Edited version of private ruling

Authorisation Number: 1011855829787

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Ruling

Subject: Medical expenses tax offset

Are your costs associated with surrogacy and egg donation eligible medical expenses for the purposes of calculating a 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 both residents for tax purposes.

You and your spouse have had numerous attempts to have children in Australia via IVF.

You have looked overseas to find a suitable egg donor and surrogate.

The treatments are carried out at a medical facility and the medical expenses are all for the use of a donor egg, sperm plantation and the cost of the donor via surrogacy.

All payments are made to legally qualified medical practitioners.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 159P(1)

Income Tax Assessment Act 1936 Subsection 159P(4)

Reasons for decision

Summary

For a medical expense to qualify for the medical expenses tax offset, it must be in respect of you or your dependant. The egg donor and surrogate are not your dependants. Therefore, the expenses you have incurred in respect of the egg donor and surrogate are not in respect of a dependant. Consequently, these expenses cannot be included in the calculation of a medical expenses tax offset.

Detailed reasoning

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.

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 surrogate and egg donor are not considered to be dependants, the medical expenses have not been paid in respect of a dependant as defined in subsection 159P(4) of the ITAA 1936.

Therefore, you cannot include any of the costs involved in the surrogacy and egg donation as part of a calculation for the medical expenses tax offset.