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Edited version of private ruling
Authorisation Number: 1011604208916
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Subject: Medicare levy surcharge
Are you liable for the Medicare levy surcharge?
Answer: Yes.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts
In 2005 you suffered an injury which lead you to being hospitalised.
As you were self employed you had little to no income from that point on and have been supported by your family.
In the 2010 income year you had the General Interest Charge (GIC) of several years of tax debt remitted by the Tax Office under section 340 of the Taxation Administration Act 1953 (TAA 1953).
The GIC forms part of your assessable income for the 2010 income year.
You do not have private health insurance.
The addition of GIC remission to your assessable income placed you and your wife's combined income over the Medicare levy surcharge (MLS) threshold.
You are not a prescribed person.
Relevant legislative provisions
Section 8D of the Medicare Levy Act 1986
Reasons for decision
In accordance with section 8D of the Medicare Levy Act 1986 (MLA 1986), a surcharge of 1% of the persons taxable income is payable in addition to the amount of Medicare levy otherwise payable where a person satisfies all of the following tests for the whole or part of the year:
· the person is married,
· the person or at least one of the persons dependants (and the dependant was not a prescribed person), is not covered by an insurance policy that provides private patient hospital cover,
· the person is not, or is taken not to be, a prescribed person, and
· the combined taxable income of the person and the persons spouse exceeds the family surcharge threshold.
For surcharge purposes, a married couple who are living together are treated as a family. Each spouse is considered to be a dependant of the other.
Where the person is regarded as a member of a family, the family surcharge threshold amount applies. The amount is calculated as a minimum amount of $100,000 that is increased by $1,500 for each dependent child after the first child.
Taxable income for MLS purposes includes:
· taxable income,
· total reportable fringe benefit amounts, and
· the amount on which family trust distribution tax has been paid,
· Less any taxed element of a superannuation lump sum for which the tax rate is zero.
As you are not a prescribed person, you did not have the required private patient hospital cover and the combined income of you and your spouse exceeds the family surcharge threshold, you are therefore required to pay the MLS.
Whether the Commissioner has any discretion in relation to the imposition of the MLS was discussed in McCarthy v. FC of T 2002 ATC 2204. The Administrative Appeals Tribunal (AAT) held that the Commissioner has no power to remit the MLS imposed on a taxpayer. The taxpayer argued that the imposition of the surcharge was unfair as his income in the year in question had been inflated due to unusual circumstances. The AAT held that the Commissioner had no choice but to impose the levy. The clear wording of the MLA 1986 required the 1% surcharge to be imposed on anyone with a taxable income exceeding the relevant threshold and where they satisfied the other criteria laid down in the MLA 1986. There was no dispute that the taxpayer satisfied those criteria. Further, legislation did not include the discretion to waive or modify the surcharge in cases of hardship or other special circumstances, and therefore the surcharge was payable.
You advised that it was only due to remission of GIC which resulted in your combined taxable income exceeding $100,000. However, as discussed above, the Commissioner does not have any discretion to waive the MLS.
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