Edited version of your written advice

Authorisation Number: 1012847644126

Date of advice: 28 July 2015

Ruling

Subject: Medicare levy and surcharge

Question

Are you entitled to a Medicare levy and Medicare levy surcharge exemption whilst living and working overseas?

Answer

No.

This ruling applies for the following periods:

Year ended 30 June 2015

Year ended 30 June 2016

The scheme commenced on:

1 July 2014

Relevant facts and circumstances

You are an Australian resident for tax purposes.

You are single with no dependants.

You have a two to three year contract with an Australian employer to work overseas.

You were overseas for the full 2014-15 financial year.

You are paid by the Australian employer and you are issued with an Australian payment summary declaring your income as foreign income.

You are required to lodge both Australian and overseas income tax returns.

You pay an equal levy overseas for your medical expenses.

You did not make any Medicare claims in the 2014-15 financial year as you were not physically in Australia for that period.

You have suspended your Australian private patient hospital insurance cover for the period you are overseas.

You plan to return to Australia upon the completion of your overseas contract.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 251S

Income Tax Assessment Act 1936 Section 251U

Medicare Levy Act 1986 Section 3(5)

Medicare Levy Act 1986 Sections 8B to 8G

Reasons for decision

Medicare levy

Section 251S of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a Medicare levy is levied and shall be paid by an individual who is a resident of Australia at any time during the income year based on his or her taxable income for the year. The Medicare levy is levied at the rate applicable in the Medicare Levy Act 1986.

Full or partial exemption from the Medicare levy may be provided to a person that qualifies as a 'prescribed person'. Under section 251U of the ITAA 1936, a 'prescribed person' is:

• a person entitled to full free medical treatment as a member of the Defence Force or as a relative of, or as a person otherwise associated with a Defence Force member

• a person entitled under Veteran's entitlement (repatriation) legislation to full free medical treatment

• a blind pensioner or a sickness allowance recipient

• a person who is not a resident of Australia for tax purposes, or a person who is a resident of Norfolk Island

• a person who is attached to a diplomatic mission or consular post established in Australia or a household member of the person's family, provided the person is not an Australian citizen and is not ordinarily resident in Australia, or

• a person certified by the Health Minister as not being entitled to Medicare benefits.

In your case, you are not a prescribed person. Although you are not currently living in Australia, you are still an Australian resident for tax purposes.

As an Australian resident, should you return to Australia, you will be entitled to receive Medicare benefits in respect of professional services rendered in Australia.

In certain circumstances, the Minister for Health certifies that a person is ineligible for Medicare benefits in respect of medical services, or free treatment and care in a public hospital and is exempt from the Medicare levy. An Australian citizen residing overseas for five years or more may be eligible for such a Medicare levy exemption.

In your case you do not qualify as a 'prescribed person' of any of the Medicare levy exemption categories for the purposes of being granted exemption from the Medicare levy.

We acknowledge your specific circumstances; however, as you are not a 'prescribed person', there is no provision in the legislation that allows the Commissioner to exempt you from paying the Medicare levy.

Medicare Levy Surcharge

Under the provisions of section 8B of the Medicare Levy Act 1986 (MLA 1986), a surcharge will be imposed on a single person without dependants where all the following tests apply for whole or part of a year of income and the relevant income threshold is exceeded. The tests are that the person:

(a) is not a married person; and

(b) does not have dependants; and

(c) does not have private patient hospital cover; and

(d) is not a prescribed person.

Subsection 3(5) of the MLA 1986 provides:

'For the purposes of this Act, 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), to which paragraph 5A(1)(a) of that Act applies.'

Under paragraph 5A(1)(a) of the NHA 1953, an arrangement is an 'applicable benefits arrangement' if the contributor is covered for liability to pay fees and charges in respect of some or all hospital treatment provided by a hospital with which a 'registered organisation' has a hospital purchaser-provider agreement.

As you satisfy all the requirements above, there is no provision in the legislation that allows the Commissioner to exempt you from paying the Medicare levy surcharge if your income for the year exceeds your relevant income threshold for Medicare levy surcharge purposes.