Private ruling: Medicare levy surcharge
Published: November 2011
Ruling period: Year ended 30 June 2009
Date scheme commenced: 1 July 2008

Ruling: Q1: Does the Commissioner have a discretion not to impose a Medicare levy surcharge? | A1: 

Relevant facts and circumstances: In the 20XX-XX financial year you re-married. You were unaware that your new spouse did not personally maintain private health cover. Your spouse prepared their own income tax return and your tax agents were unaware that your spouse did not have the appropriate level of private health insurance cover. You have always had, and still maintain, full private health insurance cover for yourself with Medibank Private.

Relevant legislative provisions: Medicare Levy Act 1986 Section 8D

Reasons for decision: Summary: Taxpayers without adequate private patient hospital cover through health insurance are liable to pay an additional 1% Medicare levy surcharge if their combined taxable income and reportable fringe benefits exceed the relevant threshold. For example for the 2008-09 financial year, a married person without private patient hospital cover will pay the Medicare levy surcharge if their own and their spouses combined taxable income and reportable fringe benefits exceed the family surcharge threshold of $140,000 (plus $1,500 for each dependent child after the first). The Medicare levy surcharge is imposed by sections 8B to 8G of the Medicare Levy Act 1986 (MLA 1986). Whether the Commissioner has any discretion in relation to the imposition of the Medicare levy surcharge was discussed in McCarthy v FC of T 2002 ATC 2204. The Administrative Appeals Tribunal (AAT) held that the Commissioner has no power to remit the Medicare levy surcharge imposed on a taxpayer. The taxpayer argued that the imposition of the surcharge was unfair. 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. As outlined above the legislation has no provision to remit the Medicare levy surcharge. Therefore you are liable for the Medicare levy surcharge as imposed on your 2008-2009 amended assessment.

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