Edited version of private ruling

Authorisation Number: 1011534665921

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Ruling

Subject: GST and rehabilitation services

Relevant facts and circumstances

You are registered for goods and services Tax (GST).

You advise that you provide health services of a kind specified in the table in subsection 38-10(1) of the A New Tax System (Goods and Services Tax Act) 1999 (GST Act) which form part of your rehabilitation services.

You also advise the following:

· All your health services consultants hold relevant degrees in their discipline and are members of professional associations that have uniform national registration requirements relating to the supply of their services.

· Insurers refer their patients to you but they are not entitled to control the services that you supply to the patients that they refer to you.

· The insurers refer their patients and pay you for assessing the appropriate treatment and for providing appropriate treatment to the patients only.

· You do not provide medico/legal assessments for the patients referred by the insurers. Liability is determined by the Courts and approval of services (where liability is yet to be determined) is provided by the insurers on a 'without prejudice basis'.

· When the insurers refer their patients to you, you contact the patients and provide the allied health services listed in the table in subsection 38-10(1) of the GST Act.

· You are not obliged to accept any referrals from the insurers.

· You neither have verbal nor written agreements/contracts with the insurers.

· The majority of the patients referred to you are paid to you by an insurers

· You provide reports to the insurers in respect of the progress of the patients referred to you. However, you apply GST to such services and as such you do not require a ruling to address this issue.

· The health services listed in the table in subsection 38-109(1) of the GST Act are generally accepted in those professions as being necessary and appropriate treatment of the patients in their circumstances.

· You are a specialist provider in complex disability for patients with catastrophic injury. Distinctive to this area of disability, you provide rehabilitation case management services.

· Rehabilitation case management service has evolved to be a specialist intervention provided to all patients with complex cognitive impairment by recognised health professionals with experience in the particular area of rehabilitation.

· Your health services consultants who are listed in the table in subsection 38-10(1) of the GST Act are required to perform 'transdisciplinary' treatment as part of the supply of rehabilitation case management services. 'Transdisciplinary' treatment is provided to patients and is an extension of the health professionals' specific discipline listed in the table in subsection 38-10(1) of the GST Act.

· Rehabilitation case management services are only provided by qualified health professionals listed in the table in subsection 38-10(1) of the GST Act and it is a direct service to the patient. It is distinct from generic case management which mainly involves administrative duties.

· The rehabilitation case managers must have 'qualifications and experience in health, rehabilitation or disability services specific to the participant'. All your rehabilitation case managers who are listed in the table in subsection 38-10(1) of the GST Act hold qualifications in their individual disciplines. They hold a Bachelor or Masters Degree of applied sciences. As noted earlier all your rehabilitation case managers who are listed in the table in subsection 38-10(1) of the GST Act are members of a professional association that has uniform requirements relating to the supply of their services.

· Rehabilitation case managers do not solely or only attend to paper work. Therefore, it is not to be confused with generic case management which mainly involves administrative duties.

· The rehabilitation case managers are responsible for treatment planning and communication with the patients, their families and individual therapists/therapists/service providers to ensure that treatments are appropriately focussed and continually monitored and or adapted to ensure the patient achieves maximal benefit from the rehabilitation programme. This is essential to the overall rehabilitation programme, as the nature of their cognitive deficits often undermine the patient's ability to benefit from treatment.

· The rehabilitation case managers are responsible for ensuring the patients with complex cognitive impairment are appropriately assessed and are able to contribute to the formulation of their rehabilitation programme.

· The rehabilitation case management services are not provided for the benefit of a third party. This means that the rehabilitation case management services are direct clinical services to the patients and not to the insurers. It is an integral clinical service to the overall rehabilitation process of the patient.

· The rehabilitation case managers who are listed in the table in subsection 38-10(1) of the GST Act make sure that the patients with cognitive impairments carry out the tasks prescribed by other treatment providers listed in the table in subsection 38-10(1) of the GST Act.

