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ATO Interpretative Decision

ATO ID 2006/27 (Withdrawn)

Income Tax
Medicare Levy Surcharge: foster child not covered by an insurance policy that provides private patient hospital cover

Attention This ATO ID is withdrawn. Guidance relating to the issue addressed in this ATO ID can be found in Family and dependants for Medicare levy surcharge purposes (QC 27044).
Attention This document has changed over time. View its history.
FOI status: may be released
Status of this decision: Decision withdrawn 12 January 2018.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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

Is the taxpayer liable for the Medicare levy surcharge under section 8D of the Medicare Levy Act 1986 (MLA) if the taxpayer's foster child is not covered by an insurance policy that provides private patient hospital cover?

Decision

No. The taxpayer is not liable for the Medicare levy surcharge under section 8D of the MLA if the taxpayer's foster child is not covered by an insurance policy that provides private patient hospital cover, because the foster child is not a dependant of the taxpayer.

Facts

The taxpayer and their spouse are covered by an insurance policy that provides private patient hospital cover.

The taxpayer has a foster child who is not covered by the insurance policy.

The combined taxable income of the taxpayer and their spouse exceeds the family surcharge threshold. They do not receive any reportable fringe benefits.

The taxpayer's taxable income exceeds the individual low income Medicare levy threshold.

Neither the taxpayer nor the taxpayer's foster child are prescribed persons as defined under subsection 251U(1) of the Income Tax Assessment Act 1936 (ITAA 1936).

The foster child is 12 years of age.

Reasons for Decision

Paragraph 251S(1)(a) of the ITAA 1936 provides that the Medicare levy is levied at the rate applicable under the MLA on the taxable income of a person who at any time during the year of income was a resident.

Section 8D of the MLA provides that the amount of the Medicare levy payable by a taxpayer is increased by 1% of their taxable income where, for the whole of the period:

·
 they are a married person
·
 the family income (total taxable income and reportable fringe benefits of the taxpayer and their spouse) exceeds the family surcharge threshold
·
 they, or at least one of their dependants who is not a prescribed person, are not covered by an insurance policy that provides private patient hospital cover
·
 they are not, or are taken under section 251VA of the ITAA 1936 not to be, a prescribed person, and
·
 the taxpayer's taxable income and reportable fringe benefits exceeds the Medicare levy individual low income threshold.

This increase in the amount of Medicare levy payable is commonly known as the Medicare levy surcharge.

A dependant for the purposes of the MLA is determined by sections 251R and 251V of the ITAA 1936 (see Note 2 subsection 8D(1) of the MLA).

The interaction of sections 251R and 251V of the ITAA 1936 relevantly provides that a child of the taxpayer less than 21 years of age, which the taxpayer contributes to the maintenance of, is a dependant of the taxpayer for the purposes of the MLA. Under subsection 251R(6) of the ITAA 1936, a person who resides with another person is presumed to contribute to the maintenance of that other person.

Subsection 6(1) of the ITAA 1936 defines a child by reference to subsection 995-1(1) of the Income Tax Assessment Act 1997 , in relation to a person, as including '... an adopted child, a step-child or an ex-nuptial child of that person; a child of the individual's *spouse; someone who is a child of the individual within the meaning of the Family Law Act 1975 '.

The meaning of the term child in its ordinary sense at common law is discussed in Words And Phrases - legally defined , (1988), Volume 1, 3rd Edition, Saunders JB, Butterworths, London. At page 254 it states that:

   The general rule has been that in the absence of a contrary intention, express or implied, and unless it is more consonant with the object of the statute to include illegitimate children, all statutory provisions in respect of children refer exclusively to legitimate children. However, this rule has been altered extensively by statute ....

The foster child in the present circumstances is not a child of the taxpayer as the word is used in its ordinary sense in that they are not the legitimate child of the taxpayer. Nor is the foster child a child of the taxpayer under the extended definition in subsection 6(1) of the ITAA 1936. Accordingly, the foster child is not a dependant of the taxpayer for the purposes of the MLA.

The taxpayer and their spouse are covered by an insurance policy that provides private patient hospital cover. As the taxpayer's foster child is not a dependant for the purposes of the MLA, the taxpayer does not have a dependant that is not covered by the relevant insurance policy. Accordingly, the taxpayer is not liable for the Medicare levy surcharge under section 8D of the MLA.

Date of decision: 12 January 2006

Year of income:Year ended 30 June 2006

Legislative References:
Income Tax Assessment Act 1936
   subsection 6(1)
   section 251R
   subsection 251R(6)
   paragraph 251S(1)(a)
   subsection 251U(1)
   section 251V
   section 251VA

Income Tax Assessment Act 1997
   Subsection 995-1(1)

Medicare Levy Act 1986
   section 8D
   subsection 8D(1)

Other References
Words And Phrases - legally defined, (1988), Volume 1, 3rd Edition, Saunders JB, Butterworths, London,

Keywords
Medicare levy
Medicare levy surcharge

Siebel/TDMS Reference Number: 4927925; 1-B0VAB51

Business Line: Small Business/Individual Taxpayers

Date of publication: 3 February 2006

ISSN: 1445-2782

ATO ID 06/27W history   Top  
   Date   Version 
   12 January 2006   Original statement   
 You are here ®  12 January 2018   Withdrawn   


 


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