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Loophole unlikely to close

Some years ago, in a previous incarnation, I was employed as an assessor in the Australian Taxation Office.

It amused me greatly that a ruling had been issued by the ATO at that time that was entitled Anomalies and Injustices.

The ruling highlighted what were termed unintended and sometimes anomalous consequences of some of the taxation legislation.

It would seem time to reissue this ruling in respect of the health insurance surcharge first applied last year.

For those who are unaware of it, the health insurance or Medicare surcharge applies when your individual income exceeds $50,000 or combined family income exceeds $100,000 and you are not covered by private health insurance.

The surcharge that applies is an additional 1 per cent of taxable in-come over the 1.5 per cent Medicare Levy that we all already pay.

The anomaly arises because where two single people come together and one is covered by a private health insurance policy for a single and the other is not, if their incomes exceed the threshold levels they will both be subject to the surcharge.

Under these circumstances, the partner who is covered will have paid Medicare levy at 1.5 per cent of their income, a Medicare surcharge at 1 per cent of their income and private health insurance premiums.

Peter MacDonald of the Australian Taxpayer’s Association indicated to me that he had raised this issue with the Assistant Treasurer only to be advised it wasn’t seen as a problem.

It does seem this is an unintended consequence that is quite profitable for government and as such they are not going to remedy it.

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