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ATO Interpretative Decision

ATO ID 2002/49 (Withdrawn)

Income Tax
Medicare Levy Surcharge - general health insurance cover taken whilst overseas

Attention This ATO ID is withdrawn. Guidance relating to the issue addressed in this ATO ID can be found in Private health insurance rebate eligibility (QC 49964).
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 1 September 2017.

CautionCAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.


Issue

Does the Commissioner have the discretion to exempt a taxpayer from the Medicare Levy Surcharge (surcharge), imposed under section 8B of the Medicare Levy Act 1986 (MLA 1986), if the taxpayer is overseas for part of the year and substitutes their normal health insurance cover with a policy obtained from a general insurance company providing unlimited hospital and medical cover?

Decision

No. The Commissioner does not have the discretion to exempt a taxpayer from the surcharge imposed under section 8B of the MLA 1986 if the taxpayer is overseas for part of the year and, having changed their health cover, does not have the appropriate private patient hospital cover during that period.

Facts

The taxpayer, who was single, suspended their private patient hospital cover while on 12 months leave overseas.

While overseas, the taxpayer entered into an insurance policy with a general insurance company, obtaining unlimited hospital and medical cover.

The general insurance company was not a 'registered organisation' under the National Health Act 1953 (the Health Act).

The taxpayer was not a 'prescribed person' as defined in section 251U of the Income Tax Assessment Act 1936 (ITAA 1936).

The taxpayer was overseas during parts of two consecutive years of income.

The taxpayer's taxable income for surcharge purposes exceeded the threshold in each of the years of income.

Reasons for Decision

An unmarried person with no dependants is liable to pay a surcharge of 1 per cent on their taxable income under section 8B of the MLA 1986 if: they are not a prescribed person as defined in section 251U of the ITAA 1936, they do not have an insurance policy providing 'private patient hospital cover' and their income for surcharge purposes exceeds the threshold.

A person will have 'private patient hospital cover' if their insurance policy is an 'applicable benefits arrangement' within the meaning of section 5A of the Health Act. Only 'registered organisations', as defined in the Health Act, can provide an 'applicable benefits arrangement'. The taxpayer suspended their private patient hospital cover while overseas and entered into an insurance policy with a general insurance company that is not a 'registered organisation' under the Health Act. Therefore, the taxpayer did not have the appropriate 'private patient hospital cover' as required under section 8B of the MLA 1986 while overseas.

Income for surcharge purposes, as defined in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997), means the sum of the taxpayer's: taxable income, reportable fringe benefits, reportable superannuation contributions and the total net investment loss for the income year. As the taxpayer's taxable income for surcharge purposes exceeded the threshold in each of the years of income, the surcharge will apply under paragraph 8B(2)(b) of the MLA 1986 for those days in each of the years of income that the taxpayer did not have the appropriate 'private patient hospital cover'. There is no provision in the MLA 1986 that provides the Commissioner with the discretion to exempt a taxpayer from the surcharge where the taxpayer has taken equivalent health insurance with a non-registered organisation.

Amendment History

Date of Amendment Part Comment
2 September 2014 Facts Minor amendments to clarity content
    Minor amendments to align with the ATO style and citation guides
    Remove references to the old threshold and refer to threshold generally
  Reason for Decision Remove reportable fringe benefits as it is no longer referred to in the legislation cited
    Remove references to the old threshold and refer to threshold generally
    Minor amendments to clarity content
    Correct reference to the MLA 1986 instead of the ITAA 1936
    Add paragraph to define income for surcharge purposes for clarification and as referred to in the legislation
  Legislative references Addition of Section 995-1 of the Income Tax Assessment Act 1997

Date of decision: 11 July 2001

Year of income:Year ended 30 June 2000

Legislative References:
Medicare Levy Act 1986
   section 8B
   paragraph 8B(2)(b)

National Health Act 1953
   section 5A

Income Tax Assessment Act 1936
   section 251U

Income Tax Assessment Act 1997
   section 995-1

Related ATO Interpretative Decisions
ATO ID 2002/50

Keywords
Medicare levy surcharge
Australians overseas

Siebel/TDMS Reference Number: DW237610; 1-5R7FRLU

Business Line: Small Business/Individual Taxpayers

Date of publication: 24 January 2002

ISSN: 1445-2782

ATO ID 2002/49 (Withdrawn) history   Top  
   Date   Version 
   11 July 2001   Original statement   
    2 September 2014   Updated statement   
 You are here ®   1 September 2017   Withdrawn   


 


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