Private ruling: Temporary budget repair levy
Date of advice: 24 May 2016
Published: July 2016
Ruling period: Year ending 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Is the taxable component of your employment termination payment included in calculating your taxable income for the purposes of the Temporary Budget Repair Levy? | A1: Yes. | Q2: Are you required to pay the temporary budget repair levy where your taxable income exceeds $180,000? | A2: Yes. | Q3: Is the taxable component of your employment termination payment included in calculating your taxable income for the purposes of the Medicare levy? | A3: Yes. | Q4: Are you required to pay the Medicare levy on your total taxable income? | A4: Yes.


Relevant legislative provisions: Income Tax (Transitional Provisions) Act 1997 Section 4-11 | Income Tax Assessment Act 1997 Section 4-15 | Income Tax Assessment Act 1936 Section 251S

Reasons for decision: Summary: The taxable component of your employment termination payment is included in determining your taxable income for the temporary budget repair levy purposes and Medicare levy. The Commissioner does not have the discretion to disregard your employment termination payment from your taxable income when calculating the amount of levy payable. | Detailed Reasoning - Detailed reasoning: Temporary Budget Repair Levy As part of the 2014-15 Federal budget the Government introduced a Temporary Budget Repair Levy. Section 4-11 of the Income Tax (Transitional Provisions) Act 1997 states you must pay extra income tax for a financial year if your taxable income exceeds $180,000. The levy is payable at a rate of two per cent of each dollar of a taxpayer's taxable income over $180,000. It will apply to both resident and non-resident individuals from 1 July 2014 and applies to the 2014-15, 2015-16 and 2016-17 income years. The levy will cease to apply from 1 July 2017. The legislation provides no exclusions or exemptions for one off payments such as employment termination payment when calculating your taxable income for the levy purposes. That is taxable income = assessable income less deductions (section 4-15 of the Income Tax Assessment Act 1997 ). In your case, your taxable income for the year ended 30 June 2015 was more than $180,000 and therefore you are liable for the Temporary Budget Repair Levy. Medicare levy Section 251S of the Income Tax Assessment Act 1936 provides that a Medicare levy is levied and shall be paid by an individual who is a resident of Australia at any time during the income year based on his or her taxable income for the year. The Medicare levy is levied at the rate applicable in the Medicare Levy Act 1986 . For the 2014-15 financial year, the Medicare levy is payable at the rate of 2% of taxable income. Full or partial exemption from the Medicare levy may be provided in certain circumstances. For example, if you are not an Australian resident for tax purposes, you are exempt from the Medicare levy. However, none of the exemptions apply in your circumstances. There is no provision within the taxation legislation which allows the Commissioner to exclude your employment termination payment from the calculation of your taxable income for Medicare levy purposes. Nor is the Commissioner able to omit any one-off payments which you would not normally receive during a financial year. Accordingly, the Medicare levy will be calculated based on your total taxable income for the year ended 30 June 2015 which will include the taxable component of your employment termination payment received.

Relevant facts: You received a one off employment termination payment. | This has increased your income to be above $180,000.