Medicare levy exemption- taxpayer entitled to free medical treatment

Is the taxpayer, who is entitled to free medical treatment under the Veterans' Entitlements Act 1986 , entitled to a Medicare levy exemption under section 251T of the Income Tax Assessment Act 1936 (ITAA 1936)?

Yes. The taxpayer who is entitled to free medical treatment under the Veterans' Entitlements Act is a prescribed person and is exempt from the Medicare levy under section 251T of the ITAA 1936.

Both the taxpayer and their spouse are recipients of a Veterans Affairs Repatriation Health Card (Gold Card).

The recipient of a Gold Card is entitled to full free medical treatment for all medical conditions.

Paragraph 251S(1)(a) of the ITAA 1936 provides that a Medicare levy is levied at the rate applicable in the Medicare Levy Act 1986 from the 1984 year of income onwards on the taxable income of a person who at any time during the year of income was a resident.

However, paragraph 251T(a) of the ITAA 1936 provides that the Medicare levy is not payable by a 'prescribed person'. Whether a person is a 'prescribed person' for the purposes of the Medicare levy is determined by section 251U of the ITAA 1936.

Paragraph 251U(1)(b) of the ITAA 1936 provides that a person will be a 'prescribed person' where they are entitled under the Veterans' Entitlements Act to free medical treatment in respect of every incapacity, disease or disability. Subsection 251U(2) of the ITAA 1936 provides that entitlement to prescribed person status is conditional on the taxpayer's dependants also being prescribed persons.

As the taxpayer and their spouse are recipients of the Gold Card, which entitles them to full free medical treatment, they are both 'prescribed persons' and are therefore the taxpayer is exempt from the Medicare levy under section 251T of the ITAA 1936.