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Edited version of your written advice
Authorisation Number: 1013028353225
Date of advice: 9 June 2016
Ruling
Subject: Medicare Levy Surcharge
Question 1
When you cancel your private health insurance will you be liable for the Medicare Levy Surcharge?
Answer
No
This ruling applies for the following periods:
Year ending 30 June 2017
Year ending 30 June 2018
Year ending 30 June 2019
The scheme commences on:
1 July 2016
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
You are exempt from paying the Medicare Levy as you are provided a pension under the Veterans' Entitlements Act 1986.
You currently have private health insurance.
You will be cancelling your private health insurance as of 1 July 2016.
You have a spouse who is liable for the Medicare Levy and has appropriate private health insurance.
Relevant legislative provisions
Income Tax Assessment Act 1936 paragraph 251U(1)(b)
Income Tax Assessment Act 1936 subsection 251U(2)
Income Tax Assessment Act 1936 subsection 251U(3)
Income Tax Assessment Act 1936 section 251VA
Medicare Levy Act 1986 section 8D
Veterans' Entitlements Act 1986
Reasons for decision
Summary
For the period 1 July 2016 until 20 June 2019 you will not be liable for the Medicare Levy Surcharge.
Reasoning
Sections 251U of the Income Tax Assessment Act 1936 (ITAA) provides the conditions in which a person is a prescribed person for the purpose of the Medicare Levy and Surcharge. A prescribed person is someone who is not liable for the Medicare Levy and Surcharge. Paragraph (b) of subsection 251U(1) states that a person who is in receipt of free medical treatment under the Veterans' Entitlements Act 1986 are a prescribed person.
Subsection 251U(2) of the ITAA 1936 states that a person who is prescribed will not be a prescribed person if their dependants are not also prescribed.
Subsection 251U(3) of the ITAA 1936 states that if you are not a prescribed person because of subsection 251U(2) but you are a prescribed under paragraph 251U(1)(a) of the ITAA 1997 then you will be considered a prescribed person for half of the income period.
Section 251VA of the ITAA 1936 states that a person who is a prescribed person under subsections 251U(3) must use sections 8B, 8C, and 8D of the Medicare Levy Act 1986 (MLA) to work out their Medicare Levy Surcharge.
Section 8D of the MLA provides the conditions for the application of the Medicare Levy Surcharge for a person who is married. Subsection 8D(1) states that this section applies in the circumstances that the person or one of their dependants are not covered by private patient hospital cover and the person is not, or is taken under section 251VA of the ITAA 1936 not to be a prescribed person in regards to the MLA.
However, subsection 8D(2) of the MLA states that for the purpose of section 8D a person who is a prescribed person under section 251VA of the ITAA 1936 will be taken to have been covered by private patient hospital cover for the whole of the income period.
Application to your circumstances
You are cancelling your private health cover. You are receiving a pension provided under the Veterans' Entitlements Act 1986 making you exempt from the Medicare Levy and Surcharge. The only reason you would be liable for the Medicare Levy Surcharge is because your spouse is liable for the Medicare Levy and Surcharge. Due to this you will be considered under section 8D of the MLA to have private hospital cover for the full income period.
As your spouse will also have private hospital cover for the full income period you will not meet the requirements of section 8D of the MLA and therefore, you will not be liable to the Medicare Levy Surcharge.