Edited version of private advice

Authorisation Number: 1052372750471

Date of advice: 20 March 2025

Ruling

Subject: Medicare levy surcharge

Question 1

Are you eligible for an exemption from paying the Medicare levy and Medicare levy surcharge for the 20XX financial year?

Answer 1

No.

This private ruling applies for the following period:

Year ended XX June 20XX.

The scheme commenced on:

XX July 20XX.

Relevant facts and circumstances

This private ruling is based on the facts and circumstances set out below. If your facts and circumstances are different from those set out below, this private ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You moved from Country B to Australia in 20XX.

You subsequently became an Australian resident for taxation purposes.

You do not have a spouse or any dependants.

Upon your arrival, you applied for a Medicare number which you received in 20XX.

You subsequently applied for private patient hospital cover.

For the 20XX financial year, your assessable income was over the threshold for the Medicare levy surcharge.

Your application for a Medicare Entitlement Statement was rejected by Services Australia.

Relevant legislative provisions

Income Tax Assessment Act 1936

Medicare Levy Act 1986

Reasons for decision

Medicare levy

The Medicare levy is imposed on the taxable incomes of persons residing in Australia, and on Australian residents, who are entitled to receive Medicare benefits. The Medicare levy is 2% of your taxable income.

The imposition and collection of the Medicare levy is governed by the Income Tax Assessment Act 1936 (ITAA 1936) and the Medicare Levy Act 1986 (MLA 1986).

Taxation Ruling IT 2615 Income tax: medicare levy - test for Australian residency - payable by Australians living overseas and by visitors to Australia discusses the operation of the Medicare levy and in particular the tests for residency for Medicare levy purposes and provides the following overview:

The Medicare levy is payable by persons who are residents of Australia and Australian residents are entitled to receive Medicare benefits in respect of professional services rendered in Australia, unless eligible for an exemption.

You may claim an exemption from the Medicare levy if any of the following apply to you:

•                     you were a blind pensioner

•                     you were entitled to full free medical treatment for all conditions under either

­                             Defence Force arrangements

­                             Veterans' Affairs Repatriation Health Card (Gold Card).

•                     You were a foreign resident for tax purposes for:

­                             The full year, you can claim a full exemption from the Medicare levy

­                             Only part of the year, you can still claim full exemption from the Medicare levy for that period if you didn't have any dependants for that period or all your dependants were in a Medicare levy exemption category for that period.

•                     You were not entitled to Medicare benefits because you either

­                             Have a Medicare Entitlement Statement showing you were not entitled to Medicare benefits because you were either a temporary resident for Medicare purposes and either did not have any dependants for that period or all your dependants, including your spouse, were also in a Medicare levy exemption category for that period

­                             Are a member of a diplomatic mission or consular post in Australia and meet other conditions.

Medicare levy surcharge (MLS)

You may have to pay the MLS if:

•                     You, your spouse, and your dependant children do not have an appropriate level of private patient hospital cover

•                     You earn above a certain income.

•                     You will not pay the MLS for the 2024 financial year if your income is less than the base income threshold, which is:

­                             $93,000 for singles

­                             $186,000 (plus $1500 for each dependant child after the first one) for families.

Private patient hospital cover is provided by registered health insurers for hospital treatment within the meaning of section 5A of the National Health Act 1953 (the NHA). For singles, an appropriate level of cover must have an excess of $750 or less. Couples or families must have an excess of $1500 or less. General cover, commonly known as 'extras' is not private patient hospital cover.

In the case of McCarthy v F C of T 2002 ATC 2004 (McCarthy), the applicant applied for an exemption to the Medicare levy. 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.

Application to your circumstances

Medicare Levy

For the period between when you become an Australian resident for tax purposes, to when you received your Medicare card, you were entitled to receive Medicare benefits. Although you did not obtain a Medicare number until some time after you became an Australian resident for tax purposes, there is no discretion available to the Commissioner to exempt you from paying the Medicare levy on this basis.

MLS

In accordance with the case of McCarthy, once a person's liability to the surcharge has been established by satisfying the criteria discussed above, the Commissioner has no discretion to waive or modify the criteria. Once a person's income has reached the MLS threshold the surcharge must be imposed in accordance with the legislation.

From the period between when you became an Australian resident for tax purposes, to when you were covered by an appropriate level of private patient hospital cover within the meaning of s 5A of the NHA, your income surpassed the MLS threshold and, as such, the surcharge applies.