Private ruling: Medicare levy surcharge
Date of advice: 13 April 2016
Published: June 2016
Ruling period: Year ended 30 June 2015
Date scheme commenced: 1 July 2014

Ruling: Q1: Are you liable for the Medicare levy surcharge (MLS) where you are covered by an overseas health insurance policy? | A1: Yes

Relevant facts and circumstances: You are covered under a private health insurance policy. The policy covers the taxpayer, spouse and dependent children. The private health insurance policy is issued by an overseas health insurance fund.

Relevant legislative provisions: Medicare Levy Act 1986 Section 8D | Medicare Levy Act 1986 Subsection 3(5)

Reasons for decision: Detailed Reasoning - Question 1: Are you liable for the Medicare levy surcharge (MLS) where you are covered by an overseas health insurance policy? Summary The MLS is imposed by the Medicare Levy Act 1986 (MLA). Section 8D of the MLA provides that a taxpayer will be liable to pay the MLS for any part of an income year where: • during the whole of the year the taxpayer is married; • the taxpayer, their spouse and all of their dependents are not covered by a health insurance policy that provides private patient hospital cover; and • the taxpayer and their spouse's combined income for MLS purposes for the year exceeds $180,001. The rate of MLS imposed depends upon your combined income as follows: $180,001 - $210,000 1% $210,001 - $280,000 1.25% $280,001 and above 1.5% Subsection 3(5) of the MLA states the following: For the purposes of this Act, a person is covered by an insurance policy that provides private patient hospital cover if: (a) the policy is a complying health insurance policy (within the meaning of the Private Health Insurance Act 2007) that covers hospital treatment (within the meaning of that Act); and (b) any excess payable in respect of benefits under the policy is no more than: (i) $500 in any 12 month period, in relation to a policy under which only one person is insured; and (ii) $1,000 in any 12 month period, in relation to any other policy. Your situation is similar to that of the taxpayer in Adam Fraser v. Commissioner of Taxation AATA 738. In that case Mr Fraser was a member of BUPA International. The Private Health Insurance Administration Council confirmed in this case that BUPA International is not on the Register of Health Benefit Organisations. The Private Health Insurance Administration Council administers the Private Health Insurance Act 2007 and maintains on its website ( www.phiac.gov.au) an up to date record of all private health insurers providing complying policies. As the overseas provider is not on the Register of Health Benefit Organisations, it cannot issue complying health insurance policies. As you are not covered by a complying health insurance policy, when you and your spouse's combined income for MLS purposes is greater than the threshold, you will be liable for the MLS. In the case of McCarthy v F C of T 2002 ATC 2004 , the applicant applied for an exemption from the Medicare levy being imposed. It was determined that the Commissioner had no discretion to not impose the Medicare levy (or the Medicare levy surcharge) as there was no provision in the legislation to do so. Once a taxpayer's income has reached the Medicare levy surcharge threshold the surcharge must be imposed in accordance with the legislation.