Private ruling: Private health insurance tax offset
Published: July 2013
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you entitled to use the family tier thresholds for private health insurance tax offset purposes? | A1: Yes. | Q2: Are you entitled to claim the full private health insurance tax offset when your former spouse is insured under the policy? | A2: No.

Relevant facts and circumstances: You are divorced. You have dependent children. You have shared care for your children and contribute substantially to their maintenance. For many years you have had family health care with a complying health insurance policy. Your health cover includes you, your ex-spouse and your children.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 61-205 | Income Tax Assessment Act 1997 Section 61-210 | Income Tax Assessment Act 1997 Section 61-215

Reasons for decision: Summary: Subsection 61-205(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines who is eligible to receive this private health insurance tax offset. The subsection has been amended to restrict eligibility for the private health insurance tax offset to people who are private health insurance incentive beneficiaries (PHIIBs) of that policy for the 2012/13 and later income years. The definition of "PHIIB" has been inserted into the Private Health Insurance Act 2007 (PHIA) by Act No 26 of 2012. Each adult insured under the complying health insurance policy throughout the premium period is a PHIIB in respect of the premium or amount. For the 2012/13 or later income years, an individual is eligible for the tax offset if three conditions are satisfied. (a) you or another entity paid a premium or an amount in respect of a premium for a complying health insurance policy in respect of the period, (b) you are a private health insurance incentive beneficiary in respect of the premium, and (c) each person insured under the complying health insurance policy during the period must be an "eligible person" for the whole of the time that he or she is insured under the policy during that period. An eligible person means an Australian resident or an eligible overseas representative. Under section 61-210 of the ITAA 1997, the amount of the tax offset is your share of the private health insurance incentive benefit in respect of the premium or amount. That is, each PHIIB is eligible to receive a tax offset for their share of the private health insurance incentive benefit in respect of the insurance policy premium or amount. A person is not entitled to an offset for private health insurance premiums if: § a direct payment has already been made § the payment has already been reduced by way of premium reduction. Your share of the private health insurance incentive benefit is defined in the PHIA. Division 22 of the PHIA describes the private health insurance tiers. The family private health insurance tier applies to a person for a financial year if: (a) on the last day of the financial year, the person is married, or (b) on any day in the financial year, the person contributes in a substantial way to the maintenance of a dependent child who is the person's child. It is considered that you contribute to your dependent children in a substantial way. Therefore you are entitled to use the family private health insurance tiers. Please note it is the combined income of you and your former spouse that is used to determine which family tier and threshold is relevant. | Detailed Reasoning - Reallocation of the private health insurance tax offset: Section 61-215 of the ITAA 1997 allows people that are married (within the meaning of the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999) on the last day of the income year to claim the private health insurance tax offset on behalf of their partner. Where one partner makes a choice to claim the offset on behalf of the other partner, which may only be made in the person's tax return at year end, the offset entitlement of their partner will be reduced to nil. Under section 7 of the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999) a person is taken not to be married to another person if they are living separately and apart. Therefore you are unable to claim the whole private health insurance tax offset. You are only entitled to your share, or half, of any allowable private health insurance tax offset.