Chartered accountant GAIL FREEMAN had to break it to newlyweds Josh and Ash that, as a couple, they had a problem with the Medicare levy.

Josh and Ash, who have just got married, want to know if there was anything special they needed to do in relation to their taxes as a married couple.

In congratulating them, I said there was not very much that was different in lodging tax returns as a married couple.

“But I will explain the position so that you are aware of potential pitfalls,” I said.

“Ash, if you are changing your name, then you will need to notify the ATO and provide details of your marriage certificate number so that they can update their records.

“I have a few clients who have had problems with this when they try to ring the ATO, so I recommend you go online to make the change. As you would know, everyone is much more sensitive to scams these days so it’s impossible just to make a phone call and say I changed my name and expect that it will be updated.

“Also, people sometimes discover that the ATO has incorrect information about them and that may also need to be updated.”

I told them the main practical point was that they were taxed separately, so nothing changed for them.

“You lodge your returns as you have done previously in your own name and under your own tax file number,” I said.

“However, there is one area where you do need to report spouse information and that is for the Medicare Levy surcharge.

“If you have hospital cover this will exempt you from the Medicare Levy surcharge.“

I asked if they both had hospital cover.

Josh replied: “Ash has hospital cover and I don’t as I don’t think it’s necessary.”

I replied: “That’s awkward for you, Ash. The Medicare Levy surcharge is payable when your joint income exceeds a certain figure (in the 2025 year that figure is $202,000).

“That threshold is not applied to your taxable income; it is applied to your adjusted taxable income, which includes negative gearing losses and reportable fringe benefits.

“So although your taxable incomes, when added together, may be below the threshold, your adjusted taxable income seems to be marginally above it.

“The sting in the tail, which will affect you both as a couple, is that as only Ash is covered for hospital cover, you are both treated as if neither of you has hospital cover and you are both liable for the Medicare Levy surcharge.

“Josh I would highly recommend that you join a health fund for hospital cover straight away. It is usually cheaper to be in a health fund than it is to pay the surcharge.”

Ash said: “Oh, my goodness, I am up for the surcharge, even though I was in a health fund?”

I reluctantly told her that was the case.

Ash said it didn’t seem fair and I told her I agreed.

“Unfortunately that is the law,” I said. “However, it can be remedied quickly by getting Josh to join a health fund.

“This is a trap for couples when they first get together. It is also a trap if you each have single insurance and then have children so your children do not have cover. Again you both would have to pay the surcharge.”

If you need guidance on the moves you need to make for tax when you have a lifestyle change or any other tax matter contact the experts at Gail Freeman Pty Ltd on 02 6295 2844, email info@gailfreeman.com.au or visit gailfreeman.com.au

Disclaimer
This column contains general advice, please do not rely on it. If you require specific advice on this topic please contact Gail Freeman or your professional adviser. Authorised Representative of Lifespan Financial Planning Pty Ltd AFS Lic No. 229892.