Edited version of private ruling

Authorisation Number: 1011785330891

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fac sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Medicare levy surcharge exemption

Question and answer:

Are you exempt from the Medicare Levy Surcharge whilst serving in the Australian Defence Force overseas?

Yes.

This ruling applies for the following periods:

Year ended 30 June 2009.

Year ended 30 June 2011.

The scheme commenced on: 1July 2008.

Relevant facts:

You are a current serving member of the Australian Defence Force.

You are entitled to full free medical treatment for all conditions under defence force arrangements.

You were posted overseas.

Your family accompanied you.

During this time you suspended your private hospital family cover, because you believed that whilst you were overseas, your dependent family could claim against it.

The cover was only suspended for your time overseas and was re-established when you returned to Australia.

As a condition of your service overseas the Australian Department of Defence paid for all medical expenses for your spouse and dependent children.

Relevant legislative provisions:

Income Tax Assessment Act 1936 Section 251U.

Income Tax Assessment Act 1936 Section 251R.

Income Tax Assessment Act 1936 Subsection 251R(6)(b).

Income Tax Assessment Act 1936 Subsection 251R(6)(c).

Income Tax Assessment Act 1936 Section 251V.

]Reasons for decision

Medicare Levy

The Medicare levy is an additional charge calculated by reference to the taxable income of a taxpayer. Some prescribed taxpayers may be exempt from the Medicare levy.

Section 251U Income Tax Assessment Act 1936 (ITAA 1936) includes members of the Australian Defence Forces and their relatives who are entitled to free medical treatment in respect of every incapacity, disease or disabling condition.

There are conditions that must be satisfied in respect of any dependents a prescribed person may have for the exemption to apply;

Every dependant must also be a prescribed person, subject to 2 exceptions:

· The dependant is subject to the levy on separate income, subsection 251R(6)(b) of the ITAA 1936.

· The prescribed person has a spouse who is liable to pay the levy and the spouse contributes to the maintenance of dependants, subsection 251R(6)(c) of the ITAA 1936.

Dependents for purposes of the Medicare levy are a spouse and or children under 21 where the prescribed person contributes to their maintenance and presuming they are Australian residents. Children aged 21 to 25 who are full time students are also included as dependents provided the taxpayer is entitled to a notional dependants rebate for the child, section 251R of the ITAA 1936.

You are a prescribed person with prescribed relatives in receipt of free medical treatment as outlined above, and as such are exempt from the Medicare levy whilst serving overseas.

Medicare Levy Surcharge

The Medicare Levy Surcharge is an additional amount to the Medicare Levy, which taxpayers may be liable to pay where they have no private hospital cover.

Where taxpayers are exempt from the previously discussed Medicare Levy as prescribed persons, they will generally also be exempt from the Medicare levy surcharge for the same period.

Dependents for purposes of the Medicare levy surcharge are a spouse, child in receipt of full-time education who is 21 or more but less than 25 will be a dependant regardless of the level of the dependant's adjusted taxable income under section 251V of the ITAA1936.

As your spouse and dependents also qualify as prescribed persons you are exempt from the Medicare levy surcharge, whilst serving overseas.