Private ruling: Medicare levy - family income
Published: January 2012
Ruling period: Year ended 30 June 2011
Date scheme commenced: 1 July 2010

Ruling: Q1: Is your spouse's income included for the purposes of calculating the family income for Medicare levy when you separated from your spouse prior to the end of the 2010-11 financial year? | A1: No

Relevant facts and circumstances: You separated from your spouse prior to the end of the 2010-11 financial year. After that date you had sole care of your children and received Family Tax Benefit in respect of the children for the entire financial year.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 251S | Medicare Levy Act 1986 Section 3 | Medicare Levy Act 1986 Section 7 | Medicare Levy Act 1986 Section 8

Reasons for decision: Summary: Section 251S of the Income Tax Assessment Act 1936 (ITAA 1936) states that an individual who is a resident of Australia at any time during the income year is liable to pay a Medicare levy on their taxable income for the year at the rate set in the Medicare Levy Act 1986 (MLA 1986). Section 7 of the MLA 1986 provides relief from the levy for certain low income earners. If a taxpayer's taxable income is below the threshold amount set in section 3 of the MLA 1986 no levy is payable or if their taxable income is within the phase-in limit set in section 3 of the MLA 1986 a reduced levy is payable. Section 8 of the MLA 1986 provides a higher threshold amount and phase-in limit if the taxpayer is married on the last day of the income year or is, or would have been, entitled to a child/housekeeper, housekeeper or sole parent rebate. The amount of levy payable depends on the amount by which the taxpayer's 'family income' exceeds the 'family income threshold'. 'Family income' is defined in subsection 8(5) of the MLA 1986 to mean: (a) if the person was a married person on the last day of the year of income - the sum of the taxable income of the person and the taxable income of the spouse of the person; and (b) in any other case - the taxable income of the person. Subsection 3(3) of the MLA 1986 states that for the purposes of this Act a person shall be deemed not to be married to another person if they are living separately and apart. As you were not a married person on the last day of the year of income, paragraph 8(5)(b) of the MLA 1986 applies to determine your family income for the purposes of the Medicare levy reduction. Therefore, your taxable income only will be taken into account when calculating your family income. Accordingly, you will be entitled to an exemption from the Medicare levy imposed under section 251S of the ITAA 1936 based on your family income excluding your spouse's income.

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