What if the service is provided under a multi-party arrangement with a third party?

From 1 July 2012, where a supply of a health service made to an individual is a GST-free supply of health services, that supply will also be GST-free where the recipient of the supply is:

  • an insurer settling a claim under an insurance policy
  • an operator of a statutory compensation scheme
  • an operator of a compulsory third party scheme
  • an Australian government agency.

Sometimes, health related services are provided to patients under multi-party arrangements that are organised and paid for by a third party.

Where the third party is an insurer, an operator of a statutory compensation scheme or compulsory third party scheme (scheme operator), or an Australian government agency, the practitioner may make a supply to both the patient and the third party.

From 1 July 2012, where a supply is made to the insurer, the scheme operator or the Australian government agency, the supply is GST-free to the extent that the underlying supply of health services to the patient is GST-free.

Example 1: GST-free supplies to a third party

ABC Health Fund has a pre-existing agreement with a physiotherapist for services supplied to settle claims made under their insurance policies. The agreement outlines what both parties need to do when the physiotherapist treats an ABC Health Fund member. It also outlines that ABC Health Fund must pay the physiotherapist for their services to the private health member, as well as the authorisation required for such payments.

Peter has private health insurance with ABC Health Fund. Peter has an injury that requires physiotherapy so he contacts ABC Health Fund who refer him to the physiotherapist. The physiotherapist is a recognised professional and the service is generally accepted in the physiotherapy profession as necessary and appropriate for Peter's treatment. Therefore, the supply of the physiotherapy health service is a GST-free supply.

Under this arrangement, the payment to the physiotherapist is for the supply made to ABC Health Fund of physiotherapy services to Peter.

The supply to ABC Health Fund will be GST-free because the underlying supply of physiotherapy services made by the physiotherapist to Peter is a GST-free health service.

End of example

Where a supply is not made to a third party (for example, the third party is merely paying the health practitioner on behalf of the patient), the supply of the health service is GST-free to the patient where the service is:

  • a listed health service
  • performed by a recognised health professional
  • accepted in the relevant health profession as necessary and appropriate to treat the recipient of the service.
    Last modified: 22 May 2014QC 16264