Private ruling: Medicare Levy Surcharge - exemption
Date of advice: 1 August 2025
Published: 29 September 2025
Ruling period: Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Are you liable for the Medicare Levy Surcharge for the 20XX-20XX income year? | A1: Yes.

Relevant facts and circumstances: You were in a de facto relationship with your spouse throughout the 20XX-20XX income year. You resided in Australia for tax purposes during the 20XX-20XX income year. Your spouse also resided in Australia for tax purposes during the 20XX-20XX income year. You and your spouse lived together for the entire 20XX-20XX income year. You and your spouse do not have any children. Your spouse was an overseas student from Country B. On DD MM YYYY, your spouse entered Australia on a visa and remained on that visa until DD MM 20XX. When they applied for a partner visa. Between, DD MM YYYY and DD MM YYYY, your spouse held a Medicare Entitlement Statement confirming they were ineligible for Medicare benefits. During this time, they maintained continuous overseas health cover from DD MM YYYY to DD MM YYYY. On DD MM YYYY, Services Australia issued your spouse a Medicare eligibility letter and card. Between DD MM YYYY and DD MM YYYY (a period of XX days), your spouse did not hold private health insurance that met the Medicare Levy Surcharge requirements. This gap in coverage extended into the 20XX-20XX income year and lasted until DD MM YYYY. On DD MM YYYY, your spouse obtained Australian private hospital cover after becoming eligible for Medicare. You maintained private hospital cover that complied with Medicare Levy Surcharge requirements for the entire 20XX-20XX income year. Your combined taxable income with your spouse exceeded the Medicare Levy Surcharge threshold for the 20XX-20XX income year. You are not a prescribed person.

Relevant legislative provisions: A liability for the Medicare Levy Surcharge generally arises where a person, or any of their dependants, does not have the required private patient hospital cover and the person's taxable income exceeds the threshold amount. | Where the person is regarded as a member of a family, the 'family surcharge threshold' amount applies. This amount is calculated as a minimum amount of $XX for the 20XX-20XX income year and is increased by $XX for each dependent child after the first child. | Under sections 8B to 8D of the Medicare Levy Act 1986 (MLA 1986)a Medicare Levy Surchargewill be imposed on persons who meet the criteria set out in the MLA 1986, with reference to the relevant income threshold and the provision of private patient hospital cover under a valid health insurance fund. For a person with dependants who is not married during the whole or part of a financial year, the Medicare surcharge is imposed by Section 8C of the MLA which states: | (1) This section applies to a person during a period if during the whole of the period: | (a) the person is not a married person; and | (b) the person has one or more dependants; and | (c) 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 not covered by an insurance policy that provides private patient hospital cover; and | (d) 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)(c), 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 private patient hospital cover. Where a person satisfies all the above tests for the whole of the year of income and their combined family taxable income exceeds the relevant threshold, they will be liable for a surcharge in addition to the amount of Medicare Levy otherwise payable. | The meaning of 'dependent' for Medicare Levy purposes is contained in subsection 251R(3) of the ITAA 1936. A person is considered to be a dependent of a taxpayer if: | • The dependent is a resident of Australia at any time during the year of income; | • The taxpayer contributes to the maintenance of that person. | For surcharge purposes, a married or de facto couple who are living together are treated as a 'family'. Each spouse is considered to be a dependant of the other, even if they are each in receipt of income from different sources. | A family is not treated as two singles, even where there are no children present. Both spouses are treated as members of the same family. For this reason, the family surcharge thresholds apply rather than the single surcharge thresholds. | Based on the provisions of the MLA, your spouse is considered your dependant for surcharge purposes, and as such, your combined income and private health insurance status as a family will determine your liability for the Medicare Levy Surcharge. | Section 251U of ITAA 1936 defines prescribed persons as the following: | 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 | 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; or the person was, during the whole of that period, a recipient of: | - an age pension under Part 2.2 of the Social Security Act 1991; or | - a disability support pension under Part 2.3 of the Social Security Act 1991; | - where the rate of the pension was calculated under section 1065 of the Social Security Act 1991; or during the whole of that period the person was a non-resident; or | during the whole of that period the person was: | - the head of a diplomatic mission, or the head of a consular post, established in Australia; or | - a member of the staff of a diplomatic mission, or a member of the consular staff of a consular post, established in Australia; or | - a member of the family of a person referred to in subparagraph (i) or (ii), being a member who forms part of the household of that person; | - and was not an Australian citizen and was not ordinarily resident in Australia; or | the Health Minister has certified that, had any service, treatment or care to which Medicare benefits under the Health Insurance Act 1973 relate been rendered to the person or to another person during that period, the first-mentioned person would not have been entitled to Medicare benefits in respect of that service, treatment or care. In your case you are not considered a prescribed person under section 251U of ITAA 1936 for the 2023-2024 income year. However, your spouse: | • Was a resident of Australia for tax purposes throughout the entire 20XX-20XX income year. | • Held a Medicare Entitlement Statement from DD MM YYYY to DD MM YYYY, confirming ineligibility for Medicare benefits during that period. | • Maintained continuous overseas health Cover throughout the same period. | • Became eligible for Medicare on DD MM YYYY, but experienced a gap in private hospital cover from DD MM YYYY to DD MM YYYY. | Based on these circumstances, your spouse does not meet any of the criteria outlined in section 251U to be considered a prescribed person for the full income year. Specifically: | • they were not entitled to free medical treatment under any listed government schemes. | • they were not a non-resident. | • They were not receiving a qualifying pension or supplement. | Therefore, your spouse is not considered a prescribed person for the entire 20XX-20XX income year. However, they did meet the criteria to be considered a prescribed person for the period from DD MM YYYY to DD MM YYYY. | Conclusion | Based on your circumstances, the combined income of you and your spouse, who is considered your dependant, exceeded the family surcharge threshold of $X for the 20XX-20XX income year. Your total combined income of $XX places you within Tier X of the family income thresholds for that period. | Although you maintained compliant private hospital cover throughout the 20XX-20XX income year, your spouse did not hold appropriate hospital cover for a X-day period between DD MM YYYY and DD MM YYYY. As a result, the Medicare Levy Surcharge applies to you for that period. | The Commissioner has no discretion to waive or reduce your liability for the Medicare levy (or the Medicare Levy Surcharge) as there is no provision in the legislation to do so. Once the income of a taxpayer, who does not hold the appropriate health cover, reaches the Medicare Levy Surcharge threshold the surcharge must be imposed in accordance with the legislation. | Further information to consider | To determine Medicare Levy Surcharge liability, the number of liable days is calculated by subtracting the days covered by appropriate private hospital insurance and the days exempted via a Medicare Entitlement Statement from the total days in the income year, with the surcharge applied proportionally to any remaining uninsured and non-exempt days (See QC 16846 - Medicare levy calculator ).

Reasons for decision: Summary: Income Tax Assessment Act 1936 paragraph 251S(1)(a) Income Tax Assessment Act 1936 subsection 251U(1)(a) Income Tax Assessment Act 1936 subsection 251R(3) Income Tax Assessment Act 1936 section 251VA Medicare Levy Act 1986 section 3A Medicare Levy Act 1986 section 8B Medicare Levy Act 1986 section 8C Medicare Levy Act 1986 section 8D Medicare Levy Act 1986 section 8(1) Income Tax Assessment Act 1997 subsection 995(1)