Getting married may cost you… for MLS, anyway
Now that weddings can actually happen again (in NSW, anyway – I have a friend who is now on his 5th wedding invite attempt), anyone who has been through the experience knows that it can and usually will cost you an arm and a leg.
During this festive period of choosing bouquets and bonbonnieres (I still can’t say this word properly) not much time gets devoted to fun stuff like you and your future spouse’s private health insurance (“PHI”) position.
But, after the honeymoon period is over and life becomes more focused on the more mundane things like whether you have enough toilet paper to last the week*, the last thing you want is an unexpected tax surprise at tax time.
BUT, let’s just use the following example:
Person 1 has a taxable income of $210k a year. They have had sufficient PHI for years to ensure they aren’t subject to the Medicare Levy Surcharge (“MLS”), which ranges from 1%-1.5% of their taxable income.
Person 2 has a taxable income of $80k a year. They have previously chosen not to get PHI, noting that MLS does not generally apply to a single person with this level of taxable income.
Person 1 and Person 2 get married on 1 July 2021 (let’s pretend we weren’t in lockdown), and don’t update their health insurance.
For MLS purposes, upon getting married:
This new family gains access to a combined MLS income threshold of $180,000. Not only are they way over the threshold ($290,000), but they are also on the highest income threshold tier of MLS (1.5%).
BOTH Person 1 and Person 2 are up for MLS on as a percentage of their taxable income for the year ended 30 June 2022.
This is despite Person 1 having their own PHI. The rules state that both you AND your dependents are required to have PHI.
“Dependents” for Medicare Levy purposes isn’t what you would generally think. It covers an otherwise completely financially independent spouse, just because you are married.
Getting married has cost Person 1 $3,150 in MLS.
Getting married has cost Person 2 $1,200 in MLS.
In short? Getting married cost this lovely couple $4,350 in additional taxes. And probably a good chunk of time in arguments.
Now, I must stress that this is in no way advice as to whether you should or shouldn’t get PHI. That’s everyone’s personal choice. But it’s a discussion you should probably have with your prospective partner before tying the knot.
If you have any questions as to the mechanics of how MLS operates, please feel free to reach out.
AKL
* may or may not be a real life example