Private ruling: Medicare levy surcharge
Date of advice: 18 September 2015
Published: September 2015
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you liable for the Medicare levy surcharge? | A1: Yes

Relevant facts and circumstances: You are a member of the Australian Defence Force and are therefore entitled to full free medical treatment. You have a spouse who is liable for the Medicare levy. Neither of you are covered by an appropriate private health insurance policy. Your family income is above the threshold for Medicare levy surcharge purposes.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 251S | Income Tax Assessment Act 1936 Section 251R | Income Tax Assessment Act 1936 Section 251U | Income Tax Assessment Act 1936 Section 251V | Medicare Levy Act 1986 Section 8D

Reasons for decision: Summary: Paragraph 251S(1)(a) 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 1986) on the taxable income of a person who at any time during the year was a resident. Section 8D of the MLA 1986 provides the amount of Medicare levy payable by a taxpayer is increased by 1% of their taxable income and reportable fringe benefits where, for the whole of the period: • they are a married person • the family income (total taxable income and reportable fringe benefits) exceeds the family surcharge threshold • they, or at least one of their dependants, are not covered by an insurance policy that provides private patient hospital cover, and • they are not a prescribed person as defined in section 251U of the ITAA 1936. This increase in the amount of Medicare levy payable is commonly known as the Medicare levy surcharge. | Detailed Reasoning - Dependants: A dependant of a taxpayer is defined in subsection 251R(3) of the ITAA 1936 to include a person who was a resident Australian spouse of the taxpayer and the taxpayer contributed to their maintenance. A person who resides with another person is presumed to contribute to the maintenance of that other person (subsection 251R(6) of the ITAA 1936). Where a person is a dependant of a taxpayer and is liable to the Medicare levy on their taxable income in the year of income, subsection 251R(6B) of the ITAA 1936 provides that the person will be deemed not to be a dependant of the taxpayer. However, for the purposes of the Medicare levy surcharge, section 251V of the ITAA 1936 provides that subsection 251R(6B) of the ITAA 1936 does not apply. Therefore a resident Australian spouse is considered to be a dependant of the taxpayer for Medicare levy surcharge purposes, even if they are themselves liable for the Medicare levy. | Detailed Reasoning - Prescribed persons: A 'prescribed person' is defined in paragraph 251U(1)(a) of the ITAA 1936 to include a person who was a member of the Defence Force and was entitled to free medical treatment, or a relative of a member of the Defence Force who was entitled to free medical treatment. However, a person will not be a 'prescribed person' if any of their dependants are not prescribed persons (subsection 251U(2) of the ITAA 1936). Your spouse is considered to be your dependant for the purposes of the Medicare levy surcharge. Your spouse is not a 'prescribed person' as defined by subsection 251U(1) of the ITAA 1936. Therefore you will not be considered a 'prescribed person' as defined in paragraph 251U(1)(a) of the ITAA 1936 for the purposes of determining the Medicare levy surcharge. In your case, you have a dependent, your spouse, who is not covered by an appropriate private patient hospital policy. You are not considered to be a 'prescribed person' for the purposes of the Medicare levy surcharge as you have dependants who are not also a 'prescribed person'. You are therefore liable for the Medicare levy surcharge.