Private ruling: Private health insurance tax offset
Published: November 2013
Ruling period: Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016 | Year ended 30 June 2017 | Year ended 30 June 2018
Date scheme commenced: 1 July 2012

Ruling: Q1: Are you entitled to reallocate your share of your private health insurance tax offset to your former spouse? | A1: No. | Q2: Can your former spouse's income be used to determine the relevant family private health insurance tier? | A2: No.


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 | Private Health Insurance Act 2007 Division 22 | A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 Section 7

Reasons for decision: Summary: Subsection 61-205(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines who is eligible to receive the 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. Reallocation of the private health insurance tax offset Section 61-215 of the ITAA 1997 allows a person to reallocate their private health insurance tax offset in certain circumstances. You can only choose to reallocate your tax offset entitlement if: § you are a PHIIB in respect of the premium or amount, and § on the last day of the income year, you are married (within the meaning of the A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999 ), and § the individual to whom you are married is also a PHIIB in respect of the premium or amount, and § the individual to whom you are married has not made a choice under this section in relation to the income year. 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 as you are not married to your former spouse, you are unable to reallocate your share of the private health insurance tax offset. Family tier threshold Division 22 of the PHIA describes the private health insurance tiers. The family private health insurance tiers apply 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. As you contribute to your dependent children in a substantial way, the family private health insurance tiers apply in your circumstances. As outlined in section 22-30 of the PHIA, it is the income for surcharge purposes of the person to whom you are married that is relevant for the family tier threshold purposes. Under section 7 of A New Tax System (Medicare Levy Surcharge - Fringe Benefits) Act 1999, a defacto couple is treated as if married. Where a taxpayer is a member of a couple, it is their combined income that is relevant. We acknowledge your specific circumstances, however, the legislation does not allow you to choose your former spouse's income to be used to determine your family income for the private health insurance tax offset purposes.

Relevant facts: You separated from your former spouse and later divorced. | Under the consent orders your former spouse is to continue maintaining private health insurance for you and your child until your child attains the age of 18 years. Your former spouse pays 100% of the premium. | To date your former spouse has honoured these orders and you remain covered for private health insurance. | The private health entity has issued you a statement showing your 50% share of the premiums paid and 50% share of the rebate. | Your child lives with you and you contribute substantially to their maintenance. | You are now in a defacto relationship and the combined income for you and your partner is in excess of the relevant threshold. | The combined income of you and your former spouse is below the relevant threshold.