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Edited version of private ruling
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Ruling
Subject: Medical expenses tax offset
Are you entitled to a medical expenses tax offset for costs paid as part of a surrogate program?
No.
This ruling applies for the following periods:
Year ended 30 June 2010
Year ended 30 June 2011
The scheme commences on:
1 July 2009
Relevant facts and circumstances
You are an Australian resident for tax purposes.
You are part of a same sex couple.
You and your partner decided to utilise the services of surrogacy donor for the purpose of having children. The surrogate was fertilized with your sperm which was implanted through an in-vitro fertilisation program.
All treatment was conducted by a legally qualified medical practitioner.
You are responsible for the medical expenses of the donor. You have incurred expenses in relation to treatment, medication, anaesthetist, hospital and doctors for the surrogacy donor and medical costs related to the process of removing your sperm and storing and transferring it to the surrogacy donor.
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.
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. In your case the expenses are not in respect of an illness of either you or your partner.
Subsection 159P(1) of the ITAA 1936 requires that the medical expenses 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 surrogate mother is not considered a dependant, the medical expenses have not been paid in respect of a dependant as defined in subsection 159P(4) of the ITAA 1936. Accordingly, you are not entitled to a medical expenses tax offset for costs paid as part of a surrogate program.