Edited version of private advice

Authorisation Number: 1052128449823

Date of advice: 15 June 2023

Ruling

Subject: Medicare levy surcharge

Question1

Are you both prescribed persons in accordance with section 251U of the Income Tax Assessment Act 1936?

Answer 1

Yes

Question 2

Are you both exempt from paying the Medicare levy surcharge in accordance with subsection 8D(1) of the Medicare Levy Act 1986 for the period when your children were covered by an insurance policy that provides hospital cover?

Answer 2

Yes

This ruling applies for the following periods:

Year ended 30 June 2021

Year ended 30 June 2022

Year ending 30 June 2023

The scheme commenced on:

1 July 2020

Relevant facts and circumstances

Person A and Person B (You) are married.

You have both previously been employed by a government department. As a result of injuries sustained during that employment, you both have a card which entitles you to clinically required treatment for all medical conditions

You have two children aged under 21.

Your children have been covered by a private health insurance policy since X XXXX 20XX.

Relevant legislative provisions

Income Tax Assessment Act 1936 subsection 251R(3)

Income Tax Assessment Act 1936 section 251U

Medicare Levy Act 1986 section 8D

A New Tax System (Medicare Levy Surcharge- Fringe Benefits) Act 1999 section 8

Reasons for decision

Question 1

Summary

You are both prescribed persons in accordance with section 251U of the Income Tax Assessment Act 1936.

Detailed reasoning

Prescribed persons

Section 8 of A New Tax System (Medicare Levy Surcharge- Fringe Benefits) Act 1999 provides that a person is a prescribed person for a period, if the person would be a prescribed person for the purposes of Part VIIB of the Income Tax Assessment Act 1936 (ITAA 1936) during the period, disregarding subsection 251U(3) of the ITAA 1936.

Subject to section 251U of the ITAA 1936, a person shall be taken to have been a prescribed person, for the purposes of Part VIIB of the Act and of any Act imposing Medicare levy, during a particular period if:

(a)  the person was entitled to free medical treatment during the whole of that period in respect of every incapacity, disease or disabling condition because the person was a member of the Defence Force or was a relative of or was otherwise associated with a member of the Defence Force; or

(b)  the person was entitled under the Veterans Entitlements Act 1986, the Military Rehabilitation and Compensation Act 2004, the Australian Participants in British Nuclear Tests and British Commonwealth Occupation Force (Treatment) Act 2006 or the Treatment Benefits (Special Access) Act 2019 to free medical treatment during the whole of that period in respect of every incapacity, disease or disabling condition.

Application to your circumstances

As you and your spouse are entitled to free medical treatment as a result of your previous military service, evidenced by your Veterans' Gold cards, you are prescribed persons in accordance with section 251U of the ITAA 1936.

Question 2

Summary

You are not liable for the Medicare levy surcharge for the period when your children were covered by an insurance policy that provides hospital cover.

Detailed reasoning

The Medicare levy surcharge (MLS) is imposed by sections 8B to 8G of 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.

Section 8D of the MLA provides for the imposition of the Medicare levy surchargein relation to a person who is married during whole or part of the financial year and states:

1)    This section applies to a person during a period if during the whole of the period:

(a)  the person is a married person; and

(b)  the person or at least one of the person's dependants (other than a dependant who is, or would, apart from subsection 251U(2) of the Assessment Act, be taken to be, a prescribed person) is

(c)   not covered by an insurance policy that provides patient hospital cover; and

(d)  (c)the person is not, or is taken under section 251VA of the Assessment Act not to be, a prescribed person

2)    For the purposes of paragraph (1)(b), a person to whom section 251VA of the Assessment Act applies is taken to be covered during the whole of the period by an insurance policy that provides patient hospital cover.

Subsection 251R(3) of the Income Tax Assessment Act 1936(ITAA 1936) defines dependants to include children less than 21 years of age for the purpose of the Medicare levy surcharge (MLS).

Application to your circumstances

As you are prescribed persons who are married, and your children are covered by an insurance policy that provides patient hospital cover, you will be exempt from paying the Medicare levy surcharge from X XXXX 20XX, when the insurance commenced.

For the period prior to X XXXX 20XX when your children were not covered by an insurance policy that provides hospital cover and your combined income and reportable fringe benefits total exceeds the threshold amount, you will be liable for the Medicare levy surcharge.