· In the above context the rehabilitation case management service is considered in the health profession as being appropriate treatment of the recipient of the supply. The reason being the rehabilitation of patients with acquired specific injury requires very specific clinical reasoning and treatment planning skills and must be provided by appropriately qualified, clinically trained staff whose professions are listed in the table in subsection 38-10(1) of the GST Act with expertise and experience in the treatment of cognitive disorders.

Question

Are the supplies that are listed in the table in subsection 38-10(1) of the GST Act that you provide as part of your rehabilitation services and are paid for by insurers GST-free under subsection 38-10(1) of the GST Act?

Answer: Yes.

Summary

The supplies that are listed in the table in subsection 38-10(1) of the GST Act that you provide as part of your rehabilitation services and are paid for by insurers are GST-free under subsection 38-10(1) of the GST Act.

Detailed reasoning

Subsection 38-10(1) of the GST Act states that a supply is GST-free if:

a) it is a service of a kind specified in the table in this subsection, or of a kind specified in the regulations; and

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.

(*denotes a term defined in section 195-1 of the GST Act)

All of the elements in subsection 38-10(1) of the GST Act must be satisfied in order for a supply of a health service to be GST-free.

Paragraph 38-10(1)(a) of the GST Act

For the purposes of paragraph 38-10(1)(a) of the GST Act, the services must be of a kind specified in the table in subsection 38-10(1) of the GST Act.

In your case, you provide services listed in the table in subsection 38-10(1) of the GST Act as part of your rehabilitation services.

As such, the first requirement in paragraph 38-10(1)(a) of the GST Act is satisfied.

Paragraph 38-10(1)(b) of the GST Act

For the purpose of paragraph 38-10(1)(b) of the GST Act, a recognised professional must provide the service.

Section 195-1 of the GST Act provides the definition of a recognised professional. It provides that a person is a recognised professional, in relation to the supply of a service of a kind specified in the table in subsection 38-10(1) of the GST Act if:

· the service is supplied in a State or Territory in which the person has a permission or approval, or is registered, under a State law or a Territory law prohibiting the supply of services of that kind without such permission, approval or registration

· the service is supplied in a State or Territory in which there is no State law or Territory law requiring such permission, approval or registration, and the person is a member of a professional association that has uniform national registration requirements relating to the supply of services of that kind, or

· in the case of services covered by item 3 in the table - the service is supplied by an accredited service provider with the meaning of section 4 of the Hearing Services Administration Act 1997.

You advise that, in your case, the consultants who provide health services, listed in the table in subsection 38-10(1) of the GST Act, as part of your rehabilitation service are members of their respective professional association that has national registration requirements relating to the supply of services that they provide.

You, therefore, satisfy paragraph 195-1(b) of the GST Act and accordingly you are a recognised professional under paragraph 38-10(1)(b) of the GST Act.

Paragraph 38-10(1)(c) of the GST Act

Whether the requirements in paragraph 38-10(1)(c) of the GST Act are satisfied, will be a question of fact to be determined by reference to the service being supplied. However, it is noted that the GST Act requires that the services that you provide be necessary for the appropriate treatment of the recipient of the supply.

The term 'appropriate treatment' is not defined in the GST Act, and therefore will take its ordinary meaning.

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 allied health service and the patient), generally there is a single supply to which the GST Act applies and the recipient is the patient.

In your case, there are three parties involved in the provision of the allied health services, namely, the insurer, you and the patient. Therefore, we need to consider the supply of your services in the context of tripartite arrangements.

The Australian Taxation Office view with respect to a supply and a tripartite arrangement is explained in Goods and Services Tax Ruling GSTR 2006/9.

Analysing a tripartite arrangement

Paragraphs 114,115 and 116 of GSTR 2006/9 state:

114. In a two party transaction, a thing supplied to an entity is typically also provided to that entity.

115. In more complex arrangements involving more than two entities, which the Commissioner refers to as the tripartite arrangements, analysis may reveal:

· a supply made to one entity but provided to another entity

· two or more supplies made, or

· a supply made and provided to one entity and consideration paid by a third party.

