Issue
Is a lump sum in arrears payment included in a taxpayer's taxable income for the purposes of the medicare levy family surcharge threshold under section 3A of the Medicare Levy Act 1986 (MLA 1986)?
Decision
Yes, a lump sum in arrears payment is included in taxable income for the purposes of the medicare levy family surcharge threshold under section 3A of the MLA 1986.
Facts
The taxpayer's taxable income for the income year includes a lump sum in arrears payment which relates to several earlier financial years.
The taxpayer is a member of a family.
The taxpayer receives a lump sum in arrears payment as a result of which the combined family income was in excess of the medicare levy family surcharge threshold as calculated under section 3A of the MLA Act 1986.
Reasons for Decision
Subsection 8D(1) of the MLA 1986 imposes an increased amount of medicare levy (the surcharge) on those taxpayers : • who are married • where they or their dependents do not have required private patient hospital cover, and • where they are not a prescribed person.
The taxpayer met each of those requirements.
Subsection 8D(3) of the MLA 1986 provides that the surcharge is payable where the combined taxable incomes of the taxpayer and their spouse exceeds the family surcharge threshold.
The family surcharge threshold is calculated under section 3A of the MLA 1986 to be $100 000 increased by $1500 for every dependent child after the first child.
A lump sum in arrears payment is included as part of a taxpayer's taxable income in the year of receipt. The Commissioner has no discretion to disregard the lump sum in arrears payment when calculating an individual's taxable income for the purposes of the surcharge.
The combined taxable incomes of the taxpayer and their spouse are above the family surcharge threshold. The taxpayer is therefore liable for the surcharge.