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In 2014 TAXVINE No 33 (12 September 2014), Member 135 wrote suggesting that the ATO was incorrectly calculating the Medicare Levy Surcharge by ignoring reportable fringe benefits.


"Member 135, the note you refer to in the notice of assessment is a short and simple message, but we can confirm the Medicare levy surcharge is calculating correctly.  Total reportable fringe benefits is included in the income test as well as the calculation of Medicare levy surcharge (MLS). 

Income for MLS purposes, which includes taxable income, total reportable fringe benefits, total net investment losses and reportable superannuation contributions, is the income test used to determine whether a person is liable to pay the MLS, and if so, the rate that will apply.  The rate, being either 1%, 1.25% or 1.5% is what is provided in the note in the notice of assessment that you have referred to.  The MLS rate is only applied to taxable income, total reportable fringe benefits and any amount on which family trust distribution tax has been paid, in calculating the Medicare levy surcharge liability.

We will review our note on the notice of assessment to see if we can improve it.  Further information about the MLS can be found on our website here."