• 1.a.6. What is the GST position where the provision of actual treatment to a patient is paid for by a third party?

    For source of ATO view, refer to paragraph 177 onwards in part 3 of GSTR 2006/9External Link– Goods and services tax: supplies.

    Ordinarily, it does not matter that the patient (who is the recipient of the supply) does not provide the consideration for the supply (section 9-15(2)). Provided all the necessary elements of section 38-7 (especially the requirements in relation to ‘recipient of the supply’) are met it will be a GST-free supply.

    The case of Federal Commissioner of Taxation v Secretary to the Department of Transport (Vic) [2010] FCAFC 84; 2101 ATC 20-196 illustrated that, in some cases, the payer may also be the recipient of a supply based upon the one set of activities. That is, depending on the arrangement or framework, the medical practitioner may make a supply to both the patient and the payer (Refer to Proposition 15 of GSTR 2006/9).A payer will be the recipient of a supply where, pursuant to an agreement between the payer and a medical practitioner, there is a binding obligation between the medical practitioner and the payer for the medical practitioner to provide the thing to the patient.

    In the absence of a binding obligation, there may still be a supply by the medical practitioner to a payer when taking into account the factors listed in paragraph 221B of GSTR 2006/9.

    From 1 July 2012, where the payer is an insurer, an operator of a statutory compensation scheme or compulsory third party scheme (scheme operator), or an Australian government agency, the supply to the payer will be GST-free to the extent that the underlying supply of the health service to the patient is a GST-free health supply under Subdivision 38-B (section 38-60). For administrative ease however, the parties may agree for the supply to the payer, or supplies of a kind that include that supply, not to be treated as GST-free (section 38-60(4)).

    Where a payer is not an insurer, a scheme operator or an Australian government agency, the supply to the payer will generally not be a GST-free health supply.

    Example

    ABC Health Fund has a pre-existing arrangement with a medical practitioner for the supply of goods and services to settle claims made under their insurance policies.

    The arrangement outlines what both parties need to do when the medical practitioner treats an ABC Health Fund member. Under the arrangement, the payment to the medical practitioner from ABC Health Fund is for the supply made by the medical practitioner to ABC Health Fund of supplying medical treatment to the ABC Health Fund member.

    The supply by the medical practitioner to ABC Health Fund is GST-free to the extent that the supply of the medical treatment to the ABC Health Fund member is a GST-free supply under section 38-7.

    End of example
      Last modified: 16 Oct 2013QC 16330