Private ruling: Medicare Levy
Published: April 2015
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are the taxpayers entitled to a full Medicare levy exemption? | A1: Yes. | Q2: If not, can one partner pay the half Medicare levy is a family agreement is signed? | A2: Not applicable.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are both prescribed persons and are nominally exempt from the Medicare levy. You have no dependent children together and are not entitled to FTB. One partner has children (under age 21) who resided with you for a number of days of the 2013-14 financial year. The children resided with one partner's ex-spouse for the remainder of days in the 2013-14 financial year. The ex-spouse received family allowance payments in respect of the children for days of care. The ex-spouse is not exempt and is liable for Medicare levy due to their income. The ex-spouse has private health insurance which covers the children for hospital care. Child support was paid in respect of the children for the full year. You are both under the threshold for Medicare Levy Surcharge in the 2013-14 financial year.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 251R(6C). | Income Tax Assessment Act 1936 Section 251S. | Income Tax Assessment Act 1936 Section 251T. | Income Tax Assessment Act 1936 subsection 251U(1).

Reasons for decision: Summary: 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. Taxation Ruling TR 93/35 provides at paragraph 3, 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. Section 251R of the ITAA 1936 provides that a person's child is a dependant of that person during any part of the year of income in which the child was a resident of Australia, less than 21 years of age and the person contributed to the maintenance of the child. However, if the parents of the child lived separately and apart from each other, both parents have to be eligible for family tax benefit at the Part A rate under the A New Tax System (Family Assistance) Act 1999 and each parent's percentage of care has to be determined for the child during a care period for the child to be considered a dependant of each parent. Taxation Ruling TR 93/35 clarifies that where parents are divorced or separated and each contributes to the maintenance of a child, the child is taken to be a dependent solely of the parent who is entitled to receive family allowance in respect of that child (subsection 251R(5) of the ITAA 1936). In this case, the ex-spouse is entitled to receive the family allowance in respect of the children. For the purposes of the Medicare Levy, the children are taken to not be dependants of yours in accordance with subsection 251R(5) of the ITAA 1936. Accordingly, as you are both prescribed persons and each of your dependants for Medicare levy purposes (each other) qualify as exempt in their own right, you will both be entitled to a full Medicare levy exemption. Not applicable.