Edited version of your private ruling

Authorisation Number: 1012461572185

Ruling

Subject: Medicare levy surcharge

Question 1

Does your overseas health insurance policy qualify as a complying health insurance policy for Medicare levy surcharge purposes?

Answer

No.

Question 2

Are you entitled to an exemption for the Medicare levy surcharge?

Answer

No.

Question 3

Can the Commissioner remit or reduce the Medicare levy surcharge imposed for the years ended 30 June 2010 and 30 June 2011?

Answer

No.

This ruling applies for the following periods

Year ended 30 June 2010

Year ended 30 June 2011

Year ended 30 June 2012

Year ended 30 June 2013

The scheme commenced on

1 July 2009

Relevant facts

You are an Australian resident.

You have a spouse and child who live in Australia.

You live and work in overseas for most of the year.

You have private hospital cover provided an overseas fund, which is compulsory.

You have extra covers with an Australian complying fund.

Your spouse and child have combined hospital and extras with a complying Australian fund.

Your overseas hospital policy covers you worldwide so you would never make a claim on the Australian system.

You and your spouse's combined income for Medicare levy surcharge purposes is more than the relevant threshold.

Medicare levy surcharge has been imposed on your 2009-10 and 2010-11 income year assessments.

You have not lodged your 2011-12 and 2012-13 income year tax returns.

Relevant legislative provisions

Income Tax Assessment Act 1936 section 251R

Income Tax Assessment Act 1936 section 251S

Income Tax Assessment Act 1936 section 251U

Medicare Levy Act 1986 sections 8B to 8G

Reasons for decision

Medicare Levy Surcharge (MLS)

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.

You and your spouse and your child are not prescribed persons.

A dependent includes your spouse as defined in section 251R of the ITAA 1936.

Subsection 3(5) of the MLA 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, for policies that cover more than one person.

The Private Health Insurance Administration Council (PHIAC) administers the PHIA 2007 and maintains on its website (www.phiac.gov.au) an up to date record of all private health insurers providing complying policies.

Your overseas fund does not appear on the PHIAC's website. Therefore this policy is not a complying health insurance policy within the meaning of the PHIA 2007 and does not satisfy the requirement of subsection 3(5) of the MLA.

Whilst we accept that you have private patient hospital cover with the overseas fund, your policy is not a complying policy for MLS purposes. That is, your health cover is not provided by an insurance policy issued by a registered health insurer for hospital treatment in Australia.

Where a person does not have private patient hospital cover with a complying fund, they are liable to pay an additional Medicare levy surcharge if their income, for Medicare levy surcharge purposes, exceeds the relevant threshold.

The relevant combined income thresholds for MLS purposes for people who have a spouse are:

For year ending 30 June 2010 $146,000

For year ending 30 June 2011 $154,000

For year ending 30 June 2012 $160,000

For year ending 30 June 2013 $168,000

In your case, you and your spouse's combined income for MLS purposes exceeds the relevant threshold.

Whether the Commissioner has any discretion in relation to the imposition of the Medicare levy surcharge 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 Medicare levy surcharge imposed on a taxpayer. The taxpayer argued that the imposition of the surcharge was unfair. The AAT held that the Commissioner had no choice but to impose the levy. The clear wording of the MLA 1986 required the surcharge to be imposed. Furthermore, the 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.

We acknowledge your specific circumstances, however, the legislation has no provision to remit or reduce the Medicare levy surcharge. There are no exemptions that apply to your specific circumstances, therefore you are liable for the MLS.