ATO Interpretative Decision
ATO ID 2001/486
Income Tax
Post-June 1983 Eligible Termination Payment - exclusion from taxable income for Medicare levy purposesFOI status: may be released
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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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 taxpayer's post-June 1983 component of the taxpayer's Eligible Termination Payment (ETP) excluded under subsection 251S(1A) of the Income Tax Assessment Act 1936 (ITAA 1936) when calculating taxable income to which the Medicare levy will apply?
Decision
Yes, the taxpayer's post-June 1983 component of the taxpayer's ETP is excluded under subsection 251S(1A) of the ITAA 1936 when calculating taxable income to which the Medicare levy will apply.
Facts
The taxpayer received an ETP consisting of a post-June 83 taxed element which was included in the taxpayer's assessable income for the income year.
The taxpayer was over 55 years of age at the time of the payment and the amount received falls below the low rate threshold limit for the income year.
Reasons for Decision
Section 251S of the ITAA 1936 provides that the Medicare levy is based on the taxpayer's taxable income for the year.
There is one exclusion from taxable income, as otherwise calculated, in calculating taxable income to which the Medicare levy will apply. Subsection 251S(1A) of the ITAA 1936 provides that the Medicare levy is not payable on that portion of any ETP included in assessable income in respect of which a rebate under section 159SA of the ITAA 1936 will effectively reduce the primary rate of tax to 0%.
Section 159SA of the ITAA 1936 allows a rebate to ensure that any post-June 1983 taxed element of an ETP received by a taxpayer at the age of 55 and over is taxed at 0% up to a certain threshold applicable for a particular income year.
The taxpayer is over 55 years of age and the amount received by the taxpayer is below the relevant low rate threshold limit for the income year. The post-June 1983 taxed element component is subject to the low rate threshold provisions and is therefore effectively taxed at a 0% rate.
Accordingly, as the rebate under section 159SA of the ITAA 1936 effectively reduces the primary tax rate to 0%, the amount is excluded from the calculation of taxable income for the taxpayer for Medicare levy purposes.
Date of decision: 5 October 2001
Legislative References:
Income Tax Assessment Act 1936
section 159SA
section 251S
subsection 251S(1A)
Keywords
Income tax
Eligible termination payments
Medicare levy
Medicare levy exemptions
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 5 October 2001 | Original statement |
| 23 May 2014 | Archived |
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