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Edited version of your written advice
Authorisation Number: 1012711313798
Ruling
Subject: Medciare levy surcharge
Question
Are you liable for Medicare Levy Surcharge (MLS)?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2014
The scheme commenced on
1 July 2013
Relevant facts
You came to Australia holding a working visa.
You held overseas health cover.
In late 2013 you applied for permanent residency which was subsequently granted in mid 2014.
You have a Medicare levy exemption certificate covering up to the date you applied for permanent residency.
You held appropriate health cover from early 2014.
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 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 MLS.
A liability for the MLS 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.
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.
As you were not covered by an appropriate private patient hospital cover between the date of application for permanent residency until a later time you are liable for the MLS for that period.