Edited version of private advice

Authorisation Number: 1052131544199

Date of advice: 22 June 2023

Ruling

Subject: Medicare levy surcharge

Question

Are you considered to be covered by private patient hospital cover for the purpose of section 8D of the Medicare Levy Act 1986 (MLA 1986) where you have an international health insurance policy that provides private patient hospital cover in Australia?

Answer

No

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are an Australian resident for taxation purposes.

You have previously maintained Private Health Insurance cover in Australia, however the coverage is currently suspended.

Your spouse is currently employed and based in Country A and has recently had their contract renewed for a further period.

As part of your spouse's employment conditions and entitlements, employees are automatically enrolled within the global medical coverage provided by Company A. This coverage extends to eligible family members.

You qualify for this coverage and have maintained it since becoming eligible.

Your income and pension is sourced from within Australia.

Relevant legislative provisions

Medicare Levy Act 1986 section 3(5)

Medicare Levy Act 1986 section 8D

Private Health Insurance Act 2007 section 63-10

Private Health Insurance (prudential Supervision) Act 2015 Division 3 of Part 2

Reasons for decision

Medicare levy surcharge

The Medicare levy is imposed on the taxable income of people residing in Australia. The Medicare levy surcharge (MLS) is imposed by the MLA. Broadly, the MLS is an additional levy surcharge that is paid in addition to the Medicare levy, payable by taxpayers who are not covered by a complying health insurance policy with adequate private patient hospital cover and who earn more than the relevant income threshold.

A person's liability to pay the MLS during a period is affected by whether they:

•         are married

•         have dependants

•         are covered by a private patient hospital insurance (and whether their dependants are also covered)

•         are a 'prescribed person', and

•         whether their income and reportable fringe benefits total (or the combined total of both partners where they are married) exceeds the threshold amount

Insurance policy with private patient hospital cover

Subsection 3(5) of the MLA contains the meaning of an insurance policy that provides private patient hospital cover in the context of the legislation. It states:

For the purposes of this Act, a person is covered by an insurance policy that provides private patient hospital cover if:

(a)    the policy is a complying health insurance policy (within the meaning of the Private Health Insurance Act 2007) that covers hospital treatment (within the meaning of that Act); and

(b)    any excess payable in respect of benefits under the policy is no more than the applicable amount set out in section 45-1 of that Act in any 12 month period.

'Complying health insurance policy' is defined in section 63-10 of the Private Health Insurance Act 2007 (PHIA). Section 63-10 of the PHIA has a list of requirements of the private health insurer.

The phrase 'private health insurer' is defined in the act as a body that is registered under Division 3 of Part 2 of the Private Health Insurance (Prudential Supervision) Act 2015.

This means that to be considered a private health insurer providing a complying health insurance policy for the purposes of the MLA, the insurer must be registered with APRA. APRA is required under the Private Health Insurance (Prudential Supervision) Act 2015 to maintain a list of currently registered health insurance providers available on their website (apra.gov.au/register-of-private-health-insurers).

Application to your circumstances

In your case, Company A is not registered with APRA as a private health insurer under Division 3 of Part 2 of the Private Health Insurance (Prudential Supervision) Act 2015. This means it is not a private health insurer for the purposes of the Private Health Insurance Act 2007, and therefore your coverage with them is not considered a complying health insurance policy for the purpose of the MLA.