3.b.1. Where a patient has both a cosmetic procedure and a GST-free procedure within the same admission, how will the accommodation fee and theatre fee be treated?
For source of ATO view, refer to GSTR 2001/8External Link - Goods and services tax: apportioning the consideration for a supply that includes taxable and non-taxable parts.
Subsection 38-20(2) provides that a supply of hospital treatment is not GST-free to the extent that it relates to a supply of a *professional service that is not GST-free because of subsection 38-7(2). Subsection 38-7(2) provides that a medical service is not GST-free if it is rendered for cosmetic reasons and it is not a professional service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973.
If a Medicare benefit is payable in relation to the cosmetic procedure then the fee for that procedure, the accommodation fee and theatre fee will all be GST-free.
If there is no Medicare benefit payable and the procedure is rendered for cosmetic reasons, then the fee for that procedure, the accommodation fee and theatre fee will all be subject to GST.
Where an admission is in relation to both a GST-free procedure and a taxable procedure, the word ‘extent’ as itappears in subsection 38-20(2) requires an apportionment between the two procedures. Accordingly, the accommodation and theatre fees will need to be apportioned. Section 9-80 provides that the method of apportionment is based on the value of the taxable supply.
The basis for the apportionment will need to be on a reasonable basis. A reasonable basis will be one which does not favour either the GST-free supply or the taxable supply over the other part of the supply.
The method of apportionment used by the medical practitioner rendering the cosmetic procedure may not be relevant to the method of apportionment to be used by the supplier of the hospital accommodation or the theatre.
The medical practitioner rendering the cosmetic procedure may apportion the fees charged based on the normal charges for each of the procedures rendered. However, for the supplier of the hospital treatment, the method of apportionment by the medical practitioner may not be relevant and it may be more appropriate to apportion fees based on other factors. It may be appropriate to apportion the theatre fee based on the time for each procedure and the accommodation fee based on the time that would normally be associated with accommodation for each of those procedures.
For example, a GST-free procedure may cost $1,000, take one hour and require 10 days hospitalisation and a taxable procedure may cost $3,000, take two hours and require three days hospitalisation. If the procedures were supplied at the same time the medical practitioner may charge $4,000, the two procedures may take three hours in total and the hospitalisation may be for 10 days.
For the medical practitioner, it may be appropriate to apportion the overall fees 25% to the GST-free procedure and 75% to the taxable procedure based on the normal charges for each procedure. For the theatre fees, it may be appropriate to apportion the overall fees one third to the GST-free procedure and two thirds to the taxable procedure based on the time for each procedure. For the accommodation fees, it may be appropriate to apportion the overall fees 85% to the GST-free procedure (being half of the first three days and all of the balance of seven days) and 15% to the taxable procedure (being half of the first three days) based on the normal hospitalisation for each procedure.
However, the facts of each case must be taken into account to determine the appropriate method of apportionment. The above example is for illustrative purposes only and will not be relevant in all cases. Also, other methods of apportionment may be available and appropriate.
GSTR 2001/8 provides information in relation to apportionment and apportionment methods for supplies that includes taxable and non-taxable parts and the application by way of examples.