Edited version of private ruling

Authorisation Number: 1011600928593

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Ruling

Subject: Medicare Levy Surcharge

Question

Is your health insurance policy a complying health insurance policy for the purposes of the Medicare Levy Surcharge (MLS)?

Answer: Yes.

This ruling applies for the following period

Year ending 30 June 2011

The scheme commenced on

1 July 2010

Relevant facts and circumstances

You are a citizen of an overseas country.

You and your family have been issued with a visa to stay in Australia.

As citizens of an overseas country you and your family are covered by Medicare under the reciprocal health care agreement.

You are the only income earner in your family.

Your income may exceed the threshold amounts for the MLS surcharge purposes.

You are considering taking out health cover provided by a registered health fund for you and your family.

Relevant legislative provisions

Income Tax Assessment Act 1936 paragraph 251S(1)(a)

Income Tax Assessment Act 1936 section 251U

Medicare Levy Act 1986 subsection 3(5)

Medicare Levy Act 1986 section 8D.

Reasons for decision

Paragraph 251S(1)(a) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a Medicare levy is levied at the rate applicable in the Medicare Levy Act 1986 (MLA) on the taxable income of a person who is a resident of Australia.

Section 8D of the MLA imposes an increase in the Medicare Levy (the Medicare levy surcharge) for a married person for the period they or any of their dependants, who are not prescribed persons, are not covered by an insurance policy that provides private patient hospital cover.

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 1986 states 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 2007)) that covers hospital treatment, and any excess payable in respect of benefits under the policy is no more than $1,000 in any 12 month period, in relation to any other policy that covers more than one person.

In your case, the health insurance policy is a complying health insurance policy for the purposes of the PHIA 2007. Accordingly, the health insurance policy is private patient hospital cover for the purposes of subsection 3(5) of the MLA 1986.

You are not liable for the MLS for the period you and all of your dependants are covered by the policy. If the health insurance policy is taken out during the income year the MLS will apply up until the day it is taken out. Any MLS payable will be determined once your income tax return is lodged and processed and the amount of MLS payable will be noted on the notice of assessment.