Revenue Ruling HIL 001 Health Insurance Levy - Section 11A
Ruling number | HIL 001 |
Tax/benefit | Heath Insurance Levy |
Date issued | May 2024 |
Issued by | Scott Johnston |
| Chief Commissioner of State Revenue |
Effective from | May 2024 |
Effective to | - |
Status | Current |
Purpose
The purpose of the ruling is to clarify when section 11A of the Health Insurance Levies Act 1982 (“Act”) will apply.
Background
Under the Taxation Administration Act 1996 (“TAA”) , the Chief Commissioner of State Revenue (“CCSR”) has the power to administer and enforce taxation laws. The Act is included as a taxation law under section 4 of the TAA. Section 10 of the TAA states that a person liable to pay tax1 under a taxation law must fully and truly disclose to the CCSR all the facts and circumstances affecting the tax liability under the relevant taxation law.
Section 10 of the Act provides that an organisation2 which, on the first day in any month, carries on the business in New South Wales of providing health benefits to contributors must pay to the CCSR on or before the 15th day of each month, the monthly levy calculated in accordance with section 10A of the Act. Failure to pay the levy is a tax default and the organisation will be liable to pay interest and/or penalty as prescribed under Part 5 of the TAA.
Section 10A(1) of the Act provides the formula to calculate the amount of levy payable. The monthly levy is calculated in accordance with that formula:
L = (S+2F) x C x D x 1/7
where:
L is the monthly levy in dollars.
S is the number of single contributors at the beginning of the month.
F is the number of contributing families at the beginning of the month.
C is the prescribed rate in force during the month.
D is the number of days in the month.
Section 10A(3) of the Act clarifies that when determining the values of S and F in the formula, certain contributors are not to be counted. This include single contributors or members of a contributing family all of whom are permanently resident outside New South Wales or are members of one or more of the following classes of contributors:
(i) persons who contribute to an organisation for the purpose of securing entitlement only to benefits other than basic health benefits,
(ii) persons who hold one or more of the following cards issued to them by the Commonwealth:
- Concession Card
- Health Benefits Card
- Pensioner Health Benefits and Transport Concession Card
- Pharmaceutical Benefits Concession Card and Social Security Card
(iii) persons who are in receipt of a service pension under Part III of the Veterans’ Entitlements Act 1986 of the Commonwealth,
Contributor means a person who is a contributor to the health benefits fund conducted by an organisation in accordance with the rules of the organisation (including a person who, in accordance with those rules, for the time being remains a contributor even though in arrears with his or her contributions), and includes a person for whom or on whose behalf contributions are made.
Health benefits fund means a fund out of which an organisation makes payments to contributors for periods of accommodation and maintenance in hospitals, and for surgical, therapeutic or other medical or health treatment, service or procedure in hospitals.
Ruling
Assessment of monthly levy in certain circumstances
Under subsection 10A(1) of the Act, the calculation of the levy amount payable for a month is based on the number of single contributors and contributing families at the beginning of that month. This means that the monthly levy amount payable must be determined on the basis of the facts (i.e., the number of single contributors and contributing families) as they exist at the relevant time being the beginning of that month. The legislation considers that the number of contributors can change from time to time and that an organisation may not be able to “determine accurately the number of contributors for the purpose of calculating the amount of the levy” when the levy is due.
Section 11A3 of the Act provides that if an organisation is unable to determine accurately the number of contributors for the purpose of calculating the amount of levy, the organisation can make an estimate of its contributors.
As soon as the precise number of contributors become known, the organisation must:
a) inform the Chief Commissioner of the number of contributors,
b) assess the difference between the amount paid and the amount of the monthly levy, and
c) pay any additional amount required or apply for a refund if the amount paid exceeds the actual monthly levy.
This section replaced the provisions of the former section 12 of the Act that only required an organisation to make what it considered a reasonable determination of its liability.
It is clear that section 11A of the Act is intended to ensure that a payment is still required in a month where an organisation has some uncertainty as to the number of contributors and that the organisation is required to take steps to determine the correct liability and pay any shortfall or seek a refund for any overpayment.
The CCSR has become aware of organisations using section 11A to make an estimate of the number of exempt contributors.
While section 11A may be used to estimate a monthly liability until accurate contributor numbers are known, it does not enable an organisation to estimate the number of exempt contributors on an ongoing basis.
Organisations must take steps to determine their correct liability and notify Revenue NSW of the correct liability when it is determined. If an organisation is unable to determine the actual number of contributors by the time the following return is due, they must notify Revenue NSW.
The organisation must provide the correct liability within 6 months of the first estimate assessment to avoid penalty tax.
If an organisation cannot determine the actual number within the time provided, they cannot claim the concession card exemption.
Record keeping
Organisations are also reminded of their obligations under Part 8 of the TAA in relation to their record keeping requirements. Sufficient records must be kept that show where any additional liability that was identified was paid.
Organisations will also need to keep records that identify the type and expiry date of any concession cards.
Interest & Penalty
Interest and penalty tax under Part 5 of the TAA may apply where an organisation fails to pay the correct amount of health insurance levy when it falls due.
If an organisation is a significant global entity within the meaning of the Income Tax Assessment Act 1997 (Cth), the penalty tax for a tax default increases from 25% to 50%.
Audits
Revenue NSW conducts audits on organisations as part of its ongoing compliance program to ensure that state tax obligations are being met.
Should an organisation believe that they may have not complied with the requirements of the Act or the record keeping requirement of the TAA, they are encouraged to contact Revenue NSW to discuss their circumstances.
1. Tax is defined in the TAA as tax, duty, contribution or levy.
2. Means a society, body or group of persons, whether corporate or unincorporate which conducts a health benefits fund.
3. Inserted by the State Revenue Legislation (Amendment) Act 1984.