Edited version of private advice

Authorisation Number: 1051885046689

Date of advice: 17 August 2021

Ruling

Subject: Medicare levy surcharge - exemption

Question

Are you exempt from paying the Medicare levy surcharge (MLS) until 20XX because you had an international health insurance policy, that covers all the requirements of an Australian policy that would exempt you from the MLS?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commences on:

X XX 20XX

Relevant facts and circumstances

You were on a visitor's visa until X XX 20XX, when you applied for a permanent residency visa.

You applied for permanent residency.

You are currently an Australian permanent resident.

You had a comprehensive Health Insurance Policy through an Insurance Company as a foreign resident. This insurance policy provided comprehensive private health coverage similar to the comparable domestic policy.

Your Private Health Insurance Company was not on the Register of Health Benefit Organisations and provides health insurance for visitors to Australia.

You received Permanent residency on X XX 20XX

You were unaware you could apply for Medicare while waiting for an outcome on your permanent residency application. During the time you had made several enquiries to finalise your Medicare application/entitlement as well as transferring your private insurance policy to a domestic private health insurance policy.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 995-1(1)

Income Tax Assessment Act 1936 subsection 6(1)

Reasons for decision

The MLS is imposed by the Medicare Levy Act 1986 (MLA).

Sections 8B, 8C and 8D of the MLA state that if a person earns more than their relevant income threshold and is not covered by an insurance policy that provides private patient hospital cover, they will be liable to pay the MLS.

Subsection 3(5) of the MLA states the following:

For the purposes of this Act, 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) that covers hospital treatment.

Your situation is similar to that of the taxpayer in Adam Fraser v. Commissioner of Taxation AATA 738. In that case Mr Fraser was a member of BUPA International. The Private Health Insurance Administration Council confirmed in this case that BUPA International is not on the Register of Health Benefit Organisations.

An up to date record of all registered private health insurers providing complying policies can be found on the PrivateHealth.gov.au website.

As your insurance provider is not on the list of registered health insurers, it cannot issue complying health insurance policies. As you are not covered by a complying health insurance policy, when your income for MLS purposes is greater than the threshold, you will be liable for the MLS.

In the case of McCarthy v F C of T 2002 ATC 2004, the applicant applied for an exemption from the Medicare levy being imposed. It was determined that the Commissioner had no discretion to not impose the Medicare levy (or the MLS) as there was no provision in the legislation to do so. Once a taxpayer's income has reached the MLS threshold the surcharge must be imposed in accordance with the legislation.

Your private health insurance provider and policy does not meet the requirements under the Private Health Insurance Act 2007. This is because it is not listed under the Register of Health Benefit Organisations and a health insurance policy is not for permanent residents. Consequently, your policy will not exempt you from paying the MLS.