Private ruling: Medicare Levy Surcharge
Published: September 2014
Ruling period: Income year ended 30 June 2011 | Income year ended 30 June 2012 | Income year ended 30 June 2013
Date scheme commenced: 28 April 2011

Ruling: Q1: Are you liable for the Medicare levy surcharge (MLS) if you suspend your private patient hospital cover for the period you are overseas? | A1: Yes

Relevant facts and circumstances: You travelled overseas to seek medical treatment for a family member. The medical treatment was not available in Australia. While you were overseas you cancelled your private health insurance.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 251S | Medicare Levy Act 1986 section 8D

Reasons for decision: Summary: Section 251S of the Income Tax Assessment Act 1936 (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 under section 8D of the MLA on a taxpayer's taxable income for the period they 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. In your circumstance you suspended your private health insurance while you were overseas. Even though you were overseas you will still be an Australian resident for tax purposes. Consequently you will be liable for the MLS for the periods during the income year you were without private health insurance and your combined family income exceeded the relevant threshold. You have stated that it is not fair for the Australian Government to tax you for the use of a Medicare service which you couldn't access and didn't provide the medical services needed for your son. While the Commissioner appreciates your circumstances he has no power or discretion in relation to the imposition of the MLS. In the case McCarthy v. FC of T 2002 ATC 2204, the Administrative Appeals Tribunal (AAT) held that the Commissioner has no power to remit the MLS imposed on a taxpayer. The taxpayer argued that the imposition of the surcharge was unfair as his income in the year in question had been inflated due to unusual circumstances. The AAT held that the Commissioner had no choice but to impose the levy. The clear wording of the MLA 1986 required the 1% surcharge to be imposed on anyone with a taxable income exceeding the relevant threshold and where they satisfied the other criteria laid down in the MLA 1986. There was no dispute that the taxpayer satisfied those criteria. Further, legislation did not include the discretion to waive or modify the surcharge in cases of hardship or other special circumstances, and therefore the surcharge was payable.