Costs associate with donor eggs and donor sperm are treated the same by the ATO. Thus rulings which mention one apply to the other. Here's what our tax account found -
Also further - from ATO (she sent us this - I can't find it myself):
1011286371630
Edited version of private ruling
Authorisation Number: 1011286371630
This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Ruling
1. Are you entitled to a tax deduction for the costs associated with IVF, egg and sperm donation?
No.
2. Are you entitled to a medical expenses tax offset for the costs associated with IVF, egg and sperm donation?
Yes.
3. Are you entitled to a medical expenses tax offset for the costs associated with legal fees, agency fees and donor insurance?
No.
Relevant Facts:
You enlisted the services of an overseas IVF agency.
You were responsible for paying all costs incurred, including medical, travel of the donors, legal and agency fees for the egg and sperm donation.
You incurred the following costs:
· Agency fee to search for a egg donor
· Set up fee for depositing money
· Monitoring services for the egg donor
· Psychological screening for egg donor
· Medical screening for donor
· Psychological screening for yourself
· Monitoring services for another donor
· Lab screening for donor
· Medication for donor and yourself
· Attorney fees for yourself and donor
· Sperm donor fees
· Donor insurance
· Genetic evaluation.
Reasons for decision
Summary:
You are not entitled to a tax deduction for the costs associated with IVF treatment.
However, you are entitled to a medical expenses tax offset for your medical treatment expenses in relation to IVF.
You are not entitled to a medical expenses tax offset for your expenses in relation to donor insurance, legal expenses and agency fees.
Detailed reasoning:
Deductibility of services provided by fertility clinic and associated expenses
Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.
In your situation, you have sought the services of a fertility clinic and incurred expenses related to egg and sperm donation, IVF process as well as travel, legal and agencies expenses.
These expenses have no direct connection to the gaining or producing assessable income and as such are considered to be expenses of a private nature. Accordingly, you are not eligible for a deduction under section 8-1 of the ITAA 1997.
Although you are not entitled to a work related deduction for fertility clinic services and associated expenses incurred, you may be eligible for the medical expenses tax offset for specific expenses.
Medical expenses tax offset
A medical expense tax offset is available where the taxpayer, who is an Australian resident, pays medical expenses in an income year for themself or a dependant who is also an Australian resident. The medical expense tax offset is only available if the amount of medical expenses, reduced by any entitlement to reimbursement from a health fund or government authority (the rebatable amount) exceeds $1,500.
The tax offset is 20% of the amount by which the rebatable amount exceeds $1,500.
The term medical expenses is defined for the purposes of the medical expenses tax offset to cover payments to doctors, nurses, chemists, dentists, opticians and optometrists. It also covers payments for such expenses as therapeutic treatment, medical or surgical appliances.
Medical expenses
Medical expenses are defined in paragraph 159P(4)(a) of the Income Tax Assessment Act 1936 (ITAA 1936) to include payments to a legally qualified medical practitioner, nurse or chemist, or a public or private hospital in respect of an illness or operation.
Taxation Ruling IT 2359 states that infertility is an illness within the ordinary meaning of the term and payments to a legally qualified medical practitioner or hospital for treatment under an IVF program qualify as medical expenses.
In your case, you incurred expenses related to egg and sperm donation as part of your IVF treatment. Although some of the medical expenses were made on behalf of a person other than yourself or your dependant, this does not preclude the expenses from qualifying for the medical expenses tax offset. The cost of obtaining the donor eggs and sperm as part of IVF is considered to be a cost of the treatment to overcome infertility.
Therefore, you are entitled to the medical expenses tax offset for the following medical expenses under subsection 159P(1) of the ITAA 1936:
· Monitoring services for the egg donor
· Psychological screening for egg donor
· Medical screening for donor
· Psychological screening for yourself
· Monitoring services for another donor
· Lab screening for donor
· Medication for donor and yourself
· Sperm donor fees
· Genetic evaluation.
Donor Insurance, Legal Expenses & Agency Fees
Subsection 159P(4) of the ITAA 1936 specifically defines medical expenses which are eligible for the medical expenses tax offset. The definition does not include the costs of legal or agency services to obtain medical treatment. This was confirmed by the decision of the Administrative Appeals Tribunal in Case R12 84 ATC 165; 27 CTBR (NS) Case 63. In that case, travelling whilst necessary in order to receive medical treatment, were held not to be a payment for the medical treatment.
Accordingly, legal and agency expenses incurred in order to obtain medical treatment are not medical expenses as defined in subsection 159P(4) of the ITAA 1936 and you will not be entitled to a medical expenses tax offset. This includes the following expenses:
· Agency fee to search for a egg donor
· Set up fee for depositing money
· Attorney fees for yourself and donor
· Donor insurance.
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