Private ruling: Medical expenses tax offset
Published: November 2013
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1 July 2011

Ruling: Q1: Are you entitled to a tax deduction for the costs of storing of cord blood and tissue? | A1: No. | Q2: Do the costs incurred to store cord blood and tissue qualify as medical expenses for the purposes of the medical expenses tax offset? | A2: No.

Relevant facts and circumstances: You decided to store cord blood and tissue. You have stored the cord blood and tissues in the knowledge that it can be used for treatment in the future. You have incurred storage expenses.

Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P | Income Tax Assessment Act 1997 Section 8-1

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. In your situation, you have incurred expenses to store cord blood and tissue for future use. These expenses have no direct connection to the gaining or producing assessable income and as such are considered to be expenses of a private nature. Accordingly you are not eligible for a deduction under section 8-1 of the ITAA 1997. | Detailed Reasoning - Medical expenses tax offset: A medical expenses tax offset is available to a taxpayer under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer incurs medical expenses for themselves or a dependant who is an Australian resident. The term 'medical expenses' is defined in section 159P(4) of the ITAA 1936. Paragraph (a) of the definition includes payments made to "a legally qualified medical practitioner… in respect to an illness or operation. Taxation Ruling IT 2359 contains the Commissioner's views as to the meaning of 'illness' or 'operation'. The terms are not defined in the income tax law and are to be given their ordinary meaning. The term 'illness' within the context of section 159P of the ITAA 1936 requires an existing condition that is a deviation from the normal healthy state (paragraph 5 of IT 2359). Paragraph 5 of IT 2359 also states that: ' In its ordinary meaning the term "operation" refers to an act performed by hand and/or instrument to some part of the body to remedy deformity, injury, disease, pain etc.' You made a payment for the storage of cord blood and tissues. The services provided are not in respect of an 'illness' as required by section 159P(4) of the ITAA 1936; nor is it an act in respect of remedying a deformity, disease, pain etc and therefore would not satisfy the requirement of paragraph 159P(4)(a) of the ITAA 1936. Accordingly the amount you paid is not paid to a medical practitioner or hospital in respect of an illness or operation. Therefore, the expenses you have paid for the storage of cord blood and tissues do not qualify as medical expenses for the purposes of the medical expenses tax offset under section 159P of the ITAA 1936.