Private ruling: Medicare levy surcharge
Published: February 2013
Ruling period: Year ended 30 June 2012
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to a Medicare levy surcharge tax offset? | A1: 


Relevant legislative provisions: Medicare Levy Act 1986 Sections 8B to 8G. | Income Tax Assessment Act 1997 Section 61-580 | Income Tax Assessment Act 1997 Section 61-590 | Income Tax Assessment Act 1997 Section 83-10 | Income Tax Assessment Act 1936 Section 159ZR Detailed reasoning | Under section 83-10 of the Income Tax Assessment Act 1997 (ITAA 1997), your lump sum for unused leave is assessable in the 2011-12 income year. Although the payment accrued in earlier years, the lump sum is assessable income in the year of receipt. Therefore, as you received the lump sum payment in the year ended 30 June 2012, it is assessable in that income year. The legislation does not allow any discretion in these circumstances. Taxpayers without adequate private patient hospital cover through health insurance are liable to pay an additional 1% Medicare levy surcharge if their income for Medicare levy surcharge purposes exceeds the relevant threshold. For example, a taxpayer without private patient hospital cover who had a spouse during the income year will pay the Medicare levy surcharge if their income for surcharge purposes exceeds $160,000 for the 2011-12 income year. | The Medicare levy surcharge is imposed by sections 8B to 8G of the Medicare Levy Act 1986 . As your family income for the 2011-12 income year was over $160,000 a Medicare levy surcharge was imposed. | Section 61-580 of the ITAA 1997 may allow a Medicare levy surcharge lump sum in arrears tax offset if the Medicare levy surcharge was imposed because you received an eligible lump sum payment in the year of income. | A Medicare levy surcharge lump sum for the tax offset purposes is defined in section 61-590 of the ITAA 1997 to be: | · A lump sum payment of eligible income (within the meaning of section 159ZR of the Income Tax Assessment Act 1936 (ITAA 1936)) that is included in the individual's assessable income for the current year (but only to the extent that it accrued in an earlier income year); or · A lump sum payment that is included in the individual's exempt foreign employment income for the current year (but only to the extent that it accrued during a period ending more than 12 months before the date of which it was paid). | Under section 159ZR of the ITAA 1936 eligible income includes salary or wages to the extent to which they accrued during a period ending more than 12 months before the date on which they are paid. However, salary and wage for section 159ZR purposes does not include unused leave payments. | Your lump sum A payment for unused leave does not qualify as a Medicare levy surcharge lump sum for the tax offset purposes. | We acknowledge that your redundancy was not predictable or voluntary. Your personal circumstances are also acknowledged. However the legislation does not provide any alteration or discretion in your circumstances. You are not entitled to a Medicare levy surcharge tax offset under section 61-580 of the ITAA 1997. | There are no other provisions that allow a reduction of your Medicare levy surcharge.


Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet. | Relevant facts: You were made redundant in the 2011-12 financial year. The decision was unexpected and formal redundancy procedures were not adhered to. | At the time of your redundancy you had days of unused annual leave that had accrued over a period of more than three years. You received a lump sum A payment in the 2011-12 financial year.. | The payment put your family income over the relevant threshold for Medicare levy surcharge purposes. Medicare levy surcharge was imposed. | You expect your family income to be much less in the 2012-13 income year as your annual salary in your new job is less and your spouse is not working. Your family income in the previous two years was also less than the relevant Medicare levy surcharge threshold.