ATO Interpretative Decision

ATO ID 2004/844 (Withdrawn)

Goods and Services Tax

• This ATO ID is withdrawn. The issue is covered in GSTR 2005/D8 making supplies and analysing multi-party arrangements.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the entity, an occupational therapist, making a GST-free supply under subsection 38-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when, pursuant to an agreement it has with a company, it supplies consultancy services to assess the needs of the company's employee?

Decision

No, the entity is not making a GST-free supply under subsection 38-10(1) of the GST Act when, pursuant to an agreement it has with a company, it supplies consultancy services to assess the needs of the company's employee.

The entity is making a taxable supply under section 9-5 of the GST Act.

Facts

The entity is an occupational therapist. A company engages the entity to assess the needs of an employee who suffers from multiple sclerosis and needs to use a wheelchair to get around. The employee requires their work area to be redesigned and also needs a special car park.

The entity and the company enter into an agreement whereby the entity is required to provide the outcome of the assessment in a report to the company and to send an invoice for its services to the company for payment.

The entity is a recognised professional as defined in section 195-1 of the GST Act in relation to the supply of occupational therapy services. The services provided by the entity are generally accepted by the occupational therapy profession as being necessary for the appropriate treatment of the employee in their circumstances.

Both the entity and the company are registered for goods and services tax (GST). The entity's supply satisfies the other positive limbs of section 9-5 of the GST Act.

Reasons for Decision

Under subsection 38-10(1) of the GST Act, a supply is GST-free if:

(a)

it is a service of a kind specified in the table in subsection 38-10(1) of the GST Act, or of a kind specified in the A New Tax System (Goods and Services Tax) Regulations 1999

(b)

the supplier is a recognised professional in relation to the supply of services of that kind, and

(c)

the supply would generally be accepted, in the profession associated with supplying services of that kind, as being necessary for the appropriate treatment of the recipient of the supply.

The entity supplies occupational therapy services which are listed at item 11 in the table in subsection 38-10(1) of the GST Act. The entity is a recognised professional, as defined in section 195-1 of the GST Act, in relation to the supply of occupational therapy services. Therefore, the first two requirements in subsection 38-10(1) are satisfied.

The services provided by the entity are generally accepted by the occupational therapy profession as being necessary for the appropriate treatment of the company's employee in their circumstances. However, the third requirement in section 38-10(1) of the GST Act is that there be appropriate treatment of the 'recipient of the supply'. Therefore, it is necessary to determine who the recipient of the entity's supply is.

Section 195-1 of the GST Act defines 'recipient' in relation to a supply to mean 'the entity to which the supply was made'. Where there are only two parties to the supply of health services (the entity that supplies the health service and the patient), generally there is a single supply to which the GST Act applies and the recipient of that supply is the patient.

However, where there is a third party payer involved in a transaction, there may be one or more supplies to which the GST Act applies and it is necessary to determine what is being supplied and to whom. For example, tripartite arrangements may result in a supply of professional services to a third party payer by an entity that supplies health services, with a further supply of treatment services to a patient.

A third party will be the recipient of a supply where:

•

that third party engages the entity to provide something to them or to someone else

•

that third party, by agreement with the entity, determines what is required to be provided to them or to someone else, and

•

there is a binding obligation between that third party and the entity for the thing to be provided and the third party is liable to provide payment.

Where all of the above elements are satisfied there will be a supply made to the third party payer in addition to any supply that is made where a patient receives treatment services.

Generally, where there is a supply made to a third party payer, the arrangements will result in a further supply where a patient receives treatment services. This subsequent supply is considered separately to any supply between the entity that supplies the health service and the third party payer.

The company engages the entity to provide its services. There is an agreement between the company and the entity that requires the entity to assess the needs of an employee of the company who suffers from multiple sclerosis. Under the agreement, the entity is required to provide the outcome of the assessment in a report to the company and the company is obliged to pay for the entity's services. As all the three elements above are satisfied, the recipient of the entity's supply of services is the company and not the employee.

As the recipient of the supply is the company, the services are not provided for the appropriate treatment of the recipient. Rather, the services are provided for the appropriate treatment of the employee. The requirement that there be appropriate treatment of the recipient of the supply is not satisfied. Accordingly, as the third requirement in subsection 38-10(1) of the GST Act is not satisfied, the entity is not making a GST-free supply to the company under subsection 38-10(1) of the GST Act.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free nor input taxed under any other provisions of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when, pursuant to an agreement with the company, it supplies consultancy services.

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   subsection 38-10(1)
   section 195-1

Keywords
Goods and services tax
GST free
GST health
GST supplies & acquisitions
Section 38-10 - other health services
Taxable supply

Business Line:  GST

Date of publication:  25 October 2004

ISSN: 1445-2782