As an Australian expatriate having the right health cover and advice is essential as incorrect advice can proof costly.
This post is prompted by a number of questions raised during the last couple of weeks, from Australian expatriates, with most questions relating to the following three:
- The Medicare Levy surcharge(MLS)( It's tax time) and
- Why doesn't my international health cover qualify to exempt me from the (MLS)
- Why can’t global expatriate health policies cover my routine medical expenses in Australia and exempt me from the (MLS)?
These are very good questions and I’ll endeavor to explain these questions over several articles, to avoid making it too long and boring, starting with the Medicare Levy Surcharge (MLS) which is a very onerous tax easily avoided.
The Australian health system, Medicare, is simple and at the same time very complex and confusing with lots of twist and turns for expatriates on international assignment. Whilst the system works very well for Australian citizens residing in Australia, even though not appreciated, it causes sticky and regulatory problems for many expatriates on international assignments.
In fact very few people in Australia know how National Health Act & Health Insurance Act legislation affects Australian expatriates. We, at HICA, have made it our business to be experts in health insurance legislation and how this legislation impacts Australian expatriates on international assignments.
Medicare, our public health system in Australia, works very different to public health systems in any other country and is very strictly regulated.
The following is a summary of the National Health Act and National Health Insurance Act legislation that can cause expatriates lots of grief that is easily avoided by obtaining correct advice.
AUSTRLIA'S NATIONAL PUBLIC HEALT SYSTEM , "MEDICARE".
All Australian expatriates, eligible for Medicare, are affected by measures, introduced through Commonwealth Government legislation, designed to encourage Private Health Fund membership in Australia.
This legislation doesn’t stop at the border, and it affects all Australian expatriates on international assignments.
Government Incentives relating to Private Health Insurance.
In July 2000 three main Federal Government legislative initiatives were introduced aimed to promote individual participation in private health insurance.
- The Private Health Insurance Rebate
- The Medicare Levy Surcharge (MLS)
- Lifetime Health Cover premium loading (LHC)
(All of the above can affect expatriates but we'll concentrate on the (MLS)and it's eligibility.
The statutory position regarding Medicare eligibility
A Ministerial Order was issued in October 1993 under subsection 6(1) of the National Health Act 1953 and received Royal ascent 31 December 1993. This order has renewed, unaltered, effective 31 December 1998, 2003, 2008, 2013 and renewed to expire in its present form, 31 December 2018
The order in part states:
“Expatriate Australian citizens who have resided outside the country for a period of no longer than five (5) years from the date of last departure*, still retain their entitlement to Medicare and as such, must be a member of a registered health benefits organisation, (RHBO) in Australia, to receive any form of private health cover when re-entering Australia”.
Please note “date of last departure”. This means the next departure date after a permanent return, not a departure after a temporary return.
MEDICARE & CONNECTIVITY TO AUSTRALIA
Medicare is the sole provider of all medical benefits in Australia( there is no exception) and provides access to GP’s specialist etc. and free public hospital treatment as legislated in the Health Insurance Act 1973 .
The following are the sections of the Act that will affect you as an expatriate:
- S126 Prohibition of insurance for medical expenses in respect of the rendering in Australia of a professional service for which a Medicare benefit is payable.
- S10 Medicare benefit is payable in respect of a professional service rendered in Australia to an “eligible person”
- S3 Australian Residents (The definition under this section is very broad)
- S6 (1) Individuals or classes of persons can be declared by order of the Minister to be eligible persons (e.g. refugees)
- S6 (2) Individuals or classes of persons who would otherwise be an eligible person, can be declared by order of the Minister NOT to be eligible person
- S7 Visitors from countries which have Reciprocal Health Care Agreements (RHCA) with Australia are, subject to the reciprocal agreement, eligible persons.
Medicare Levy Surcharge (MLS)
Under Australian taxation law, anyone who holds a Medicare Card (or, who is entitled to hold a Medicare Card) and does not have “appropriate “* Private Health Insurance is liable to pay a 1% to 1.5% Medicare Levy Surcharge (MLS). The (MLS) is levied by the Australian Taxation Office (ATO) after assessment of an individual’s tax return at the end of each financial year and is calculated on income from all sources, including exempt income earned overseas, not only taxable income in Australia.
This levy applies to singles, couples and families with an income over nominated thresholds, including expatriates on international assignments, who are classed as an Australian resident for tax purposes.
Important - You will need to obtain the correct advice from your accountant as to your resident status for tax purposes as the tax impost can be very costly. Each situation is on a case by case basis.
*What is “Appropriate” Insurance?
“Appropriate “insurance is private patient hospital cover issued by an Australian registered health fund to Australian citizens and Permanent residents.
Appropriate or Private patient hospital cover does not include:
- Travel insurance. (Business or leisure)
- Cover provided by an overseas or unregistered fund (expatriate health insurance , Global or international health insurance or Overseas visitors policies), or
- Ancillary cover (commonly known as Extras)
HOW CAN YOU AVOID THE (MLS)
You have several options :
Your options depend on your tax residency status. If you are classed as a non tax resident then the above is not an issue, but if you have doubts then;
a) If you currently have private patient hospital cover and you are considering cancelling or suspending your cover while you are overseas, there may be Medicare Levy Surcharge implications if your income exceeds the relevant Medicare Levy Surcharge thresholds and you have to log a tax return in Australia. You may need to maintain your membership but reduce cover to a very basic hospital table to save on premium.
b) Suspension of health cover
If you have you suspended your membership of an Australian health fund you are no longer classed as a financial member and you are not exempt from (MLS) liabilities if they apply to your situation.
Suspension of membership is not indefinite and there is a lifetime period.
How can we help you?
If you have cancelled or suspended your health cover but do not have tax exempt status then we can assist with a solution backdated to the start of the 2015/16 tax year.
This will provide you with a "Private Health Insurance" statement to accompany your tax return. However you need to contact us now. June 30 is approaching fast.
As I mentioned at the beginning, the Australian health system is simple and at the same time very complex and confusing and you need to know the rules that affect you as an expatriate and how it can cost you unnecessary money.
I know its a boring subject but I hope you found the above information useful.
If you think you have a problem drop me an email. email@example.com