ATO Interpretative Decision
ATO ID 2002/736 (Withdrawn)
Income Tax
Medicare levy - family income - post June 83 component of ETP received by spouseFOI status: may be released
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This ATO ID is withdrawn from 12 November 2002 as It does not correctly state the effect of subsection 251S(1A) of the Income Tax Assessment Act 1936This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision Withdrawn 12 November 2002
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the taxed element of a post June 83 component of an eligible termination payment (ETP) received by the taxpayer's spouse part of the taxpayer's family income for the purposes of calculating the Medicare levy imposed under section 251S of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes. The taxed element of a post June 83 component of an ETP received by the taxpayer's spouse is part of the taxpayer's family income for the purposes of calculating the Medicare levy imposed under section 251S of the ITAA 1936.
Facts
The taxpayer is married and has one dependant child.
The Medicare levy threshold for a married taxpayer with one dependant child (below which no levy was payable) for the income year was $25 439.
The spouse's taxable income included the taxed element of a post June 1983 component of an ETP. As the spouse was over 55 years of age the tax payable on that component of the ETP was nil.
The combined taxable income of the taxpayer and their spouse exceeded $25 439.
If the spouse's ETP had not been taken into account in determining the taxable income of the spouse the combined taxable income of the taxpayer and their spouse would be less than $25 439.
Reasons for Decision
Subsection 251S(1) of the ITAA 1936 levies the Medicare levy upon the taxable income of a resident taxpayer. The rate of the Medicare levy is determined under the Medicare Levy Act 1986 (MLA 1986).
Subsection 8(1) of the MLA 1986 provides that where a taxpayer is married on the last day of the income year and their family income does not exceed the family income threshold, then no levy is payable by the taxpayer.
Subsection 8(5) of the MLA 1986 provides that family income of a married taxpayer is the sum of the taxable income of the taxpayer and the taxable income of their spouse.
Taxable income is calculated under section 4-15 of the Income Tax Assessment Act 1997 as being assessable income less deductions. A taxpayer's assessable income includes an ETP (sections 27A to 27H of the ITAA 1936).
However subsection 251S(1A) of the ITAA 1936 provides that if a taxpayer is entitled to a tax offset under section 159SA of the ITAA 1936 in their assessment which effectively reduces the primary rate of tax to 0% with regard to a rebatable amount, then the taxable income of that taxpayer is reduced by that rebatable amount.
The post June 1983 taxed element of an ETP received by a taxpayer at the age of 55 and over is a rebatable amount to be taxed at 0%. Therefore this rebatable amount is excluded from the taxpayer's taxable income for the purposes of the Medicare levy (ATOID 2001/486).
However subsection 251S(1A) of the ITAA 1936 only deals with the situation where a taxpayer who is being assessed for the Medicare levy is also the person who has received the rebatable amount. Subsection 251S(1A) of the ITAA 1936 does not allow for a reduction in the spouse's taxable income for the purposes of calculating the taxpayer's family income.
As it is the taxpayer's spouse who is entitled to the tax offset under section 159SA of the ITAA 1936 this rebatable amount does not reduce the taxpayer's family income for the purposes of calculating the family income threshold. Therefore the taxpayer's family income includes their spouse's taxed element of a post June 1983 ETP for the purposes of calculating the Medicare levy imposed under section 251S of the ITAA 1936.
Date of decision: 28 May 2001Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1936
Section 27A
Section 27AAAA
Section 27AAA
Section 27AA
Section 27AB
Section 27AC
Section 27ACA
Section 27ACB
Section 27B
Section 27C
Section 27CAA
Section 27CA
Section 27CB
Section 27CC
Section 27CD
Section 27CE
Section 27D
Section 27E
Section 27F
Section 27G
Section 27GA
Section 27H
section 159SA
section 251S
subsection 251S(1)
subsection 251S(1A)
section 4-15 Medicare Levy Act 1986
subsection 8(1)
subsection 8(5) Related ATO Interpretative Decisions
ATO ID 2001/486
Keywords
Medicare levy
Medicare levy exemptions
Medicare levy reductions
ISSN: 1445-2782
| Date: | Version: | |
| 28 May 2001 | Original statement | |
| You are here → | 12 November 2002 | Archived |