Issue
Is the taxpayer liable to pay the Medicare levy surcharge under section 8D of the Medicare Levy Act 1986 (MLA 1986) when they have received a determination from the Commonwealth Health Industry and Investment Division deeming the taxpayer and family to have hospital cover on 1 July 2000?
Decision
Yes. The taxpayer is liable to pay the Medicare levy surcharge under section 8D of the Medicare Levy Act 1986 (MLA 1986) when they have received a determination from the Commonwealth Health Industry and Investment Division deeming the taxpayer and family to have hospital cover on 1 July 2000 as the determination only applies to the entry age provisions.
Facts
The taxpayer is married with no dependant children.
The taxpayer did not have private patient hospital cover during the income year.
The Commonwealth Health Industry and Investment Division made a determination under Clause 10 of Schedule 2 to the National Health Act 1953 (NHA 1953) that deemed the taxpayer to have an entry age of 30 for private health insurance policies, ensuring the taxpayer has access to the lower rate of premiums.
The taxpayer's family income will exceed $100 000. No reportable fringe benefits were received.
The taxpayer is not a prescribed person as defined by section 251U of the ITAA 1936.
Reasons for Decision
Paragraph 251S(1)(a) of the Income Tax Assessment Act 1936 (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 was a resident.
Section 8D 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 period: • They are a married person • The family income (total taxable income and reportable fringe benefits) exceeds the family surcharge threshold • They, or at least one of their dependants, are not covered by an insurance policy that provides private patient hospital cover, and • They 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.
Subsection 3(5) of the MLA 1986 provides that a person is covered by an insurance policy that provides private patient hospital cover if the policy is an 'applicable benefits arrangement' within the meaning of section 5A of the NHA 1953.
Subsection 5A(1) of the NHA 1953 provides that an 'applicable benefits arrangement' is one that a registered organisation has entered into with contributors to the health benefits fund conducted by that fund, and under which the contributors are covered (wholly or partly) for liability to pay fees and charges in respect of various medical services and treatments.
Section 73BAAA of the NHA 1953 requires registered health insurance funds to apply the rules relating to Lifetime Health Cover, as contained in Schedule 2 to the NHA 1953.
Schedule 2 is specifically concerned with the rate of premium applicable to a particular person in their particular circumstances. Subclause 10(1) of Schedule 2 to the NHA 1953 provides that a person may be treated as having hospital cover from 1 July 2000 for the purposes of Lifetime Health Cover where they meet certain criteria.
The determination made by the Commonwealth Health Industry and Investment Division is only applicable to the rate of premium increase that applies to the taxpayer for the purposes of Lifetime Health Cover only. The determination is not an 'applicable benefits arrangement' for the purposes of section 5A of the NHA 1953.
The taxpayer is a married person whose family income exceeded the family threshold. The taxpayer did not have private patient hospital and was not a prescribed person for the purposes of section 251U of the ITAA 1936.
The taxpayer is liable to pay the Medicare levy surcharge under section 8D of the MLA 1986 as they are not covered by private patient hospital cover.