ATO Interpretative Decision
ATO ID 2002/105
Income Tax
Medicare levy surcharge - hospital cover - travel insuranceFOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 a taxpayer liable for the Medicare levy surcharge under section 8B of the Medicare Levy Act 1986 (MLA 1986) where they are overseas for part of the income year and, although they have travel insurance, they have suspended their private health insurance in Australia for their period of absence?
Decision
Yes. A taxpayer is liable for the Medicare levy surcharge under section 8B of the MLA 1986 in relation to the part of the income year they are overseas, as they do not have private patient hospital cover for that period.
Facts
The taxpayer is not married, does not have any dependants and is not a prescribed person.
The taxpayer travelled overseas for a period during the income year and suspended their full private health insurance for that period.
The taxpayer took out full travel insurance for that period.
The taxpayer's taxable income exceeds $50 000.
Reasons for Decision
Section 8B of the MLA 1986 provides that a taxpayer will be subject to a Medicare levy surcharge where, for the whole or part of a year of income, they:
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- are not married;
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- do not have dependants;
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- do not have private patient hospital cover; and
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- are not a prescribed person.
Where a person satisfies all the above tests for the whole of the year of income and the person's taxable income exceeds $50 000, a surcharge of 1 per cent of the person's taxable income is payable in addition to the amount of Medicare levy otherwise payable.
Where a person satisfies all of the requirements, but for only part of the year of income, the person's liability to the surcharge will be calculated according to the number of days in an income year in which they met all of the requirements.
Subsection 3(5) of the MLA 1986 determines when a taxpayer is taken to have private patient hospital cover. It provides that a person is covered by an insurance policy that provides private patient hospital cover if it is an 'applicable benefits arrangement' within the meaning of section 5A of the National Health Act 1953 (the Health Act).
Travel insurance is not an applicable benefits arrangement for the purposes of section 5A of the Health Act. Accordingly, the travel insurance is not private patient hospital cover for the purposes of subsection 3(5) of the MLA 1986.
The taxpayer will be liable for a part year Medicare levy surcharge under section 8B of the MLA 1986 with regard to the period during the income year that they were without private patient hospital cover.
Date of decision: 22 November 2001
Legislative References:
Medicare Levy Act 1986
subsection 3(5)
section 8B
section 5A
Keywords
Medicare levy
Medicare levy surcharge
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 22 November 2001 | Original statement |
| 30 April 2010 | Archived |