Income tax: is a 'prescribed person' liable for half the medicare levy if that person maintains a spouse who is not a 'prescribed person'?

Medicare levy is not payable by a person who is a 'prescribed person' during the whole year of income (section 251T of the Income Tax Assessment Act 1936). A person is a prescribed person if he or she falls within the definition contained in subsection 251U (1). Entitlement to prescribed person status is conditional on that person's dependants also being prescribed persons ( subsection 251U (2) ).

A person who is a prescribed person by reason of being a member of the Australian Defence Forces or is in receipt of certain social security or repatriation benefits is liable for half the levy if he or she maintains a spouse who is not a prescribed person (subsection 251U (3)).

However, from the year of income commencing 1 July 1989 relief is provided to eligible 'prescribed persons' defined under subsection 251R(6A) if that person has a spouse who pays the levy. The effect of the relief provision is to treat the spouse as not being a dependant of the 'prescribed person' (subsection 251R (6B)). The full medicare levy exemption applies in this case. Example 1: Jane is a defence force member. Her husband Tim is solely dependent on her salary. Jane is liable for one-half of the medicare levy otherwise payable. Example 2: John is a defence force member. His wife Ann is a teacher who is required to pay the levy on her own taxable income. Ann is not treated as a dependant of John and he is fully exempted from the medicare levy.