Private ruling: medical expenses
Published: July 2014
Ruling period: Year ended 30 June 2013
Date scheme commenced: 1 July 2012

Ruling: Q1: Are expenses in relation to in-vitro fertilisation (IVF) procedures for you and your spouse eligible medical expenses for the purposes of the medical expenses tax offset? | A1: Yes. | Q2: Can expenses in relation to IVF and other procedures and medication for the surrogate mother be included in the calculation of the medical expenses tax offset? | A2: No. | Q3: Are the expenses for the ultrasound, medication, vaccination, surgery and emergency costs and semen freezing eligible medical expenses for the purposes of the medical expenses tax offset? | A3: Yes.


Relevant legislative provisions: Income Tax Assessment Act 1936 Section 159P

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 you pay medical expenses in an income year for yourself or a dependant who is an Australian resident, to the extent that you are not reimbursed, or are eligible to be reimbursed, from a government or public authority or a society, association or fund. However, it is not necessary that the payments be made to a resident or that they be paid in Australia. Therefore, medical expenses incurred overseas may qualify as a medical expense. The amount of net medical expenses tax offset you can claim depends on your level of income. The medical expense tax offset is only available if the amount of medical expenses (reduced by any entitlement to reimbursement from a health fund or government authority) exceeds $2,120 if you are a couple or family and your combined adjustable taxable income is $168,000 or below. The medical expenses tax offset is 20% of the amount by which the net medical expenses exceeds $2,120. Where a couple or family has a combined adjustable taxable income exceeding $168,000, they can claim an offset of 10% for the eligible net medical expenses incurred in excess of $5,000. Please note that the threshold amount of $2,120 applies for the 2012-13 financial year and is subject to indexation and will change in future income years. In order for a medical expense to be treated as an eligible medical expense, the expense must fall within the definition of 'medical expenses' as contained in subsection 159P(4) of the ITAA 1936. Therefore, we have to determine whether the payments you have made qualify as medical expenses for the purposes of the medical expense tax offset. | Detailed Reasoning - IVF procedures for you and your spouse: 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, nurse or chemist, or a public or private hospital, in respect of an illness or operation. Taxation Ruling IT 2359 provides that infertility is an illness within the ordinary meaning of the term and expenses associated with overcoming that illness are medical expenses. IT 2359 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. In your case, you made payments for IVF treatment for you and your spouse. The procedure was undertaken by a legally qualified medical practitioner and the medication required was purchased from a chemist. Therefore, the payments made to your doctor and pharmacy for the ultrasound, medication, and semen freezing qualify as eligible medical expenses within the meaning of section 159P(4) of the ITAA 1936 and you are entitled to include the expenses in relation to the IVF treatment received by you and your spouse in the calculation of the medical expenses tax offset. | Detailed Reasoning - Procedures for the surrogate mother: 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 mother is not considered to be a dependant and is not an Australian resident, the medical expenses relating to the surrogate are not considered to have been paid in respect of a dependant as defined in subsection 159P(4) of the ITAA 1936. Therefore, the costs involved in the IVF and surrogate procedures for the surrogate mother, including registration and surrogate preparation, surrogate mother's medical expenses and medication for the surrogate cannot be included in the calculation of the medical expenses tax offset. | Detailed Reasoning - Surgery and emergency attendance and flu vaccination: The costs paid for surgery and emergency attendance in relation to your spouse's medical condition as well as the vaccination are in relation to an illness and qualify as a medical expense for the purposes of calculating your medical expenses tax offset. | Detailed Reasoning - Other information - transport costs: Travel, accommodation and meal expenses associated with medical treatment are not eligible medical expenses as the payments are not made to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital. Therefore, you cannot include any of your travel and incidental costs in your calculation of the medical expense tax offset.

Relevant facts: You and your spouse are Australian residents. | Your spouse has a medical condition. | Because of your spouse's medical condition, you decided to have IVF and surrogate pregnancy. | The surrogate mother lives overseas and is not an Australian resident. | You consulted a qualified medical practitioner in relation to the procedures. | You incurred the following expenses: | • ultrasound for your spouse | • medication for your spouse purchased from a pharmacy | • vaccination for your spouse.