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Edited version of your written advice
Authorisation Number: 1051459818682
Date of advice: 07 December 2018
Ruling
Subject: Medicare levy
Question 1
For the period prior to the separation from your spouse, are you exempt from Medicare levy surcharge?
Answer 1
Yes.
Question 2
For the period after the separation from your spouse, are you exempt from Medicare levy surcharge?
Answer 2
Yes.
Question 3
For the period prior to the separation from your spouse, are you entitled to full exemption from Medicare levy?
Answer 3
Yes.
Question 4
For the period after the separation from your spouse, are you entitled to full exemption from Medicare levy?
Answer 4
No.
This ruling applies for the following periods:
Year ended 30 June 20XX
Year ended 30 June 20XX
Year ended 30 June 20XX
Year ended 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You are a member of the Australian Defence Force and therefore receive full free medical treatment.
You are a member of the Australian Defence Force.
You are entitled to receive full free medical treatment.
You had a spouse who was not a defence force member.
Your spouse was not in a Medicare levy exemption category.
Your spouse had private health insurance hospital cover prior to your separation.
You have children.
Your children have private health insurance hospital cover.
Your children are full time students and do not earn any income in their own right.
Your children are not in a Medicare levy exemption category
Since separating from your spouse, your children live mainly with their other parent and you pay child support.
Relevant legislative provisions
Income Tax Assessment Act 1936 sections 251S
Income Tax Assessment Act 1936 sections 251T
Income Tax Assessment Act 1936 sections 251U
Income Tax Assessment Act 1936 sections 251VA
Medicare Levy Act 1986 sections 8C
Medicare Levy Act 1986 sections 8D
Reasons for decision
Question 1
Summary
As you receive full free medical treatment under Defence Force arrangements you are not required to have additional private health insurance or hospital cover. Your spouse and your dependants were covered by private hospital cover. As you and your dependants all had the required hospital cover, no Medicare levy surcharge is payable prior to the separation from your spouse.
Detailed reasoning
The Medicare levy surcharge (MLS) is levied on Australian taxpayers who do not have an appropriate level of private hospital insurance and who earn above a certain income.
For a person who is married during the whole or part of the financial year, the Medicare surcharge is imposed by Section 8D of the Medicare Levy Act 1986 (MLA) which states:
(1) This section applies to a person during a period if during the whole of the period:
(a) the person is a married person,
(b) the person or at least one of the person’s dependants (other than a dependant who is, or would, apart from subsection 251U(2) of the Income Tax Assessment Act 1936 (Assessment Act), be taken to be, a prescribed person) is not covered by an insurance policy that provides private patient hospital cover; and
(c) the person is not, or is taken under section 251VA of the Assessment Act not to be, a prescribed person.
(2) For the purposes of paragraph (1)(b), a person to whom section 251VA of the Assessment Act applies is taken to be covered during the whole of the period by an insurance policy that provides private patient hospital cover.
Where a person satisfies all the above tests for the whole of the year of income and their combined family taxable income exceeds the relevant threshold, they will be liable for a surcharge in addition to the amount of Medicare Levy otherwise payable.
As you receive full free medical treatment under Defence Force arrangements you are not required to have additional private health insurance or hospital cover. Your spouse and your dependants were covered by private hospital cover. As you and your dependants all had the required hospital cover, no Medicare levy surcharge is payable prior to the separation from your spouse.
Question 2
Summary
As you receive full free medical treatment under Defence Force arrangements you are not required to have additional private health insurance or hospital cover. You are paying child support while your children do not reside with you. Your dependant children are covered by private hospital cover. As you and your dependants all have the required hospital cover, no Medicare levy surcharge is payable after the separation from your spouse.
Detailed reasoning
For a person with dependants who is not married during the whole or part of a financial year, the Medicare surcharge is imposed by Section 8C of the MLA which states:
(1) This section applies to a person during a period if during the whole of the period:
(a) the person is not a married person; and
(b) the person has one or more dependants; and
(c) the person or at least one of the person’s dependants (other than a dependant who is, or would, apart from subsection 251U(2) of the Assessment Act, be taken to be, a prescribed person) is not covered by an insurance policy that provides private patient hospital cover; and
(d) the person is not, or is taken under section 251VA of the Assessment Act not to be, a prescribed person.
(2) For the purposes of paragraph (1)(c), a person to whom section 251VA of the Assessment Act applies is taken to be covered during the whole of the period by an insurance policy that provides private patient hospital cover.
Where a person satisfies all the above tests for the whole of the year of income and their combined family taxable income exceeds the relevant threshold, they will be liable for a surcharge in addition to the amount of Medicare Levy otherwise payable.
As you receive full free medical treatment under Defence Force arrangements you are not required to have additional private health insurance or hospital cover. You are paying child support while your children do not reside with you. Your dependant children are covered by private hospital cover. As you and your dependants all have the required hospital cover, no Medicare levy surcharge is payable after the separation from your spouse.
Question 3
Summary
As you receive full free medical treatment under Defence Force arrangements you are in a Medicare exemption category. Your spouse was required to pay the Medicare levy therefore you are fully exempt from paying the Medicare levy prior to the separation from your spouse.
Detailed reasoning
Section 251S of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a Medicare levy is payable by an individual who is a resident of Australia at any time during the income year based on their taxable income for the year.
Section 251T of the ITAA 1936 provides for exemption from the levy to persons who qualify as prescribed persons. Prescribed persons are listed in subsection 251U(1) of the ITAA 1936 and includes a person entitled, as a member of the Defence Force, to full free medical treatment.
Paragraph 3 of Taxation Ruling TR 93/35 Income tax: Medicare levy payable by persons entitled to full free medical treatment: dependants for Medicare levy purposes provides that if a prescribed person:
● does not have any dependants,
● has dependants who all qualify as exempt in their own right,
● has a dependant who is subject to the levy on a separate income, or
● has a spouse who is liable to pay the levy, and the spouse contributes to the maintenance of a dependant,
then that prescribed person is completely exempt from the levy.
As you receive full free medical treatment under Defence Force arrangements you are in a Medicare exemption category. Your spouse was required to pay the Medicare levy therefore you are fully exempt from paying the Medicare levy prior to the separation from your spouse.
Question 4
Summary
As you have dependant children who are not in a Medicare levy exemption category you are required to pay half of the Medicare levy after the separation from your spouse.
Detailed reasoning
Paragraph 4 of TR 93/35 states, if a prescribed person is not completely exempt from the levy in accordance with paragraph 3 of this Ruling, then that prescribed person will be required to pay half the levy: subsection 251U(3).
Paragraph 7 of TR 93/35 further states:
If a prescribed person has a spouse or one or more dependant children who are not prescribed persons as described in paragraph 3 of this Ruling, then that prescribed person is liable for payment of one half of the levy that would have been payable by a non-exempt person: subsection 251U(3). A partial levy is imposed in these circumstances because the spouse or dependants are eligible for benefits under the Medicare scheme. The spouse and dependants may not be in receipt of income (in excess of the relevant threshold) and, had full exemption from the levy been granted, there would not have been any contribution made towards the cost of Medicare for persons who are entitled to benefit under it and who are not entitled to exemption from the levy.
As you have dependant children who are not in a Medicare levy exemption category you are required to pay half of the Medicare levy after the separation from your spouse.
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