Description
A payee can submit a Medicare levy variation declaration to request that their employer withholds an additional amount of tax from their earnings to cover their Medicare levy surcharge (MLS) liability. This prevents the payee from potentially having to pay more tax at the end of the financial year to cover the Medicare levy surcharge.
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Under STP Phase 2 it is a requirement to report a tax treatment code that , among other things, identifies if a payee is subject to an a MLS and the surcharge tier that applies.
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Please be aware that the new fields added to the Payees PAYG Tax Details section are for STP Reporting purposes only. The application of this additional surcharge needs to be calculated manually and then applied via a Manual Tax Adjustment in an adjustment pay batch. |
The new fields available in To cater for this, a new option labelled Medicare Levy Surcharge has been added to the PAYG Tax Details section of the Payee Record include:
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Field
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Description
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Details
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Medicare Levy Surcharge
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If ticked, indicates that the payee is subject to a Medicare levy Surcharge.
Used to populate the relevant tax treatment code in the STP payload.
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Displayed where:
Tax scale is Tax Scale 1 or Tax Scale 2
Medicare Levy Adjustment is not ticked.
Tax Offset Claimed is not ticked.
This field is locked for the duration of the payee validity period, once the corresponding validity period has been used in a pay batch.
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Surcharge Tier
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Indicates the surcharge tier that applies to the payee.
Used to populate the relevant tax treatment code in the STP payload.
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Selection of an item in this list is mandatory where ‘Medicare Levy Surcharge’ is ticked.
The following tiers are available:
Tier 1
Tier 2
Tier 3
This field is locked for the duration of the payee validity period, once the corresponding validity period has been used in a pay batch.
On upgrade to v12.17 in the Payee Record’s PAYG Tax Details section we have added a new sub-section headers for:
Medicare Levy Adjustment Details (existing setting)
Tax Offset Details (existing setting)
Medicare Levy Surcharge Details (new settings for v12.17)
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Payroll > Payee > Payee Entry screen, as shown in the example below.
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When the Medicare Levy Surcharge option is ticked, a secondary field labelled Surcharge Tier is enabled and it becomes mandatory to select an option from the available list to indicate which surcharge tier applies.
The Medicare Levy Surcharge option is only available if the following apply to the Payee record:
the tax scale is set to Tax Scale 1 or 2
the Medicare Levy Adjustment fieldis not ticked
the Tax Offset Claimed field is not ticked.
the Seniors and Pensioners Tax Offset field is not ticked.
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Flagging a payee as being subject to MLS allows FastTrack360 to automatically report the relevant tax treatment code to the ATO via STP reporting to indicate that the payee has requested additional tax to be withheld to cover their Medicare levy liability. However, it is important to note that FastTrack360 will not calculate and apply the additional tax to the payee’s tax withholding automatically when tax is calculated at the Tax pay batch stage. Therefore, to withhold the correct, additional amount of tax from the payee’s earnings to cover the MLS it is necessary to do the following:
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We have also provided additional search options to allow you to find Payees payees that have the ‘Medicare Medicare Levy Surcharge' settings option applied via the Payroll > Payee > Search Payee > Payroll Details Tab, Tax Details section.
To apply the ‘Medicare Levy Surcharge’ filter, open the Tax Details section and set the ‘Tax Scale’ to either ‘Tax Scale 1' or ‘Tax Scale 2’. You can then select the ‘MLS’ (Medicare Levy Surcharge) filter required from:
Any (default)
Yes
No
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Benefits
This enhancement provides an agency with the ability to flag Payees that qualify for the Medicare Levy Surcharge and the applicable tier, which will support STP Phase 2 reporting requirements for these Payeesscreen. When the option in the Tax Scale field is set to Tax Scale 1 or Tax Scale 2, an MLS filter option is enabled as shown in the example below.
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Benefits
If a payee is subject to an MLS and their tax withholding is being manually adjusted to account for the surcharge, this enhancement allows the relevant tax treatment to be reported to the ATO via STP Phase 2 to inform why the tax withholding is higher than what it otherwise would be.
Click here for more information about reporting tax treatment codes in STP Phase 2.
Configuration
On upgrade to v12V12.17 where an existing payee qualifies as requiring the application of , the Medicare Levy Surcharge, the existing Payee record can be updated as follows:
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option is available and can be enabled in the PAYG Tax Details section of the Payroll > Payee > Payee Entry screen if the payee’s tax scale is set to Tax Scale 1 or
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Tick Medicare Levy Surcharge.
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Select the applicable Surcharge Tier.
As advised above, this will meet the reporting requirements for STP Phase 2, however application of the surcharge needs to be manually calculated and applied via an Adjustment Pay Batch2 and they are not claiming a Medicare levy adjustment (reduction), low income tax offset or a Seniors and Pensioners tax offset.
On enabling the Medicare Levy Surcharge option, the secondary field Surcharge Tier is enabled, and it is mandatory to select which surcharge tier applies.
Note that the Medicare Levy Surcharge option cannot be toggled on or off for a payee validity period that has already been used to pay the payee in a pay batch. Therefore, it may be necessary to add a new validity period to a payee before the Medicare Levy Surcharge option can be toggled on.