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Edited version of private ruling
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Ruling
Subject: Medical expenses tax offset
Question:
Do the fees for your In Vitro Fertilisation (IVF) treatment qualify as medical expenses for the purposes of the medical expenses tax offset?
Answer: No
Relevant facts
You and your spouse are Australian residents for tax purposes who have children who were conceived by natural means and who suffer from a medical condition.
You and your spouse underwent an IVF procedure administered by a medical practitioner.
You underwent the IVF procedure not because of an infertility problem, but in order to minimise the risk of a future child being born with the medical condition.
Your unreimbursed costs for the IVF procedure exceeded the medical benefits tax offset threshold for the 2010 year of $1,500.
Reasons for decision
Subsection 159P(3A) of the Income Tax Assessment Act 1936 (ITAA 1936) provides that a tax offset is allowable to a taxpayer whose net medical expenses in the year of income exceed the relevant threshold for an income year. The relevant threshold for the 2010 year is $1,500.
The medical expenses must be paid by the taxpayer in respect of themselves or their dependant.
The term 'medical expenses' is defined in Subsection 159P(4) of the ITAA 1936. Paragraph (a) of the definition includes payments made to 'a legally qualified medical practitioner ... in respect of an illness or operation'.
In Case Q21 83 ATC 77; (1983) 26 CTBR (NS) Case 85 Mr Hogan, in the course of his decision, discussed the scope of the phrase 'in respect of' and endorsed Mann CJ's approach in Trustees Executors and Agency Co Ltd v. Reilly [1941] VLR 110 at page 111, that:
The words "in respect of" are difficult of definition but they have the widest possible meaning of any expression intended to convey some connection or relation between the two subject matters to which the words refer.
Accordingly, any payment to a legally qualified medical practitioner or hospital in connection with an illness or an operation would satisfy the requirement that the payment is in respect of an illness or operation.
Taxation Ruling IT 2359 contains the Commissioner's views as to the meaning of 'illness' or 'operation'. The terms are not defined in the income tax law and are to be given their ordinary meaning.
The term 'illness' within the context of section 159P of the ITAA 1936 requires an existing condition that is a deviation from the normal healthy state (paragraph 5 of IT 2359).
Paragraph 5 of IT 2359 also states that:
In its ordinary meaning the term "operation" refers to an act performed by hand and/or instrument to some part of the body to remedy deformity, injury, disease, pain etc.
You underwent IVF procedures for the purpose of preventing an as yet unborn child from the possibility of suffering from a medical condition. The services provided are not in respect of an 'illness' as required by Subsection 159P(4) of the ITAA 1936.
The act of IVF is not caught by the ordinary meaning of 'operation'. The act is not in respect of remedying a deformity, disease, pain and therefore would not satisfy the requirement of Subsection 159P(4)(a) of the ITAA 1936.
Accordingly, the amount you paid is not paid to a medical practitioner or a hospital in respect of an illness or operation.
Therefore, the fee for the IVF procedure does not qualify as medical expenses for the purposes of the medical expenses tax offset under section 159P of the ITAA 1936.
For the purposes of the medical expenses tax offset, IVF treatment is a medical expense in relation to an existing illness, that being, infertility. The expenses you have incurred are to prevent future disease that may arise. The expenses are not in relation to an existing condition. Therefore, the expenses do not qualify as medical expenses for the purposes of the medical expenses tax offset.