• 7.a.18 Where doctors share the costs of operating a practice (an association which is not a separate entity) and each doctor operates independently of the other doctors, what are the requirements for each doctor to claim input tax credits for their share of the costs?

    Non-interpretative – straight application of the law.

    The answer will depend upon the actual facts of the case. The entity making a creditable acquisition will be entitled to an input tax credit. Whether the entity makes taxable supplies to another entity or entities will be a question of fact.

    In certain circumstances, doctors (or other people) will enter into arrangements whereby common expenses are paid from a shared bank account. The common expenses often include lease/rental payments, rates, telephone and electricity expenses.

    In order to establish entitlement to input tax credits, it must be established whether there is a creditable acquisition and if so, by whom. In most instances, the manner in which invoices are presented, that is who has the liability in respect of the relevant expenses, will provide the required information.

    The following scenarios, which are not necessarily the only ones that could arise, provide an example of how these type of situations may be arranged.

    Scenario 1

    • two doctors have an expense sharing contract/agreement
    • both are individually registered for GST
    • they have a joint bank account into which is deposited the fees received by the doctors and from which joint expenses are paid
    • they jointly lease a property for their surgery, have electricity and telephone connected
    • tax invoices for all expenses are made out to both doctors jointly, and
    • the surplus of fees received for the doctor less the proportionate share of expenses is paid to each doctor on a periodic basis.

    In this situation, the basic GST rules apply (Div 11, in particular sections 11-20 to 11-30) and each doctor can claim their relevant percentage of the input tax credit on the creditable acquisitions. The contract and tax invoices made out to both parties are considered to be sufficient to support the claims.

    Scenario 2

    • two doctors (A and B) have an expense sharing contract/agreement
    • both are individually registered for GST
    • the business premise is leased by A
    • all tax invoices in relation to the lease are made out to A
    • expenses are paid through A's bank account, and
    • A claims an agreed percentage from B as a 'reimbursement'.

    In this situation, A is making the creditable acquisition of the premises from the lessor and is entitled to claim all the input tax credits on the lease payments. A simultaneously makes a taxable supply of an agreed percentage of the premises to B.

    Normal attribution rules apply in relation to the taxable supply (from A to B) and the creditable acquisition (by B from A). If B is entitled to the input tax credits in relation to the acquisition of part of the premises from A, subject to the normal rules that B must hold a tax invoice (from A).

    Scenario 3

    • two doctors (A and B) have an expense sharing contract/agreement
    • both are individually registered for GST
    • the business premise is leased by A
    • all tax invoices in relation to the lease are made out to A
    • lease expenses are paid from a joint account between A and B, and
    • A claims an agreed percentage from B as a 'reimbursement'.

    In this situation, A is making the creditable acquisition of the premises from the lessor and is entitled to claim all the input tax credits on the lease payments. A simultaneously makes a taxable supply of an agreed percentage of the premises to B.

    Normal attribution rules apply in relation to the taxable supply (from A to B) and the creditable acquisition (by B from A). If B is entitled to the input tax credits in relation to the acquisition of part of the premises from A, subject to the normal rules that B must hold a tax invoice (from A).

      Last modified: 16 Oct 2013QC 16330