Edited version of your private ruling

Authorisation Number: 1012543478593

Ruling

Subject: Spouse details

Question 1

Is your foreign resident spouse a dependant for Medicare levy surcharge purposes?

Answer

No.

Question 2

Are your eligible to receive the full relevant private health insurance tax offset?

Answer

Yes.

This ruling applies for the following periods

Year ended 30 June 2013

Year ended 30 June 2014

The scheme commenced on

1 July 2012

Relevant facts

You and your spouse were married in Australia.

Your spouse is a foreign citizen and has lived permanently and continuously in country A.

After your marriage you moved to country A and lived as a permanent resident of country A.

After a few years you returned to Australia and commenced working in Australia.

Your spouse has no Australian sourced income.

Your spouse is a foreign resident for taxation purposes.

You have no dependent children.

Since your return to Australia, you have had private patient hospital cover.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 61-205.

Income Tax Assessment Act 1997 Subsection 995-1(1).

Income Tax Assessment Act 1936 Section 251R.

Income Tax Assessment Act 1936 Section 251S.

Medicare Levy Act 1986 Sections 8B to 8G.

Detailed reasoning

Medicare levy surcharge

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 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. The Medicare levy surcharge applies if the income for Medicare levy surcharge purposes exceed the relevant threshold.

For the 2012-13 income year, individual taxpayers with no dependants during the year whose income for Medicare levy surcharge purposes is more than $84,000 for the year and do not have private patient hospital cover are generally liable for the Medicare levy surcharge.

As outlined in subsection 251R(3) of the ITAA 1936, a person shall be taken to have been a dependant of another person for the purposes of the Medicare levy surcharge during any part of the year of income in which-

(a)  the first-mentioned person was a resident of Australia;

(b)  the first-mentioned person was -

(i)  the spouse of the other person;

(ii)  a child of the other person less than 21 years of age; or

(iii)  a child of the other person not less than 21 years of age but less than 25 years of age and receiving full-time education at a school, college or university; and

(c)  the other person contributed to the maintenance of the first-mentioned person.

As your spouse is not a resident of Australia, they are not regarded as a dependant for Medicare levy surcharge purposes.

Therefore as you have no dependents and you are covered by private patient hospital cover, Medicare levy surcharge does not apply.

Private health insurance tax offset

Subsection 61-205(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines who is eligible to receive this private health insurance tax offset. The subsection has been amended to restrict eligibility for the private health insurance tax offset to people who are private health insurance incentive beneficiaries (PHIIBs) of that policy for the 2012/13 and later income years.

The definition of "PHIIB" has been inserted into the Private Health Insurance Act 2007 (PHIA) by Act No 26 of 2012. Each adult insured under the complying health insurance policy throughout the premium period is a PHIIB in respect of the premium or amount.

For the 2012/13 or later income years, an individual is eligible for the tax offset if three conditions are satisfied.

(a) you or another entity paid a premium or an amount in respect of a premium for a complying health insurance policy in respect of the period,

(b) you are a private health insurance incentive beneficiary in respect of the premium, and

(c) each person insured under the complying health insurance policy during the period must be an "eligible person" for the whole of the time that he or she is insured under the policy during that period.

An eligible person means an Australian resident or an eligible overseas representative. Your spouse is not an eligible person for the private health insurance tax offset purposes.

A person is not entitled to an offset for private health insurance premiums if:

§ a direct payment has already been made

§ the payment has already been reduced by way of premium reduction.

In your circumstances, as your spouse is not an eligible person and you had a single private health policy without any dependents, you are entitled to the full amount of any allowable private health insurance tax offset.