ATO Interpretative Decision

ATO ID 2011/21 (Withdrawn)

Income Tax

• This ATO ID is withdrawn. Guidance relating to the issue addressed in this ATO ID can be found in Private health insurance rebate eligibility (QC 49964).
  This document has changed over time. View its history.

Issue

Is the taxpayer liable for the Medicare levy surcharge under section 8B of the Medicare Levy Act 1986 (MLA) where they have private health insurance under an overseas visitors policy with an Australian health insurance company?

Decision

Yes. The taxpayer is liable for the Medicare levy surcharge under section 8B of the MLA where they have private health insurance under an overseas visitors policy with an Australian health insurance company as the taxpayer is not covered by a policy that provides private patient hospital cover in accordance with subsection 3(5) of the MLA.

Facts

The taxpayer is a resident of Australia for tax purposes.

The taxpayer is single and has no dependants.

The taxpayer's income for surcharge purposes, as defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997), exceeds the single surcharge threshold for the year of income.

The taxpayer has private health insurance in the form of an overseas visitors policy with an Australian health insurance company. The policy is not a complying health insurance policy within the meaning of section 63-10 of the Private Health Insurance Act 2007 (PHIA).

The taxpayer is not a 'prescribed person' as defined in section 251U of the Income Tax Assessment Act 1936 (ITAA 1936).

Reasons for Decision

Paragraph 251S(1)(a) of the ITAA 1936 provides that a Medicare levy is levied at the rate applicable in the MLA from the 1984 year of income onwards on the taxable income of a person who at any time during the year of income was a resident.

Section 8B of the MLA provides that the amount of Medicare levy payable by a taxpayer is increased where:

•

the taxpayer's income for surcharge purposes exceeds the single surcharge threshold for the year of income; and

the taxpayer:

•

is not a married person (or treated as if married under subsection 251R(2) of the ITAA 1936)

•

does not have dependents;

•

does not have private patient hospital cover; and

•

is not a prescribed person as defined in section 251U of the ITAA 1936.

This increase in the amount of Medicare levy payable is commonly known as the Medicare levy surcharge.

Subsection 3(5) of the MLA provides 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 PHIA) that covers hospital treatment (within the meaning of the PHIA) and, for a policy under which only one person is insured, any excess payable is not more than $500 in any 12 month period.

The taxpayer has private health insurance in the form of an overseas visitors policy with an Australian health insurance company but, as the policy is not a complying health insurance policy under the PHIA, the taxpayer is not covered by a policy that provides private patient cover within the meaning of subsection 3(5) of the MLA.

As the taxpayer is single with no dependents, is not a prescribed person and does not have the required private patient hospital cover, and as the taxpayer's income for surcharge purposes exceeds the single surcharge threshold for the year of income, the taxpayer is liable to pay the surcharge under section 8B of the MLA.

Year of income:  1 July 2010 to 30 June 2011

Legislative References:
Medicare Levy Act 1986
   section 8B
   subsection 3(5)

Keywords
Medicare levy surcharge

Business Line:  Small Business/Individual Taxpayers

Date of publication:  4 March 2011

ISSN: 1445-2782