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Is the cost of purchasing donor sperm from an overseas supplier a medical expense for the purposes of the medical expenses tax offset under section 159P of the Income Tax Assessment Act 1936 (ITAA 1936)?

Yes. The cost of purchasing donor sperm from an overseas supplier is a medical expense for the purposes of the medical expenses tax offset under section 159P of the ITAA 1936.

The taxpayer suffers from infertility problems.

The taxpayer received In Vitro Fertilization (IVF) treatment from a reproductive medicine unit run by legally qualified medical practitioners.

The taxpayer required donor sperm for the purposes of the IVF treatment.

The donor sperm was obtained from an overseas Sperm Bank which is a medical practice run by legally qualified medical practitioners.

The taxpayer incurred expenses for the IVF treatment which included the fees paid to the Sperm Bank for the use of the donor sperm.

The cost of the IVF treatment exceeded the threshold dollar amount in subsection 159P(3A) of the ITAA 1936.

Section 159P of the ITAA 1936 provides that a taxpayer is entitled to a rebate of tax (medical expenses tax offset) if the taxpayer's net medical expenses in the year of income exceeds the threshold dollar amount specified in subsection 159P(3A).

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 as medical expenses.

To qualify for the tax offset the medical expenses must be paid by a resident taxpayer in respect of themselves or a resident dependant. However it is not necessary that the payments be made to a resident of Australia or that they be paid in Australia.

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.

The taxpayer received IVF treatment in respect of their infertility. As part of this treatment the taxpayer required the use of donor sperm. The cost of obtaining the donor sperm is part of the cost of the IVF treatment. All of the payments with regard to the IVF treatment, including obtaining the donor sperm, were made to a legally qualified medical practitioner. The expenses therefore qualify as medical expenses for the purposes of calculating the medical expense tax offset under section 159P of the ITAA 1936.

Date of amendment Part Comment 31 January 2014 Issue, Reasons for Decision, Keywords Amended for clarity. Facts Amended for style adherence.

Date of amendment | Part | Comment

31 January 2014 | Issue, Reasons for Decision, Keywords | Amended for clarity.

Facts | Amended for style adherence.