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Edited version of private ruling
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Ruling
Subject: Medical expenses tax offset
Do any of the costs involved in the surrogacy and birth of your child qualify as medical expenses for the purposes of calculating a medical expenses tax offset?
No.
This ruling applies for the following period
Year ended 30 June 2010
The scheme commenced on
1 July 2009
Relevant facts
You had a child born of a surrogate mother.
You donated sperm.
An egg was acquired from a third person.
After the birth, you were admitted to hospital for a period to be with the child.
You incurred the following expenses:
· Collection of donor egg, follicular monitoring and embryo transfer
· Surrogate priming, scans, pregnancy tests and medications
· Embryo freezing
· Antenatal care, scans, medical care
· Delivery costs for the surrogate
· Your own hospital cost for three days to be with the child.
Relevant legislative provisions
Income Tax Assessment Act 1936 Section 159P
Reasons for decision
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.
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.
The definition of 'medical expenses' in subsection 159P(4) of the ITAA 1936 includes payments to a legally qualified medical practitioner or a public or private hospital in respect of an illness or an operation.
The terms 'illness' and 'operation' are not defined in the income tax law. The terms are not technical and are to be given the meanings which are ordinarily given to them. The meaning of the term 'illness' was discussed by Taxation Board of Review No. 3 in Case Q21 83 ATC 77; 26 CTBR (NS) 570 Case 850. Dr Gerber expressed his understanding of the concept of illness in these words:
'Illness' is not defined in the Act. However, I do not accept that it is a term of art. Adopting a purposive construction, I find the term includes any condition marked by a pronounced deviation from the normal healthy state. If this is the correct view, 'illness' must include any disorder of body, function or systems.
Taxation Ruling IT 2359 states that infertility is accepted as an illness within the ordinary meaning of the term. However, in your case, being unable to conceive a child is not the result of infertility. Rather, the expenses are incurred because you and your partner cannot have a child because you are in a same sex relationship. The expenses relate to another person who acts as a surrogate for your child.
Expenses relating to sperm donation and your hospitalisation after the birth were in respect of yourself. However, the expenses were not in respect of an illness or operation. Consequently, the expenses cannot be included as part of a calculation for a medical expenses tax offset.
As the expenses for the surrogate were not paid in respect of yourself or a dependant, these expenses do not qualify as a medical expense.
Therefore, you cannot include any of the costs involved in the surrogacy and birth of your child as part of a calculation for a medical expenses tax offset.
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