Edited version of private ruling

Authorisation Number: 1011595244271

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Ruling

Subject: Tax offsets - medical expenses

Are you entitled to a medical expense offset for the expenses you incurred relating to your gender reassignment surgery?

Yes.

Relevant facts

You are an Australian resident for income tax purposes.

You commenced gender reassignment surgery as a result chronic gender dysphoria and associated illnesses.

The gender reassignment treatment and surgery is completed in stages, you have already underwent a bi-lateral mastectomy. The completion of your gender reassignment surgery could take up to three years.

All the treatment you have received in association with your gender reassignment surgery has been overseen by your legally qualified medical practitioner.

Your surgical specialist advised the bilateral mastectomy was also needed in order to treat your chronic neck and back pain and recurrent skin inflammation and infections in the infra-mammary region.

You have provided documentation from your doctors stating the bilateral mastectomy was required for medical and psychological reasons.

You have not received Medicare benefits or any other rebates for the bi-lateral mastectomy.

You have received Medicare rebates for some general medical expenses associated with your gender reassignment treatment.

You have documentary evidence to support your claims.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 159P(1)

Income Tax Assessment Act 1936 Subsection 159P(4)

Income Tax Assessment Act 1936 Subsection 159P(5)

Reasons for decision

Medical Expense Tax Offset

A medical expense tax offset is available to a taxpayer under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936), where the taxpayer incurs medical expenses for themselves or a dependant who is an Australian resident.

The medical expenses tax offset is only available if the net amount of medical expenses (that is, the total amount the taxpayer is out of pocket after any entitlement to reimbursement from a health fund or government authority is taken into account) exceeds $1,500.

For the 2008-09, 2009-10, 2010-11 and 2011-2012 income years, the tax offset is 20% of the amount by which the net medical expenses exceeds $1,500.

Subsection 159P(4) of the ITAA 1936 specifies that for the purposes of the medical expense tax offset a medical expense includes payments to a legally qualified medical practitioner, nurse, chemist or public or private hospital in respect of an illness or operation.

Additionally, subsection 159P(5) of the ITAA 1936, specifies that payments made to the employer of a legally qualified medical practitioner, nurse or chemist (where that employer is not a public or private hospital) are taken, for the purposes of the offset, to be payments made directly to that medical practitioner, nurse or chemist.

Ineligible medical expenses are defined in subsection 159P(4) of the ITAA 1936 as payments to a legally qualified medical practitioner, nurse, chemist or public or private hospital in respect of a cosmetic operation that is not a professional service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973. To determine whether a procedure is cosmetic in nature, the ordinary definition of cosmetic applies. The Macquarie dictionary defines cosmetic as:

· serving to beautify, imparting or improving beauty, especially of the complexion, or

· designed to effect a superficial alteration while keeping the basis unchanged.

To determine if an expense is an ineligible medical expense for medical expenses tax offset purposes two factors have to be considered:

1. Is the procedure cosmetic in nature according to the ordinary definition of cosmetic, and

2. If the procedure is cosmetic, is a Medicare benefit payable?

In your case, the operation was undertaken as part of the overall treatment of your chronic gender dysphoria and gender reassignment. Therefore, it is not considered the gender reassignment was a cosmetic operation.

Summary

You have incurred expenses greater than $1,500 for your gender identity disorder. You have documentary evidence to substantiate that the expenses were incurred and that the payment for the treatment and operations were paid to legally qualified doctors and public or private hospitals. You are an Australian resident.

Therefore, the expenses incurred to treat your gender identity disorder less any refunds you may get from Medicare or a private health insurer can be claimed as medical expenses for the purpose of calculating the medical expenses tax offset under section 159P of the ITAA 1936.