Private ruling: Medicare levy surcharge
Published: November 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Are you liable to pay the Medicare Levy surcharge (MLS) for the year ended 30 June 2014? | A1: Yes.

Relevant facts and circumstances: You are an Australian resident for tax purposes. You and your dependant do not fall within one of the Medicare levy exemption categories. You hold a private health insurance policy which covers two adult members. The annual $1,000 excess is payable once per person per calendar year. The number of days the policy provided an appropriate level of private hospital is nil. You and your spouse's combined income for MLS purposes exceeded the base income threshold and fell within tier 1. Your income for MLS purposes exceeded $20,542 and the MLS rate applied to your income was 1 per cent.

Relevant legislative provisions: Income Tax Assessment Act 1936 Part VIIB | Income Tax Assessment Act 1997 Section 251S | Medicare Levy Act 1986 | Medicare Levy Act 1986 Section 3A | Medicare Levy Act 1986 Sub section 3(5) | Medicare Levy Act 1986 Section 8 | Medicare Levy Act 1986 Section 8D

Reasons for decision: Summary: The imposition and collection of the Medicare levy is governed by Part VIIB of the Income Tax Assessment Act 1936 (ITAA 1936) and the Medicare Levy Act 1986 (MLA 1986). A fundamental objective of the legislation is to integrate collection of the levy with the collection of income tax. Section 251S of the ITAA 1936 provides that a Medicare levy is levied at the rate applicable in the Medicare Levy Act 1986 (MLA) on the taxable income of a person who is a resident of Australia. An increase in the Medicare levy (the Medicare levy surcharge) is imposed on a taxpayer's: • taxable income by section 8B to 8G of the MLA, and • reportable fringe benefits by the A New Tax System (Medicare Levy Surcharge Fringe Benefits) Act 1999 , and • any amount on which family trust distribution tax has been paid for the period the taxpayer or any of their dependants are not covered by an insurance policy that provides appropriate level of private patient hospital cover and their combined income exceeds the appropriate surcharge threshold. Income for Medicare levy surcharge purposes is the sum of: • taxable income, • reportable fringe benefits, • total net investment losses, • reportable super contributions, • any amount on which family trust distribution tax has been paid, and • exempt foreign employment income if your taxable income is $1 or more. An appropriate level of private patient hospital cover is cover provided by an insurance policy issued by a registered health insurer for some or all hospital treatment provided in an Australian hospital or day hospital facility and which does not have an annual excess of more than: • $500 (for a policy covering only one person), or • $1,000 (for a policy covering more than one person). In your case, you hold a private health insurance policy that has an annual excess of more than $1,000 as your policy covers two adult members with the $1,000 excess payable once per person per calendar year. As your private health insurance policy's excess is more than $1,000 and you and your spouse's combined income for MLS purposes, was above the base tier threshold, you are liable for the Medicare levy surcharge as imposed We acknowledge your specific circumstances, however, the Commissioner has no discretion to waive or reduce your liability for the MLS as there is no provision in the legislation to do so. Once the income of a taxpayer, who does not hold the appropriate health cover, reaches the Medicare levy surcharge threshold the surcharge must be imposed in accordance with the legislation.