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Ruling
Subject: Medicare levy exemption
Question 1
Are you required to pay half the Medicare levy?
Answer
Yes
This ruling applies for the following periods
Year ending 30 June 2011
Year ending 30 June 2012
Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015
The scheme commences on:
1 July 2010
Relevant facts and circumstances
You are entitled to free medical treatment.
You have lodged an income tax return for the 2011 income year. Your income was in excess of $40,000 and you were not entitled to the Senior Australians tax offset or the pensioner tax offset
Your wife is not entitled to free medical treatment and she was not subject to Medicare levy on her income in the 2011 financial year.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 251R
Income Tax Assessment Act 1936 Section 251S
Income Tax Assessment Act 1936 Section 251T
Income Tax Assessment Act 1936 Subsection 251U(1)
Income Tax Assessment Act 1936 Subsection 251U(2)
Income Tax Assessment Act 1936 Subsection 251U(3)
Medicare Levy Act 1986 Section 7
Reasons for decision
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. The levy is calculated at 1.5% of the taxpayer's taxable income for the year.
A reduction in the Medicare levy is available to some taxpayers depending on their taxable income. For a married taxpayer, if family taxable income (with no dependent children) in the 2011 income year is equal to or less than the threshold of $37,398, Medicare levy is reduced. Family taxable income includes the income of the taxpayer and the taxpayer's spouse. A higher threshold applies if the taxpayer is entitled to the Senior Australians tax offset.
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 under veterans' entitlement (repatriation) legislation to full free medical treatment.
Taxation Ruling TR 93/35 clarifies the circumstances in which some persons, who would normally be exempt from the Medicare levy, are required to pay half the levy. Paragraph 3 states that the broad principle is 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
§ 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.
If a prescribed person is not completely exempt from the levy in accordance with paragraph 3, then that prescribed person will be required to pay half the levy (subsection 251U(3) of the ITAA 1936).
In your case, you are entitled to full free medical treatment so you are a prescribed person. However, because your spouse does not qualify as exempt in her own right, and is not liable to pay the levy in her own right, you are not completely exempt from the levy. You are not entitled to a reduction in Medicare levy because your family taxable income was above the threshold. Therefore, you are required to pay half of the levy under section 251T of the ITAA 1936.
Further Information
The Medicare levy reduction thresholds change each year. In future years, if your circumstances change you may be entitled to a reduction in Medicare levy.