharge Purposes would really improve the Xero Tax experience and improve accountants' service overall.

  • Damian Ebzery commented  ·   ·  Report

    Where you have a client that works for the Australian Defence Forces they are exempt from Medicare Levy and if their Family (not themselves) are covered by Private Health then they are exempt from the Medicare Levy Surcharge as well. It would be great to have a tick box that allows the selection of Exempt from MLS. Currently if you say no to the Private Health and put 365 days in the area for not liable the validation throws up a warning. It would be better to have a MLS exemption option.

    XERO Tax Software does not allow me to follow the ATO guidelines as XERO tax does not have the right options in the MLS area as set out in Step 2 below (from the ATO website). This client is a member of the ADF and therefore is exempt from MLS.

    Step 1

    If you and all your dependants (including your spouse) had an appropriate level of private patient hospital cover for the whole of 2021–22, print X in the Yes box at the right of E item M2. Make sure you also complete your Private health insurance policy details 2022. You have now finished this question.

    If you or any of your dependants (including your spouse) did not have private patient hospital cover or only had cover for part of the year, print X in the No box at the right of E item M2. Continue to step 2.

    Step 2

    If you were in an exemption category (see Surcharge exemption categories) for the whole of 2021–22, print X in the Yes box to the left of 'You do not have to pay the surcharge.' and write 365 at A item M2. You have now finished this question. Go to Private health insurance policy details 2022.

    If you were not in an exemption category, print X in the No box to the left of 'You may have to pay the surcharge.'
    Step 3

    Write at A item M2 the number of days for which you do not have to pay MLS.

    If you do not have to pay MLS for any days during the period 1 July 2021 to 30 June 2022, write 365 at A item M2.

    If you have to pay MLS for:

    the whole period 1 July 2021 to 30 June 2022, write 0 at A item M2
    part of the period 1 July 2021 to 30 June 2022, write at A item M2 the number of days for which you do not have to pay MLS.

  • Ochie Butcher commented  ·   ·  Report

    M2 Medicare levy surcharge - Number of days not liable for surcharge:

    Can this be automated to an extent based on the Income for Surcharge Purposes field that is automatically filled? Have been caught out a number of times where the Xero defaults to 365 days not liable, however the threshold is exceeded due to combination of spouse income.