Private ruling: Medicare levy surcharge
Date of advice: 8 August 2017
Published: November 2017
Ruling period: Year ended 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Can you be exempt from the Medicare Levy surcharge. | A1: No

Relevant facts and circumstances: You have dependant spouse and children. You and your dependants arrived in Australia in 2014 on an employer sponsored work visa. Your employer paid your medical expenses under the visa requirements. You are an Australian resident for tax purposes. You were granted permanent visa subclass 186 in 2015. Medicare backdated your Medicare entitlement to the date of your permanent visa application not the date visa granted. You hold a private health cover statement for the period from July 2015 to June 2016 for appropriate level of private patient hospital cover of 199 days. You don’t have appropriate private health cover for 166 days.

Relevant legislative provisions: Income Tax Assessment Act 1936 Part VIIB | Income Tax Assessment Act 1997 Section 251S | Medicare Levy Act 1986 | Medicare Levy Act 1986 Section 3A | Medicare Levy Act 1986 Sub section 3(5) | Medicare Levy Act 1986 Section 8 | Medicare Levy Act 1986 Section 8D

Reasons for decision: Summary: The imposition and collection of the Medicare levy is governed by Part VIIB of the Income Tax Assessment Act 1936 (ITAA 1936) and the Medicare Levy Act 1986 (MLA 1986). A fundamental objective of the legislation is to integrate collection of the levy with the collection of income tax. Section 251S of the ITAA 1936 provides that a Medicare levy is levied at the rate applicable in the Medicare Levy Act 1986 (MLA) on the taxable income of a person who is a resident of Australia. An increase in the Medicare levy (the Medicare levy surcharge) is imposed for the period the taxpayer or any of their dependants are not covered by an insurance policy that provides appropriate level of private patient hospital cover and their combined income exceeds the appropriate surcharge threshold. Income for Medicare levy surcharge purposes is the sum of: ● taxable income, ● reportable fringe benefits, ● total net investment losses, ● reportable super contributions, ● any amount on which family trust distribution tax has been paid, and ● exempt foreign employment income if your taxable income is $1 or more. An appropriate level of private patient hospital cover is cover provided by an insurance policy issued by a registered health insurer for some, or all hospital treatment provided in an Australian hospital or day hospital facility, and which does not have an annual excess of more than $500 (for a policy covering only one person), or $1,000 (for a policy covering more than one person). In your case, your private health insurance policy statement shows you had appropriate cover for 199 days. However for the remaining 166 days you did not have the appropriate health cover. Therefore you are liable for the Medicare levy surcharge for these 166 days. We acknowledge your specific circumstances, however, the Commissioner has no discretion to waive or modify the surcharge in cases of hardship or other special circumstances. | Detailed Reasoning - Additional information: The Medicare levy and Medicare levy surcharge are not forms of income tax. They are imposed under the Medicare Levy Act 1986 . The funds collected are used to fund the operation of the Medicare system. As the calculation of the amount of Medicare levy and Medicare levy surcharge payable is linked to a taxpayer’s taxable income, their collection is administered by the Commissioner of Taxation on behalf of the Commonwealth Government. The provisions of the income tax legislation that relate to the Medicare levy and Medicare levy surcharge do not impose the levies. Instead they set out how the levies collection is to be administered.