ATO Interpretative Decision
ATO ID 2001/698
Personal tax
Medical expenses tax offset - costs of a surrogate motherFOI status: may be released
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This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the taxpayer entitled to a medical expenses tax offset under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936) for costs paid on behalf of a surrogate mother?
Decision
No. The taxpayer is not entitled to a medical expenses tax offset under section 159P of the ITAA 1936 for costs paid on behalf of a surrogate mother.
Facts
The taxpayer' spouse is infertile.
The taxpayer and their spouse have decided to have a child using the services of a surrogate mother.
The surrogate mother is the taxpayer's sibling.
The taxpayer is responsible for paying the medical practitioner and hospital fees for the surrogate mother.
Reasons for Decision
Subsection 159P(3A) of the ITAA 1936 provides that a tax offset is allowable to a taxpayer whose net medical expenses in the year of income exceeds $1250.
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 provides that infertility is an illness within the ordinary meaning of the term and expenses associated with overcoming that illness are medical expenses.
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:
- 1.
- The spouse of the taxpayer; or
- 2.
- A child of the taxpayer who is under 21 years of age; or
- 3.
- 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.
The expenses are paid in respect of the taxpayer's sibling who is not a dependant of the taxpayer as defined in subsection 159P(4) of the ITAA 1936. As the surrogate mother is not a dependant of the taxpayer, the medical expenses are not paid in respect of a dependant and therefore the taxpayer is not entitled to the medical expenses tax offset under section 159P of the ITAA 1936.
Date of decision: 22 October 2001Year of income: Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1936
section 159P
subsection 159P(1)
subsection 159P(3A)
subsection 159P(4)
Related Public Rulings (including Determinations)
IT 2359
Keywords
Medical expenses rebates
Medical expenses
Rebates
Dependants
ISSN: 1445-2782
| Date: | Version: | |
| You are here | 22 October 2001 | Original statement |
| 16 April 2010 | Archived |