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Ruling

Subject: Medicare levy surcharge

Question

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

Answer

No

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

You are an Australian resident for tax purposes.

You spend most of your time living overseas.

No registered Australian Insurers will provide medical insurance that can cover you both in Australia and overseas. Therefore you needed to take out a policy with a foreign insurer that covers you for hospital anywhere in the world including Australia.

Relevant legislative provisions

Medicare Levy Act 1986 Subsection 3(5)

Medicare Levy Act 1986 Section 8D

Reasons for decision

The Medicare levy surcharge (MLS) is in addition to the Medicare levy. The MLS is payable if you or your dependants did not have an appropriate level of private patient hospital cover and the combined incomes of you and your spouse is above the surcharge threshold amount.

An appropriate level of private patient hospital cover is cover provided by an insurance policy issued by a registered health insurer for hospital treatment in Australia.

Subsection 3(5) of the Medicare Levy Act 1986 (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)) that covers hospital treatment.

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

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

While we accept that you had hospital cover, your policy is not an approved hospital cover with a registered fund under the PHIA. There are no other exemptions that apply to your specific circumstances therefore you are liable for the MLS, when the combined income of you and your spouse for MLS purposes is above the surcharge 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.