Edited version of private ruling

Authorisation Number: 1011523206923

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Ruling

Subject: GST and supply of health services

Questions

1. Are the supplies of exercise physiology GST-free where Medicare benefit is payable?

Answer: Yes

The supplies of exercise physiology are GST-free where Medicare benefit is payable.

2. Are the supplies of exercise physiology GST-free where Medicare benefit is not payable?

Answer: No

The supplies of exercise physiology are not GST-free where Medicare benefit is not payable. These supplies are taxable.

This ruling applies for the following period

The scheme commenced on

Relevant facts

You operate a health clinic and are registered for GST.

You employ accredited exercise physiologists for the health clinic. They have undertaken university studies in the area of clinical exercise physiology and are required to meet an extensive accreditation process that includes practicum experience in a range of settings and environments.

The exercise physiologists are accredited by the Australian Association for Exercise and Sport Science (AAESS).

The role of the exercise physiologist includes clinical exercise prescription, health education, the delivery of exercise based lifestyle and behaviour modification programs for the prevention and management of chronic diseases and injuries.

The patients are referred by general practitioners (GP) and group services or one on one care is provided.

Some of the exercise physiology services that you provide attract a Medicare Benefit under the 'Allied Health Services Scheme' (AHSS) or 'Team Care Arrangements' (TCA).

Reasons for decision

1. Under Subdivision 38-B of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), certain health services are GST-free. In particular, section 38-7 of the GST Act (the supply of medical services) and section 38-10 of the GST Act (the supply of other health services).

Subsection 38-7(1) of the GST Act provides that a supply of a medical service is GST-free.

The term 'medical service' is defined in section 195-1 of the GST Act as meaning:

· a service for which Medicare benefit is payable under Part II of the Health Insurance Act 1973 (HIA), or

· any other service supplied by or on behalf of a medical practitioner or approved pathology practitioner that is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

The definition of medical service has two limbs. Any service that falls within either the first or the second limb of the definition in section 195-1 of the GST Act is GST-free. For the first limb of the definition, it should be noted that, unlike the second limb, the supply does not have to be made by a medical practitioner or approved pathology practitioner within the meaning of those terms as defined in section 195-1 of the GST Act.

You have advised that patients to whom you supply exercise physiology services can, in some circumstances, claim a Medicare benefit under the AHSS or TCA.

Hence, applying subsection 38-7(1) of the GST Act to the facts of your situation, you make a GST-free supply of exercise physiology services where a Medicare benefit is payable for the services under Part II of the HIA.

You should note that where access to Medicare benefit for allied health services under AHSS is restricted to five times in a calendar year for a particular patient, then there will be no entitlement to Medicare benefit for the sixth and subsequent health services in that year for that person. Where this is the case, then the supply of the sixth and subsequent health services provided to that particular patient cannot be GST-free under subsection 38-7(1) of the GST Act.

Also, it may be possible that the particular patient has seen other allied health professionals in that year and hence, may not be entitled to any further Medicare benefits. This would mean that a supplier of health services could not simply assume that a Medicare benefit is payable (and cannot assume GST-free status) merely because they have not seen that patient on more than five occasions during that year. You should be aware of the number of services your patients can have access to a Medicare benefit because your patient's GP provide a case management plan that lists the number and the type of services that you can provide.

2. You have advised that in some instances patients to whom you supply exercise physiology services are unable to claim a Medicare benefit.

Where no Medicare benefit is payable under Part II of the HIA for the supply of exercise physiology services, for the supply of these services to be GST-free, it must satisfy the second limb of the definition of 'medical service'. Part of that definition requires that the service be supplied by or on behalf of a medical practitioner or approved pathology practitioner.

The terms 'medical practitioner' and 'approved pathology practitioner' are separately defined under section 195-1 of the GST Act to mean a person who is a medical practitioner or an approved pathology practitioner for the purposes of the HIA.

On the information provided, the exercise physiologist is not a medical practitioner or an approved pathology practitioner. Furthermore, the exercise physiologist does not supply its services on behalf of a medical practitioner or an approved pathology practitioner. Therefore, in this instance, the exercise physiology services that you supply are not GST-free medical services under subsection 38-7(1) of the GST Act.

Subsection 38-10(1) of the GST Act provides that a supply of other health services is GST-free where:

· the services are of a kind specified in the table in subsection 38-10(1) of the GST Act (table), or of a kind specified in the regulations

· the supplier is a recognised professional (as defined in section 195-1 of the GST Act) in relation to the supply of services of that kind, and

· the supply is generally accepted in the relevant profession as being necessary for the appropriate treatment of the recipient of the supply.

For a service to be of a kind specified in the table, the service must be the provision of one of the actual services listed and not just something similar to one of the services. At this stage, no regulations have been made under section 38-10 of the GST Act.

The only way the services performed can be GST-free to patients under subsection 38-10(1) of the GST Act is if they are provided by recognised professionals operating within the health services specifically listed in the table. The supply of such services would also have to be generally accepted in the profession associated with suppling services of that kind, as being necessary for the appropriate treatment of the recipient of the supply.

A recognised professional is a person who is registered, permitted or approved under state or territory law to provide the listed health service. If there is no relevant state or territory law, a recognised professional is a member of a professional association that relates to the health service and has the same registration requirements nationally.

Exercise physiology is not a service specified in the table in subsection 38-10(1) of the GST Act. Even if the services of exercise physiology are a technique of a service listed in the table, such as physiotherapy, the services must be provided by a recognised professional in one of the services listed in the table. On the information provided, the only health professionals you employ are degree qualified and accredited exercise physiologists. You do not employ, nor contract the services of any physiotherapists.

As you only supply exercise physiology services and you are not supplying one of the services specified in the table in subsection 38-10(1) of the GST Act, you do not meet all the requirements of subsection 38-10(1) of the GST Act. Hence, the supply of your services is not GST-free under this subsection.

Accordingly, you are not making a GST-free supply of a medical service or any other health service under Subdivision 38-B of the GST Act when you supply exercise physiology services and where no Medicare benefit is payable.

You are registered for GST and supply your services for consideration, in the course of your enterprise and the supply of your services is connected with Australia. Furthermore, the supply of your exercise physiology services is neither GST-free under any other provisions in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, as all the requirements of section 9-5 of the GST Act are satisfied, you are making a taxable supply when you supply exercise physiology services where no Medicare benefit is payable.

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