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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your private ruling

Authorisation Number: 1012613527723

Ruling

Subject: Medicare levy surcharge

Are you liable for Medicare Levy Surcharge (MLS) for part of the 2012-13 financial year?

Answer

Yes.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

During the 2012-2013 income year

Relevant facts

You held a Private Hospital policy for foreign residents.

Your taxable income is above the Medicare levy surcharge threshold amount.

You were exempt from Medicare levy for part of the 2012-13 financial year.

You became a permanent resident part way through the financial year.

You forgot to change your policy when you became a permanent resident.

Relevant legislative provisions

Medicare Levy Act 1986 Section 8D

Medicare Levy Act 1986 Subsection 3(5)

National Health Act 1953 Section 5A

Reasons for decision

Section 8D of the Medicare Levy Act 1986 (MLA 1986) allows an increase of an additional 1%, 1.25% or 1.5% of the Medicare levy, where a taxpayer earns income in excess of the relevant threshold and does not have adequate private health insurance for the whole or part of an income year. This increase is known as the Medicare levy surcharge (MLS).

A liability for the Medicare levy surcharge arises where you do not have the required private patient hospital cover and your taxable income exceeds the threshold amount.

Private patient hospital cover is defined in subsection 3(5) of the MLA 1986. It states that:

A person is covered by an insurance policy that provides private patient hospital cover if the policy is an applicable benefits arrangement within the meaning of section 5A of the National Health Act 1953 (NHA 1953).

An 'applicable benefits arrangement' is one that a registered organisation has entered into with a contributor, conducted by that fund, and under which the contributor is covered (wholly or partly) for liability to pay fees and charges in respect of various medical services and treatments and that are professional services in respect of which a Medicare benefit is payable.

You have a Working Visa Hospital policy with Medibank Private. The policy is not an arrangement between the contributor and a registered organisation for the purposes of section 5A of the NHA 1953.

Therefore, the overseas visitor's policy is not an 'applicable benefits arrangement' for the purposes of section 5A of the NHA 1953. Accordingly, the policy does not provide appropriate private patient hospital cover.

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.

There are no exemptions that apply to your specific circumstances. Therefore, you are liable for the MLS for the period from when you became a permanent resident.