117. As with two party transactions, the GST consequences of tripartite arrangements turn on identifying:

· one or more supplies

· consideration (a payment, act or forbearance)

· a nexus between the supply and the consideration, and

· to whom the supply is made.

Paragraph 117 of GSTR 2006/9 explains that the propositions used to characterise two party transactions hold true for characterising tripartite arrangements.

Propositions 12 and 17 are relevant in the present case.

Proposition 12 provides that transactions that are neither based in an agreement that binds the parties in some way nor involve a supply of goods, services, or some other thing do not establish a supply.

In your case there is no binding obligation between you and the insurer to provide the health services to the patient.

You can either accept or reject a referral from the insurer. Having accepted the referral, you contact the patient and provide the appropriate treatment necessary for those patients. You control the services that are supplied to the patient.

Proposition 14 provides that a third party may pay for the supply but not be recipient of the supply. Example 8 discusses one such arrangement. Paragraphs 193 to 195 state:

196. C, a Government Department, advises the health profession that it will pay for certain health services performed for a class of persons requiring those services.

197. A, a supplier of those health services, supplies a health service to B, who falls within the required class of persons. C pays A for this service. There is no binding obligation between A and C regarding the performance of this service.

198. C is paying for the supply of health services made by A to B. The supply (for the appropriate treatment of B) will be GST-free if the requirements of section 38-10 are met. C is not the recipient of this supply.

We consider that this example is relevant to your particular circumstance. There is no binding obligation between you and the insurer. The insurer is merely a third party payer.

The services that you provide are generally accepted in the various disciplines of the health services as being necessary and appropriate treatment for the client in their circumstances. Therefore, paragraph 38-10(1)(c) of the GST Act is satisfied.

Consequently, your supplies of health services as part of the rehabilitation services that you provide and are paid for by insurers are GST-free under subsection 38-10(1) of the GST Act.

Question 2

Are the rehabilitation case management services provided by the recognised health professionals listed in the table in subsection 38-10(1) of the GST Act GST-free, when they are services of a 'transdisciplinary' nature and are paid for by insurers?

Answer: Yes.

Summary

The rehabilitation case management services provided by a recognised health professional listed in the table in section 38-10 of the GST Act are GST-free as they are services of a kind that are generally accepted within each of the professions as being necessary for the appropriate treatment of the recipient of the supply.

As advised in question 1, in your particular circumstances the services are provided to the patient and not to the insurer.

Detailed Reasoning

To satisfy the requirements of paragraph 38-10(1)(a) of the GST Act, the rehabilitation and case management services must be specified in the table in subsection 38-10(1) of the GST Act or the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations). At this stage, no regulations have been made under section 38-10 of the GST Act.

Rehabilitation case management services are not listed in the table in subsection 38-10(1) of the GST Act. They are not considered as services of a kind specified in the table. Therefore, when provided in their own right, they do not satisfy the requirements of paragraph 38-10(1)(a) of the GST Act.

However, the requirement in paragraph 38-10(1)(a) of the GST Act would be satisfied provided that the recognised health professional in relation to the supply of one or more of the services listed in the table in subsection 38-10(1) of the GST Act supplies the rehabilitation case management services as part of a standard component of the supply of those listed services.

This means, if the rehabilitation case management services are provided as a component of the supply of health services listed in the table in subsection 38-10(1) of the GST Act, the supply will satisfy the requirements of paragraph 38-10(1)(a) of the GST Act.

You advised that:

· The rehabilitation case management services are provided by recognised health professionals, and

· Within each of those professions the services supplied as part of the case rehabilitation management services are of a kind that would be accepted in each of those professions as being necessary for the appropriate treatment of the patient.

Therefore, in your case, based on the information you have provided, you are supplying the rehabilitation case management services to your patients as a standard component of the supply of health services which are listed in the table in subsection 38-10(1) of the GST Act.

As we advised in our answer to question 1, in your particular circumstances the supply of your services is to the patient and not a third party.

As such the rehabilitation case management services provided to patients with cognitive impairment and are paid for by the insurers are GST-free under subsection 38-10(1) of the GST Act.

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