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Edited version of your written advice
Authorisation Number: 1013032469821
Date of advice: 10 June 2016
Ruling
Subject: Medicare levy surcharge
Question 1
Are you liable for the Medicare levy surcharge (MLS) where you are covered by an overseas health insurance policy?
Answer
Yes
This ruling applies for the following periods:
Year ended 30 June 2015
The scheme commences on:
1 July 2014
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You are covered under a private health insurance policy by an international insurer.
The policy covers the tax payer, spouse and two dependent children.
The private health insurance policy is issued by an overseas health insurance fund.
Relevant legislative provisions
Medicare Levy Act 1986 Section 8D
Medicare Levy Act 1986 Subsection 3(5)
Reasons for decision
The MLS is imposed by the Medicare Levy Act 1986 (MLA).
Section 8D of the MLA provides that a taxpayer will be liable to pay the MLS for any part of an income year where:
• during the whole of the year the taxpayer is married;
• the taxpayer, their spouse and all of their dependents are not covered by a health insurance policy that provides private patient hospital cover; and
• the taxpayer and their spouse's combined income for MLS purposes for the year exceeds $180,001.
The rate of MLS imposed depends upon your combined income as follows:
$180,001 - $210,000 1%
$210,001 - $280,000 1.25%
$280,001 and above 1.5%
Subsection 3(5) of the MLA states the following:
For the purposes of this Act, a person is covered by an insurance policy that provides private patient hospital cover if:
(a) the policy is a complying health insurance policy (within the meaning of the Private Health Insurance Act 2007) that covers hospital treatment (within the meaning of that Act); and
(b) any excess payable in respect of benefits under the policy is no more than:
(i) $500 in any 12 month period, in relation to a policy under which only one person is insured; and
(ii) $1,000 in any 12 month period, in relation to any other policy.
Your situation is similar to that of the taxpayer in Adam Fraser v. Commissioner of Taxation [2000] AATA 738. In that case Mr Fraser was a member of BUPA International. The Private Health Insurance Administration Council confirmed in this case that BUPA International is not on the Register of Health Benefit Organisations.
The Private Health Insurance Administration Council administers the Private Health Insurance Act 2007 and maintains on its website (www.phiac.gov.au) an up to date record of all private health insurers providing complying policies.
As international insurer is not on the Register of Health Benefit Organisations, it cannot issue complying health insurance policies. As you are not covered by a complying health insurance policy, when you and your spouse's combined income for MLS purposes is greater than the threshold, you will be liable for the MLS.
In the case of McCarthy v F C of T 2002 ATC 2004, the applicant applied for an exemption from the Medicare levy being imposed. It was determined that the Commissioner had no discretion to not impose the Medicare levy (or the Medicare levy surcharge) as there was no provision in the legislation to do so. Once a taxpayer's income has reached the Medicare levy surcharge threshold the surcharge must be imposed in accordance with the legislation.
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