ATO Interpretative Decision

ATO ID 2004/841 (Withdrawn)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• This ATO ID is withdrawn.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 ambulance service, making a GST-free supply under subsection 38-10(5) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when, under an agreement with hospital A, it transfers a patient between hospital A and hospital B?

Decision

No, the entity is not making a GST-free supply under subsection 38-10(5) of the GST Act when, under an agreement with hospital A, it transfers a patient between hospitals.

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

Facts

The entity is an ambulance service. The entity enters into an agreement with a hospital A which creates a binding obligation for the supply of services by the entity as and when requested by hospital A and for payment for those services by hospital A.

Pursuant to the agreement, the entity transfers a patient from hospital A to another hospital, hospital B. The transfer of the patient is in the course of the treatment of the patient and hospital A pays the entity for its services.

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

Reasons for Decision

Subsection 38-10(5) of the GST Act provides that a supply is GST-free if it is provided by an ambulance service in the course of the treatment of the recipient of the supply. Accordingly, for a supply to be GST-free under this subsection, it must be:

(a)

provided by an ambulance service, and

(b)

provided in the course of the treatment of the recipient of the supply.

The entity is an ambulance service and as such, the first requirement is satisfied.

The entity transfers the patient from hospital A to hospital B in the course of the treatment of the patient. As the entity transfers the patient pursuant to an agreement that it has with hospital A, it is necessary to determine whether it is the patient or hospital A that is the recipient of the entity's supply of the ambulance services.

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 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 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 the above elements are satisfied there will be a supply made to the third party payer. There is also a further 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 entity transfers the patient to hospital B pursuant to an agreement that the entity has entered into with hospital A. The agreement creates a binding obligation for the supply of services and payment for those services by hospital A. As such, all the three elements above are satisfied and the recipient of the entity's supply of ambulance service is hospital A and not the patient.

The ambulance services are supplied in the course of treating the patient. However, hospital A is the recipient of the supply. This means that the requirement that the service is provided in the course of treating the recipient of the supply is not satisfied. As the second requirement in subsection 38-10(5) of the GST Act is not satisfied, the entity is not making a GST-free supply under subsection 38-10(5) 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 it transfers the patient between the two hospitals.

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

Keywords
Goods and services tax
GST health
Section 38-10 - other health services
Taxable supply

Business Line:  GST

Date of publication:  25 October 2004

ISSN: 1445-2782