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Edited version of private ruling
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Ruling
Subject: Medical expenses rebate
Questions
1. 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?
Answer: Yes.
2. Can expenses in relation to IVF procedures for the gestational surrogate be included in the calculation of the medical expenses tax offset?
Answer: No.
3. Are the amounts paid for the transport of a biological specimen for testing eligible medical expenses for the purposes of the medical expenses tax offset?
Answer: No.
This ruling applies for the following period:
Year ended 30 June 2010
The scheme commenced on:
1 July 2009
Relevant facts
You and your spouse are Australian residents for income tax purposes.
After consultation with a legally qualified medical practitioner from an overseas fertility clinic, you and your spouse decided to try to conceive a child through the services of a gestational surrogate. The surrogate is a resident of an overseas country.
You have paid expenses in relation to IVF procedures for you and your spouse.
You have also paid expenses for the gestational surrogate to undergo IVF procedures.
The prescribed drugs administered in your IVF process were supplied by an overseas pharmacy.
You paid for the transport of a biological specimen for testing.
You have not received any reimbursement from your private health fund or Medicare.
Relevant legislative provisions
Income Tax Assessment Act 1936 Subsection 159P(1)
Income Tax Assessment Act 1936 Subsection 159P(4)
Reasons for decision
A medical expenses tax offset is available to a taxpayer under subsection 159P(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the taxpayer pays medical expenses in an income year for themselves or a dependant who is an Australian resident, to the extent that they are not reimbursed, or are eligible to be reimbursed, from a government or public authority or a society, association or fund.
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.
In your case, you made payments to an overseas fertility clinic in regards to IVF treatment for you and your spouse. The procedure was undertaken by a legally qualified medical practitioner and the medication required for the procedure was prescribed.
Therefore, the payments made to the overseas fertility clinic and pharmacy 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 treatment received by you and your spouse in the calculation of the medical expenses tax offset.
IVF procedures for the gestational surrogate
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:
· 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 gestational surrogate is not considered to be a dependant, the medical expenses directly related 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 procedures for the gestational surrogate, cannot be included in the calculation of the medical expenses tax offset.
Transport costs
Subsection 159P(4) of the ITAA 1936 specifically defines medical expenses which are eligible for the medical expenses rebate. The definition does not include costs for transportation of specimens for testing.
In your case, you arranged and paid for the transportation of a biological specimen to an overseas fertility clinic for screening and testing prior to the commencement of IVF treatment. While the costs you incurred were necessary in order to have the specimen transported, it was not a payment in respect of medical treatment.
Accordingly, payments made to the transport company are not medical expenses as defined in subsection 159P(4) and cannot be included when calculating the medical expenses tax offset.
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