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

Ruling: Q1: Are the amounts you have paid to the fertility clinic and an annual fee for the supply of certain medical appliances considered to be eligible medical expenses for the purposes of the net medical expense tax offset? | A1: Yes.

Relevant facts and circumstances: You are an Australian resident of tax purposes. You and your spouse were experiencing problems conceiving so you were referred by your legally qualified medical practitioner to a fertility clinic. Your fertility assessment included a blood test; the results from this test were used to tailor your treatment plan. The clinics specialist (legally qualified medical practitioner) referred you to a counsellor within the clinic who specialises in the field of infertility for counselling sessions to provide you with emotional support through the in vitro fertilization (IVF) process. You have been advised by the clinics specialist that for you to continue your treatment you will need the use of a donor embryo. You have paid the clinic an amount of money in relation to the donor embryo. Your IVF treatment has been delivered by a legally qualified medical practitioner. All payments have been made to a legally qualified medical practitioner. You pay an annual fee to receive a monthly allocation of medical appliances in relation to a condition you have been diagnosed with. You have received a net medical expenses tax offset amount in your income tax assessment for the year ended 30 June 2013.

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(1C) | Income Tax Assessment Act 1936 Paragraph 159P(1C)(a) | 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. The amount of net medical expenses tax offset you can claim now depends on your level of income as the rebate is now income tested. This not only affects the threshold amount but also the percentage of the rebate you can claim. It should also be noted that the threshold amount is subject to indexation and will change in future income years. It should be noted that the net medical expenses tax offset (NMETO) is being phased out between the 2013-14 and 2018-19 financial years. Transitional arrangements will allow taxpayers to claim the offset from the 2013-14 financial year until the end of the 2018-19 financial year, but only for those medical expenses relating to disability aids, attendant care or aged care. In addition, for the 2013-14 financial year and 2014-15 financial year, taxpayers will be eligible to claim the full range of medical expenses (as defined currently) but only if they have received an amount of the net medical expenses tax offset in the previous financial year (or in both 2012-13 and 2013-14 in respect to claims in the 2014-15 financial year). In your case, you have received an amount of the NMETO for the 2012-13 financial year, therefore you are entitled to make a NMETO claim in the 2013-14 financial year for the entire range of medical expenses that are eligible under section 159P, not just those for disability aids, attendant care or aged care. IVF procedures Subsection 159P(4) of the ITAA 1936 defines medical expenses which are eligible for the net medical expenses tax offset. 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 Income tax: medical expenses - in vitro fertilization states that infertility is an illness within the ordinary meaning of the term and payments to a legally qualified medical practitioner or hospital for treatment under an IVF program qualify as medical expenses. The blood test, counselling sessions and the embryo registration costs have all been paid to a legally qualified medical practitioner and are considered to form part of your treatment to overcome infertility. These costs are considered eligible medical expenses for the purposes of the medical expense tax offset. Medical or surgical appliance Paragraph (f) of the definition of medical expenses in subsection 159P(4) of the ITAA 1936 includes payments made in respect of a medical or surgical appliance prescribed by a legally qualified medical practitioner. Taxation Ruling TR 93/34 Income tax: medical expense rebate - meaning of medical or surgical appliance explains which types of items qualify as a medical or surgical appliance for the purposes of the medical expenses tax offset. In your case, you pay an annual fee for the monthly supply of medical appliances in relation to a condition you have been diagnosed with. The particular item you are supplied with is mentioned in TR 93/34 and qualifies as an eligible medical expense for the purposes of the medical expenses tax offset.