3.a.5 A private hospital has an arrangement to provide hospital services to employees of a company at the company's expense. If the fees were paid by the patient for example, they would be GST-free. Are the services GST-free even though paid by the company?

For source of ATO view, refer to:

• GSTD 2012/4 (formerly issue 3.a in this issues register)
• Part 3 of GSTR 2006/9– Goods and services tax: supplies.

What supplies are made and to whom, is determined by ascertaining the true character of the transaction. This involves looking at the arrangement between the parties and all the surrounding circumstances, the description given by the parties may not of itself be determinative.

It is considered that a payer company will be the recipient of a supply by the private hospital where there is a contractual arrangement between the parties and there is a binding obligation to supply the hospital services to employees of the company. Alternatively, in the absence of a binding obligation, taking the factors listed in paragraph 221B of GSTR 2006/9 into account, the arrangement between the hospital and the company (payer) may also point to a supply being made by the hospital to the company. In either case, the supply by the hospital to the company will be a taxable supply (assuming section 38-60 does not apply).

Where the hospital supplies actual treatment to a company employee and the arrangement is that the company is only paying for that service rather than contracting for the service, the treatment supplied will be GST-free where the requirements of sections 38-7, 38-10 or 38-20 are met (for a discussion of these requirements, refer to Part 1.a., 1.b. and 2.a. of the Health Issues Log and GSTD 2012/4). In this case the recipient of the supply (that is the treatment) is the employee.