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Edited version of private ruling
Authorisation Number: 1011691243485
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Ruling
Subject: Tax offsets - medical expenses
Question and answer:
Are you entitled to medical expenses tax offset for the cost of medical expenses incurred overseas?
Yes.
This ruling applies for the following period:
Year ended 30 June 2010
The scheme commenced on:
1 July 2009
Relevant facts and circumstances
You are an Australian resident for tax purposes.
You incurred expenses for in vitro fertilisation (IVF) treatment.
The expenses were incurred for your spouse.
Your spouse is your dependant and a resident of Australia for tax purposes.
The expenses incurred were more than $1500 Australian.
The money was paid to a private hospital in a foreign country.
Included in the treatment was medication purchased from a chemist situated in the hospital.
The treatment was prescribed by a legally qualified medical practitioner.
There was no referral from an Australian doctor and one was not required in the foreign country.
You received no re-imbursement from either Medicare or a private health fund.
You have not included expenses that are incidental to the IVF treatment, such as travel, accommodation or meals.
Relevant legislation provisions:
Income Tax Assessment Act 1936 Section 159P
Income Tax Assessment Act 1936 Subsection 159P(1)
Income Tax Assessment Act 1936 Subsection 159P(3A)
Income Tax Assessment Act 1936 Subsection 159P(4)
Reasons for decision
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 Australian resident.
The medical expenses tax offset is only available if the amount of medical expenses, reduced by any entitlement to reimbursement from a health fund or government authority exceeds $1,500 (for the relevant year). The tax offset is 20% of the amount by which the rebatable amount exceeds $1,500 (subsection 159P(3A) of the ITAA 1936).
The term medical expense is defined in subsection 159(4) of the ITAA 1936. Paragraph (a) of 159P(4) provides that payments to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital, in respect of an illness or operation are medical expenses.
While it is necessary that a taxpayer must be a resident of Australia to qualify for the tax offset, it is not necessary that the payments be made to a resident of Australia or that they are paid in Australia. Therefore, the medical expenses during an overseas trip may qualify for the tax offset.
Taxation Ruling IT 2359 paragraph 8 expresses the ATO's view with respect to in vitro fertilisation (IVF) treatment:
Payments to a legally qualified medical practitioner or a public or private hospital for treatment under an In Vitro Fertilization program fall within the definition of medical expenses in sub-section 159P(4) of the Act as being in respect of an illness or an operation. Accordingly, the payments, less any reimbursements, qualify as rebatable amounts.
Application to your circumstances
You and your spouse are residents of Australia for tax purposes and your spouse is your dependant. You both travelled to a foreign country so your spouse could receive IVF treatment at a private hospital. The treatment was performed by a legally qualified medical practitioner at the hospital.
Consequently, the medical expenses you incurred for your spouse's IVF treatment are eligible medical expenses for medical expenses tax offset purposes.
As the expenses exceed $1500, you are entitled to a medical expense tax offset under section 159P of the ITAA 1936 at 20% of the excess.