Tax Laws Amendment (2006 Measures No. 3) Act 2006 (80 of 2006)

Schedule 6   Tax offset for Medicare levy surcharge (lump sum payments in arrears)

Income Tax Assessment Act 1997

4   At the end of Division 61

Add:

Subdivision 61-L - Tax offset for Medicare levy surcharge (lump sum payments in arrears)

Guide to Subdivision 61-L

61-575 What this Subdivision is about

You may get a tax offset under this Subdivision if:

(a) Medicare levy surcharge is payable by you for the current year; and

(b) a substantial lump sum was paid to you in the current year; and

(c) the lump sum accrued in whole or in part in a previous year.

The amount of the offset is the amount of additional Medicare levy surcharge payable by you for the current year because of your lump sums and your spouse's lump sums.

Alternatively, you may get a tax offset under this Subdivision if your spouse gets a tax offset under this Subdivision. The amount of the offset is the amount of additional Medicare levy surcharge payable by you for the current year because of your spouse's lump sums.

Table of sections

Operative provisions

61-580 Entitlement to a tax offset

61-585 The amount of a tax offset

61-590 Definition of MLS lump sums

Operative provisions

61-580 Entitlement to a tax offset

Tax offset for MLS lump sums paid to you

(1) You are entitled to a *tax offset for the *current year if:

(a) you are an individual; and

(b) *Medicare levy surcharge is payable by you for the current year because of:

(i) section 8B, 8C or 8D of the Medicare Levy Act 1986; or

(ii) the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999; and

(c) your assessable income or *exempt foreign employment income for the current year includes one or more *MLS lump sums paid to you; and

(d) the total of the MLS lump sums paid to you is greater than or equal to one-eleventh of the total of the following amounts:

(i) your normal taxable income (within the meaning of section 159ZR of the Income Tax Assessment Act 1936) for the current year;

(ii) your exempt foreign employment income for the current year;

(iii) your *reportable fringe benefits total for the current year;

(iv) the amounts that would be included in your assessable income for the current year if, and only if, subsection 271-105(1) (family trust distribution tax) in Schedule 2F to the Income Tax Assessment Act 1936 were ignored.

Note: The test in paragraph (d) is similar to the 10% test in paragraph 159ZRA(1)(b) of the Income Tax Assessment Act 1936, which also deals with a tax offset for lump sum payments in arrears.

Tax offset for MLS lump sums paid to your spouse

(2) You are also entitled to a *tax offset for the *current year if:

(a) during all or part of the current year, you were married to an individual (within the meaning of section 3 of the Medicare Levy Act 1986 or section 7 of the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999); and

(b) the individual is entitled to a tax offset for the current year under subsection (1); and

(c) *Medicare levy surcharge is payable by you for the current year because of:

(i) section 8D of the Medicare Levy Act 1986; or

(ii) Division 4 of Part 3 of the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999;

(which are about Medicare Levy surcharge for individuals who are married); and

(d) you are not entitled to a tax offset for the current year under subsection (1); and

(e) less of the Medicare levy surcharge referred to in paragraph (c) would be payable by you for the current year if the *MLS lump sums paid to the individual referred to in paragraph (a) were disregarded.

61-585 The amount of a tax offset

(1) The amount of a *tax offset under subsection 61-580(1) is the amount worked out using the following formula:

Total Medicare levy surcharge - Total non-arrears Medicare levy surcharge

where:

total Medicare levy surcharge means the total of the *Medicare levy surcharge referred to in paragraph 61-580(1)(b) that is payable by you for the *current year.

total non-arrears Medicare levy surcharge means the amount that would be the total Medicare levy surcharge if the *MLS lump sums paid to you (and the MLS lump sums paid to the individual referred to in paragraph 61-580(2)(a)) were disregarded.

(2) The amount of a *tax offset under subsection 61-580(2) is the amount worked out using the following formula:

Total family Medicare levy surcharge - Total non-arrears family Medicare levy surcharge

where:

total family Medicare levy surcharge means the total of the *Medicare levy surcharge referred to in paragraph 61-580(2)(c) that is payable by you for the *current year.

total non-arrears family Medicare levy surcharge means the amount that would be the total family Medicare levy surcharge if the *MLS lump sums referred to in paragraph 61-580(2)(e) were disregarded.

61-590 Definition of MLS lump sums

Both of the following are MLS lump sums paid to an individual:

(a) a lump sum payment of eligible income (within the meaning of section 159ZR of the Income Tax Assessment Act 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);

(b) 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 on which it was paid).