Edited version of your written advice

Authorisation Number: 1012760716112

Ruling

Subject: Medicare levy

Question 1

Are you liable for the Medicare levy?

Answer

Yes

Question 2

Are you liable for the Medicare levy surcharge (MLS)?

Answer

Yes

Question 3

Will the first element of the cost base for any Capital Gains Tax (CGT) assets you own be the market value on the date you ceased being a temporary resident in August 2012?

Answer

Yes

This ruling applies for the following period(s)

Income year ended 30 June 2012

Income year ended 30 June 2013

Income year ended 30 June 2014

The scheme commences on

1 July 2011

Relevant facts and circumstances

You arrived in Australia on X on a 457 Visa. The Visa was for a period of two years.

You have an adjustable taxable income of over $X.

You have a Medicare Entitlement Statement confirming that you are not eligible for Medicare benefits for the whole year.

You have a spouse who is an Australian citizen and does have access to Medicare benefits. Your spouse has the appropriate level of private patient hospital cover.

You moved in with your spouse on the X.

You applied for a Partner Visa on the X.

You were granted a Temporary Partner Visa on the X.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 251T(a)

Income Tax Assessment Act 1936 paragraph 251U(1)(f)

Income Tax Assessment Act 1936 subsection 51U(2)

Income Tax Assessment Act 1936 section 251S

Medicare Levy Act 1986 section 8D

Medicare Levy Act 1986 paragraph 8D(1)(a)

Income Tax Assessment Act 1997 section 855-45

Income Tax Assessment Act 1997 section 768-950

Income Tax Assessment Act 1997 section 995-1

Social Security Act 1991 section 7

Reasons for decision

Medicare levy

Subsection 251T(a) of the Income Tax Assessment Act 1936 (ITAA 1936) states that the Medicare levy is not payable by a 'prescribed person'.

Paragraph 251U(1)(f) of the ITAA 1936 provides that a 'prescribed person' is someone that the Health Minister has certified as not being entitled to Medicare benefits.

However, subsection 251U(2) of the ITAA 1936 goes on to clarify that someone is not a 'prescribed person' unless everyone who is their dependent is also a 'prescribed person'.

Consequently as you have a dependent who is not a prescribed person you will not be eligible for the Medicare levy exemption.

Medicare levy surcharge

Section 251S of the 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.

An increase in the Medicare Levy (Medicare levy surcharge) is imposed under section 8D of the MLA on a taxpayer's taxable income for the period they or any of their dependents are not covered by an insurance policy that provides appropriate levy of private patient hospital cover and their combined income exceeds the appropriate surcharge threshold.

Paragraph 8D(1)(a) of the MLA provides that dependent who is only liable to the Medicare Levy by virtue of subsection 251U(2) of the ITAA 1936 will not be taken into account in determining whether the relevant individuals have the appropriate private health insurance. This exclusion however only applies to dependents and not the test person.

Consequently as you meet the above requirements of section 8D of the MLA you will be liable for the Medicare levy surcharge.

Residence and CGT

Taxation Ruling TR 98/17 provides the Commissioner's view on residency status of individuals entering Australia. It provides that the definition of residence is wide enough to cover both individuals that come to Australia permanently and an individual who is dwelling here for a considerable time. It also provides that the six months is a considerable time.

In relation to timing it provides that an individual who comes to Australia intending to reside here permanently is a resident from arrival. This may also be the case where the taxpayer later extends their stay, as paragraph 25 provides:

If individuals enters Australia intending to remain for less than six months but later events extend their stay beyond six months, they are regarded as residents from their arrival, as long as their presence has a habitual and routine character during the entire period.

In your circumstances you have come to Australia on a 457 Visa with a pre-arranged employment and living arrangements. The length of your Visa was a considerable period. Consequently you have become an Australian resident from the 20 February 2012.

Normally section 855-45 of the Income Tax Assessment Act 1997 (ITAA 1997) would provide that the first element of any CGT assets you owned would be the market value on the day you became an Australian resident. However section 768-950 provides that section 855-45 does not apply to a temporary resident.

Under section 955-1 of the ITAA 1997 you are a temporary resident:

• hold a temporary visa granted under the Migration Act 1958

• are not an Australian resident within the meaning of the Social Security Act 1991, and

• do not have a spouse who is an Australian resident within the meaning of the Social Security Act 1991.

The definition of Australian resident under the Social Security Act 1991 is concerned with the common law test as in the ITAA 1997, however it includes an additional requirement that the individual be a citizen or hold a permanent visa. Consequently you were a temporary resident up until the time you moved in with your Australian citizen spouse on X.

Therefore you are taken to have acquired assets (other than assets you acquired before 20 September 1985) for their market value at the time you ceased being a temporary resident.