Edited version of private advice

Authorisation Number: 1052364179193

Date of advice: 19 February 2025

Ruling

Subject: Medicare levy surcharge

Question 1

Are you eligible for an exemption from paying the Medicare levy surcharge?

Answer 1

No.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commenced on:

02 July 20XX

Relevant facts and circumstances

You were born in Country Z.

You are a citizen of Australia.

You have been living in Australia for several years.

You live permanently in Australia.

You have a spouse.

You do not have any dependants.

You held medical cover Type A for several years.

You held medical cover Type B prior to holding Type A.

Relevant legislative provisions

Medicare Levy Act 1986 subsection 3(5)

Medicare Levy Act 1986 section 8D

Reasons for decision

Medicare surcharge is imposed if both:

•                     You, your spouse, and your dependent children do not have an appropriate level of private patient hospital cover, and

•                     You earn above a certain income.

The MLS is imposed by the Medicare Levy Act 1986 (MLA).

Section 8D of the MLA states that if a person earns more than their relevant income threshold and is not covered by an insurance policy that provides private patient hospital cover, they will be liable to pay the MLS.

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 the policy is a complying health insurance policy (within the meaning of the Private Health Insurance Act 2007) that covers hospital treatment.

Under section 8D of the Medicare Levy Act 1986 (MLA 1986), a married taxpayer will be subject to an MLS where, for the whole of a year of income:

•                     the taxpayer or at least one of their dependants (unless the dependant is a prescribed person) are not covered by an insurance policy that provides appropriate private patient hospital cover; and

•                     the taxpayer is not a prescribed person; and

•                     the combined taxable income and reportable fringe benefits (if any) of the taxpayer and their spouse exceed the relevant family surcharge threshold; and

•                     the taxpayer's taxable income and reportable fringe benefits (if any) exceeds the relevant Medicare levy single low-income exemption threshold.

A person will have appropriate private patient hospital cover if their insurance policy is an applicable benefits arrangement within the meaning of section 5A of the National Health Act 1953 (NHA 1953). Only registered organisations, as defined in the NHA 1953, can provide an applicable benefit arrangement.

You held medical cover Type B for a couple of years and after that period you held medical cover Type A.

During the above periods, you held visitors' health policies. These policies do not exempt you from the Medicare Levy surcharge.

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 MLS) as there was no provision in the legislation to do so. Once a taxpayer's income has reached the MLS threshold the surcharge must be imposed in accordance with the legislation.

Your private health insurance policy does not meet the requirements under the Private Health Insurance Act 2007. Consequently, your policy will not exempt you from paying the MLS. You are therefore required to pay the MLS in the relevant income year.

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