Edited version of your written advice

Authorisation Number: 1012881405590

Date of advice: 18 September 2015

Ruling

Subject: Medicare Levy - Exemption

Question 1

Are you entitled to a full Medicare levy exemption?

Answer

No.

This ruling applies for the following period:

Year ended 30 June 2015

The scheme commences on:

1 July 2014

Relevant facts and circumstances

You are ineligible to receive Medicare benefits.

You are an Australian resident for taxation purposes.

You now have an Australian spouse and you applied for a spouse visa which has yet to be approved.

Your spouse is eligible to receive Medicare benefits.

You received a letter from Medicare stating that you are not eligible for Medicare benefits.

You have been living with your spouse for the whole financial year.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 251U,

Income Tax Assessment Act 1936 section 251R and

Income Tax Assessment Act 1936 section 251Y.

Reasons for decision

An individual who is a resident of Australia at any time during the income year is liable to pay a Medicare levy based on his or her taxable income for the year.  The legislation governing the levy is contained section 251R to section 251Y of the Income Tax Assessment Act 1936 (ITAA 1936) and in the Medicare Levy Act 1986.

Full or partial exemption from the Medicare levy may be provided to a taxpayer who qualifies as a 'prescribed person'. 

Under section 251U of the ITAA 1936, a prescribed person is determined to be:

a) a person entitled to full free medical treatment as a member of the Defence forces or as a relative of, or as a person otherwise associated with, a Defence force member.

b) a person entitled under veteran's entitlement (repatriation) legislation to full free medical treatment.

c) a blind pensioner or a sickness allowance recipient.

d) a person who is not a resident of Australia for tax purposes, or a person who is a resident of Norfolk Island.

e) a person who is attracted to a diplomatic mission or consular post established in Australia or a household member of the person's family, provided the person is not an Australian citizen and is not ordinarily resident in Australia.

f) a person who has a certificate from the Levy Exemption Certification Unit showing that they are not entitled to Medicare benefits.

Entitlement to prescribed person status is conditional on that person's dependants (including his/her spouse) also being prescribed persons (subsection 251U(2) of the ITAA 1936).

An eligible prescribed person may be liable for half the Medicare levy if they are a prescribed person under (a) (b) or (c) and maintains a spouse who is not a prescribed person (subsection 251U(3) of the ITAA 1936).

A dependant is defined by subsection 251R(3) of the ITAA 1936 which provides that a person will be taken to be a dependant of a taxpayer if, during any part of the year of income:

• the person was a resident of Australia

• the person was either:

• the spouse of the taxpayer

• a child of the taxpayer less than 16 years of age, or

• a child of the taxpayer not less than 16 years of age but less than 25 years of age and receiving full-time education at a school, college or university, and

• the taxpayer contributed to the maintenance of the person.

Taxation ruling TR 93/35 (paragraph 13) provides some margin for a person to prove that they have not contributed to the maintenance or received maintenance from their spouse by providing evidence establishing beyond doubt that each was self-supporting. TR 93/35 states that:

Generally, the starting point in such an exercise would be a detailed record of actual household expenses and the amounts contributed by each person. Normal domestic sharing arrangements, e.g., a common account to which each person contributes and which is used to meet joint expenses, is not ordinarily sufficient to establish that one person has not contributed to the maintenance of the other.

In Margaret Mcglade v. Commissioner of Taxation [2007] AATA 1490 which was heard in the Administrative Appeals Tribunal (AAT); the issue of when a person is considered a dependant was addressed.

In that case, the applicant was covered by an appropriate private health insurance policy whilst her spouse was not. She and her spouse maintained separate finances to identify joint and independent expenditure. Joint expenditure were those expenses which benefited both of them. All joint expenditure was periodically reconciled and paid equally by the applicant and her spouse. The applicant argued that as the finances were separated and joint expenditure was shared equally, she did not contribute to the maintenance of her spouse.

In reviewing the evidence provided by the applicant and her spouse, Deputy President Olney stated:

The applicant's examples of expenditure that were considered to benefit both parties and which were put on their spreadsheet to be financed equally include items such as rent, utilities, car servicing and maintenance, household furniture and car and household contents insurance. All of these items can reasonably be regarded, in varying degrees, as basic to a contemporary lifestyle and would cost the same irrespective of how many individuals share the benefit of them. Expressed in the context of this case, what this amounts to is that but for the applicant's contribution to the cost of these items, her spouse would have had to bear the total outgoing for himself and thus, to the extent of the applicant's contribution, the applicant has contributed to the maintenance of her spouse in terms of s 251R(3) of the Assessment Act.

Application to your circumstances

Based on the above, you are considered to have contributed to the maintenance of your de facto spouse as you have paid a half share of expenses which they would otherwise had to pay the full amount themselves. Thus, your de facto spouse is considered to be your dependant for the purposes of the Medicare levy.

Your entitlement to prescribed person status is conditional on your dependants (including your spouse) also being a prescribed person. Therefore, you are not entitled to any relief from paying the Medicare levy that is described above.