Private ruling: Medical expenses tax offset
Published: November 2014
Ruling period: Year ended 30 June 2014
Date scheme commenced: 1 July 2013

Ruling: Q1: Do expenses paid in relation to In-vitro fertilisation (IVF) treatment under a surrogacy program qualify for inclusion in the calculation of the medical expenses tax offset? | A1: No.

Relevant facts and circumstances: Due to your previous medical history you and your spouse have been advised by a legally qualified medical practitioner that your only option to have a child was through a gestational surrogate. You and your spouse have commissioned the services a surrogate. You have out-of-pocket expenses in relation to the surrogate's IVF procedures which include payments made to an IVF clinic and anaesthetist for in-hospital services.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P | Income Tax Assessment Act 1936 Subsection 159(1) | Income Tax Assessment Act 1936 Subsection 159P(4)

Reasons for decision: Summary: A medical expenses tax offset is available under subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer pays eligible medical expenses in an income year for themselves or a dependant who is an Australian resident. The medical expenses tax offset is only available if the amount of medical expenses, after being reduced by any entitlement to reimbursement from a health fund or government authority such as Medicare, exceeds the threshold amount. Paragraph (a) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936 includes payments made to a legally qualified medical practitioner in respect of an illness or operation. Taxation Ruling IT 2359 Income tax: medical expenses - in vitro fertilization accepts that IVF procedures are procedures in respect of the illness of infertility, and that payments to a legally qualified medical practitioner or a hospital for treatment under an IVF program qualify as medical expenses under subsection 159P(4) of the ITAA 1936. However, subsection 159P(1) of the ITAA 1936 provides that the medical expenses must be paid in respect of the taxpayer, or a dependant of the taxpayer, to qualify for the medical expenses tax offset. A 'dependant' is defined in subsection 159P(4) of the ITAA 1936 as: • the spouse of the taxpayer; or • a child of the taxpayer who is under 21 years of age; or • a person for whom the taxpayer is entitled to a dependants rebate, or a child or student in respect of whom the taxpayer qualifies for a notional dependants rebate. As the surrogate is not considered to be a dependant, the medical expenses have not been paid in respect of a dependant as defined in subsection 159P(4) of the ITAA 1936. Therefore, you cannot include any of the costs paid in relation to the surrogate's IVF treatment as part of the calculation for the medical expenses tax offset