ATO Interpretative Decision
ATO ID 2001/424
Income Tax
Medicare Levy surcharge - private patient hospital cover - excess of $1000FOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the taxpayer liable for the Medicare levy surcharge (surcharge) under section 8D of the Medicare Levy Act 1986 (MLA 1986) if they have private patient hospital cover with an excess of $1000 for overnight hospitalisation and $0 for day patient services?
Decision
No, the taxpayer will not be liable for the surcharge under section 8D of the MLA 1986 if they have private patient hospital cover with an excess of $1000 for overnight hospitalisation and $0 for day patient services.
Facts
The taxpayer is a member of a family.
Their combined family income is greater than the family surcharge threshold amount.
The taxpayer has a health insurance policy that has basic private hospital cover and carries an excess of $1000 for overnight hospitalisation and $0 for day patient services.
Reasons for decision
A liability for the surcharge arises where a person, or any of their dependants, does not have the required private patient hospital cover and the person's taxable income exceeds the threshold amount.
Where the person is regarded as a member of a family, the 'family surcharge threshold' amount applies. This amount is calculated as a minimum amount of $100 000 that is increased by $1500 for each dependant child after the first child.
The surcharge will be imposed under section 8D of the MLA 1986 on married persons where the following tests apply for the whole or part of an income year:
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- the taxpayer is a married person
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- the combined income of the taxpayer and their spouse exceeds the family surcharge threshold
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- the taxpayer and all the taxpayer's dependants (other than dependants who are prescribed persons) are not covered by private patient hospital insurance
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- the taxpayer is not a prescribed person
The taxpayer is married, has a family taxable income exceeding the family surcharge threshold for the relevant year of income and is not a prescribed person.
Subsection 3(5) of the MLA 1986 determines when a taxpayer is taken to have private patient hospital cover.
The taxpayer has private patient hospital cover that meets the requirements of subsection 3(5) of the MLA 1986. However under subsection 3(5A) of the MLA 1986 the taxpayer will be deemed not to have private patient hospital cover if they have elected to have an annual excess of $501 or more for single cover or $1001 or more for family cover.
As the taxpayer has an excess of only $1000, subsection 3(5A) of the MLA 1986 will not apply to deem the taxpayer as not having private patient hospital cover.
The taxpayer has private patient hospital cover for the purpose of subsection 3(5) of the MLA 1986 and will therefore not be liable for the surcharge under section 8D of the MLA 1986.
Date of decision: 4 October 2001
Legislative References:
Medicare Levy Act 1986
subsection 3(5)
subsection 3(5A)
section 8D
Keywords
Medicare levy surcharge
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 4 October 2001 | Original statement |
| 1 April 2010 | Archived |