ATO Interpretative Decision

ATO ID 2003/1011 (Withdrawn)

Goods and Services Tax

• This ATO ID is a straight application of the law and does not contain an interpretative decision.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, a hospital, making a GST-free supply under subsection 38-20(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies hospital services to a patient undergoing an endoscopic brow lift for medical reasons?

Decision

Yes, the entity is making a GST-free supply under subsection 38-20(1) of the GST Act when it supplies hospital services to a patient undergoing an endoscopic brow lift for medical reasons.

Facts

The entity is a hospital. The entity provides hospital services, including accommodation and theatre services, to patients undergoing surgical procedures.

The entity supplies hospital services to a patient who undergoes an endoscopic brow lift for medical reasons. The patient has severe brow ptosis, which is obscuring their visual field. The situation cannot be addressed by simple blepharoplasty, as the brow itself is responsible for the visual obstruction. Once the brow is lifted the patient is able to see.

An endoscopic brow lift is not a professional service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973.

The entity is registered for the goods and services tax (GST).

Reasons for Decision

Under subsection 38-20(1) of the GST Act, a supply of hospital treatment is GST-free.

'Hospital treatment' is defined in section 195-1 of the GST Act as having the meaning given by subsection 67(4) of the National Health Act 1953 which is:

accommodation and nursing care, whether provided for the purpose of permitting the provision of professional attention or, in the case of a nursing-home type patient, as an end in itself, and includes:

(a)

the provision at, or on behalf of, a hospital of relevant health services to a patient of the hospital; and

(b)

the provision at a hospital of a facility for a patient of the hospital.

The entity is supplying services, including accommodation and theatre services, to a patient in the hospital. These services are covered by the term 'hospital treatment'.

However, subsection 38-20(2) of the GST Act 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, because of subsection 38-7(2) of the GST Act, is not GST-free.

Subsection 38-7(2) of the GST Act provides that a medical service is not GST free if:

•

it is a supply of a professional service rendered in prescribed circumstances within the meaning of regulation 14 of the Health Insurance Regulations made under the Health Insurance Act (other than the prescribed circumstances set out in subregulations 14(2)(ea), 14(2)(f) and 14(2)(g)) (paragraph 38-7(2)(a) of the GST Act); or

•

it is rendered for cosmetic reasons and is not a professional service for which medicare benefit is payable under Part II of the Health Insurance Act 1973 (paragraph 38-7(2)(b) of the GST Act).

An endoscopic brow lift is not one of the services excluded under regulation 14 of the Health Insurance Regulations and therefore, paragraph 38-7(2)(a) of the GST Act does not apply.

Paragraph 38-7(2)(b) of the GST Act provides that a medical service is not GST-free if it is rendered for cosmetic reasons and no medicare benefit is payable for that service. There is no medicare benefit payable for the endoscopic brow lift. Therefore, if the service is performed for 'cosmetic reasons' it is not GST-free.

The term 'cosmetic reasons' is not defined in the GST Act and is therefore given its ordinary meaning. The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales defines 'cosmetic' as '2. serving to beautify: imparting or improving beauty, especially of the complexion. 3. designed to effect a superficial alteration while keeping the basis unchanged.'

Therefore, a medical service is 'rendered for cosmetic reasons' if it is predominantly performed for, or is rendered for the purpose of permitting, the improvement of the personal appearance of a patient. Whether a service is for cosmetic reasons must be evaluated on a case by case basis. Procedures that alter or enhance a patient's appearance but have no medical or reconstructive purpose are considered to be cosmetic.

However, a procedure that is performed for medical or reconstructive reasons is not cosmetic. A procedure is for medical reasons if it is predominantly performed for, or is rendered for the purpose of permitting, the alteration of a significant defect in appearance caused by disease, trauma or congenital deformity. An example of this is skin grafting performed on a burn victim.

The endoscopic brow lift is carried out on the patient to correct the patient's severe brow ptosis that is obscuring the patient's visual field. The brow lift will improve the patient's vision. Therefore, the medical service is performed for medical reasons, not for cosmetic reasons, and paragraph 38-7(2)(b) of the GST Act does not apply.

As neither paragraph in subsection 38-7(2) of the GST Act applies in this case, the entity's supply of hospital services is not excluded from being GST-free by subsection 38-20(2) of the GST Act.

Therefore, the entity is making a GST-free supply of hospital treatment under subsection 38-20(1) of the GST Act when it supplies hospital services to a patient undergoing an endoscopic brow lift for medical reasons.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   subsection 38-7(2)
   paragraph 38-7(2)(a)
   paragraph 38-7(2)(b)
   subsection 38-20(1)
   subsection 38-20(2)
   section 195-1

Other References:
The Macquarie Dictionary, 1997, 3rd edn, The Macquarie Library Pty Ltd, New South Wales

Keywords
Goods and services tax
GST free
GST health
Hospitals
Medical expenses

Business Line:  GST

Date of publication:  14 November 2003

ISSN: 1445-2782