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Edited version of your written advice
Authorisation Number: 1013135292457
Date of advice: 7 December 2016
Ruling
Subject: Medicare Levy Surcharge
Question 1
Are you Liable for Medicare Levy Surcharge (MLS)?
Answer
Yes.
This ruling applies for the following period:
Period ended 30 June 2016
The scheme commences on:
1 July 2015.
Relevant facts and circumstances
You are a resident of Australia for tax purposes.
You worked in Australia under a subclass 457 visa.
Subclass 457 visa holders are subject to visa condition 8501. Condition 8501 requires all visa holders, to maintain adequate arrangements for health insurance for the duration of their stay in Australia.
If you had not complied with this condition, your visa would not have been granted.
You held a health insurance policy from which an annual tax statement was not issued.
The insurance company has advised this is not a compliant health insurance policy for consideration of exemption from MLS
You have a Medicare Entitlement Statement (MES) confirming that you are not eligible for Medicare benefits.
You have applied for permanent residency of Australia.
Your income for MLS purposes is above the threshold.
Relevant legislative provisions
Income Tax Assessment Act 1936 Part VIIB
Income Tax Assessment Act 1936 Section 251S
Income Tax Assessment Act 1936 Section 251U(1)(f)
Medicare Levy Act 1986
Medicare Levy Act 1986 Section 3
Medicare Levy Act 1986 Section 8B
Reasons for decision
Summary
Your private health insurance policy does not qualify as a complying health insurance policy for MLS purposes. You will be liable for the MLS as your income exceeds the relevant income threshold.
Detailed reasoning
The imposition and collection of the Medicare levy is governed by Part VIIB of the Income Tax Assessment Act 1936 (ITAA 1936) and the Medicare Levy Act 1986 (MLA 1986). A fundamental objective of the legislation is to integrate collection of the levy with the collection of income tax.
Section 251S of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a Medicare levy is levied at the rate applicable in the MLA on the taxable income of a person who is a resident of Australia.
Section 8B of the MLA imposes an increase in the Medicare levy (the MLS) for a person without dependants who is not married during whole or part of a financial year, the person is not a prescribed person and are not covered by an insurance policy that provides private patient hospital cover with a combined income that exceeds the surcharge threshold.
A prescribed person, as defined in section 251U of the ITAA 1936, is:
● a person entitled to full free medical treatment as a Defence Force member or as a relative of, or as a person associated with, a Defence Force member
● a person entitled under veterans' entitlement or military rehabilitation and compensation (repatriation) legislation to full free medical treatment
● a blind pensioner or a sickness allowance recipient
● a person who is not a resident of Australia for tax purposes, or a person who is a resident of Norfolk Island
● a person who is attached to a diplomatic mission or consular post established in Australia or a household member of the person's family, provided the person is not an Australian citizen and is not ordinarily resident in Australia
● a person certified by the Health Minister as not being entitled to Medicare benefits.
Subsection 3(5) of the MLA provides that a person is covered by an insurance policy that provides private patient hospital cover if the policy is a complying health insurance policy (within the meaning of the Private Health Insurance Act 2007 (PHIA)) that covers hospital treatment, and does not have an annual excess of more than $500 for singles or more than $1,000 for couples/families. Note: the PHIA came into effect on 1 April 2007. Prior to this date private health insurance policies were required to be registered under the National Health Act 1953.
Under subsection 8B(2) of the MLA where the period which a person qualifies for the MLS is the whole of the income year if the sum of the person's taxable incomes and reportable fringe benefits (if any) exceeds the surcharge threshold, a MLS of 1% of the person's taxable income is payable.
In your case, you were a resident of Australia for tax purposes. Your health fund advises that your health insurance policy is not a complying policy for the financial year.
The Commissioner has no discretion to waive or reduce your liability for the Medicare levy (or the Medicare levy surcharge) as there is no provision in the legislation to do so. Once the income of a taxpayer, who does not hold the appropriate health cover, reaches the Medicare levy surcharge threshold the surcharge must be imposed in accordance with the legislation.
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