Medicare Levy Surcharge - liability whilst overseas

Is an Australian resident taxpayer liable to pay the Medicare Levy Surcharge (surcharge) imposed under section 8B of the Medicare Levy Act 1986 (MLA 1986) without reduction, where the taxpayer has been overseas for part of the year of income?

Yes. The taxpayer is liable to pay the surcharge as they were a resident for at least some time during (if not all) the year of income.

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

While overseas, the taxpayer did not have appropriate private patient hospital cover.

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 2 consecutive years of income.

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. The surcharge is also incorporated in the MLA 1986.

An unmarried person with no dependants is liable to pay a surcharge of 1 per cent on their taxable income and reportable fringe benefits 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 taxable income is greater than $50 000.

The taxpayer was an Australian resident, although not residing in Australia, during parts of the years of income that the taxpayer was overseas. As the taxpayer's taxable income exceeded $50 000 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. Note: even if the taxpayer had been an Australian resident for income tax purposes for only part of the year of income, the surcharge would still apply as paragraph 251S(1)(a) of the ITAA 1936 only requires residency at any time during the year of income.