Issue
Is a taxpayer liable for the Medicare levy surcharge under section 8B of the Medicare Levy Act 1986 (MLA 1986) when they are covered by private patient hospital cover under their parent's family membership?
Decision
No. A taxpayer is not liable for the Medicare levy surcharge under section 8B of the MLA 1986 as they are considered to be covered by full private patient hospital cover.
Facts
The taxpayer had a taxable income exceeding $50 000 in the income year. The taxpayer did not receive reportable fringe benefits.
The taxpayer is under 21 years of age and single. The taxpayer's parent's family health insurance covers persons up to 21 years of age who are living at home.
The taxpayer is insured for full private patient hospital cover under the family policy.
The taxpayer is not a 'prescribed person' as defined in section 251U of the Income Tax Assessment Act 1936 (ITAA 1936).
Reasons for Decision
Paragraph 251S(1)(a) of the ITAA 1936 provides that a Medicare levy is levied at the rate applicable in the MLA 1986 from the 1984 year of income onwards on the taxable income of a person who at any time during the year of income was a resident.
Section 8B of the MLA 1986 provides that the amount of Medicare levy payable by a taxpayer is increased by 1% of their taxable income and reportable fringe benefits where, for the whole of the year, they: • Exceed $50 000 in taxable income and reportable fringe benefits • Are not a married person • Do not have dependants • Do not have private patient hospital cover, and • Are not a prescribed person as defined in section 251U of the ITAA 1936.
This increase in the amount of Medicare levy payable is commonly known as the Medicare levy surcharge.
Paragraph 8B(1)(c) of the MLA 1986 simply requires that a person be covered by private patient hospital cover in order to avoid the Medicare levy surcharge. The provision does not require the taxpayer to personally pay the premiums in respect of private patient hospital cover. The fact that the taxpayer's parents paid the premiums is not relevant to the determination of whether the taxpayer has private patient hospital cover.
The health insurance policy taken out by the taxpayer's parents provides the taxpayer with private patient hospital cover. Accordingly, the taxpayer is not liable for the Medicare levy surcharge under section 8B of the MLA 1986. Note: the Medicare levy surcharge on a taxpayer's taxable income applies from the 1998 income year onwards and on reportable fringe benefits from the 2000 and later years of income.