Edited version of your written advice

Authorisation Number: 1013079246400

Date of advice: 26 August 2016

Ruling

Subject: Medicare levy surcharge

Questions and answers

Does your overseas health insurance policy qualify as a complying health insurance policy for Medicare levy surcharge purposes?

No.

Are you required to pay the Medicare Levy Surcharge?

Yes.

This ruling applies for the following periods:

Year ended 30 June 2014

Year ended 30 June 2015

Year ended 30 June 2016

The scheme commenced on:

1 July 2013

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 a resident of Australia for taxation purposes.

You are employed by the Government.

You are based outside Australia.

You have been living with your spouse overseas for a number of years.

You and your spouse have medical insurance which covers you both in Australia and overseas for hospital and medical treatment.

The cost of the policy is paid by your employer.

Relevant legislative provisions

Medicare Levy Act 1986 Subsection 3(5)

Medicare Levy Act 1986 Section 8D

Reasons for decision

The Medicare levy surcharge (MLS) is in addition to the Medicare levy. The MLS is payable if you or your dependants did not have an appropriate level of private patient hospital cover and the combined incomes of you and your spouse is above the surcharge threshold amount.

An appropriate level of private patient hospital cover is cover provided by an insurance policy issued by a registered health insurer for hospital treatment in Australia.

Subsection 3(5) of the Medicare Levy Act 1986 (MLA) states that a person is covered by an insurance policy that provides private patient hospital cover if the policy is a complying health insurance policy (within the meaning of the Private Health Insurance Act 2007 (PHIA)) that covers hospital treatment.

From 1 July 2015 responsibility for the prudential supervision of private health insurers transferred from the Private Health Insurance Administration Council (PHIAC) to the Australian Prudential Regulation Authority (APRA).

Your insurance policy does not appear on the APRA website. expatriate insurance is not a complying health insurance policy and does not satisfy the requirement of subsection 3(5) of the MLA.

While we accept that you had hospital cover, your policy is not an approved hospital cover with a registered fund under APRA. There are no other exemptions that apply to your specific circumstances therefore you are liable for the MLS, when the combined income of you and your spouse for MLS purposes is above the surcharge threshold.

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.