Edited version of private ruling

Authorisation Number: 1011571033918

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Ruling

Subject : GST and supply of medical services and equipment

Question 1:

Are you making Goods and Services Tax (GST) free supplies in relation to your conducting of home-based Service 1 studies?

Answer:

No.

Question 2:

Are you making GST-free supplies when you provide reports on Service 1 to Dr X trading as entity D?

Answer:

No.

Question 3:

Are you making GST-free supplies when you sell or hire medical aids, appliances and accessories which:

· are listed in Schedule 3 to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) or Schedule 3 to the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), or

· are not listed in Schedule 3 to the GST Act or Schedule 3 to the GST Regulations?

Answer:

For those medical aids, appliances and accessories which are listed in Schedule 3 to the GST Act or Schedule 3 to the GST Regulations the supply is GST-free.

For those medical aids, appliances and accessories which not are listed in Schedule 3 to the GST Act or Schedule 3 to the GST Regulations the supply is not GST-free.

Question 4:

Are you making GST-free supplies when you supply spare parts specifically designed for GST-free medical aids and appliances?

Answer:

Yes

Question 5:

Are you making GST-free supplies when you provide labour to service and calibrate GST-free medical aids and appliances?

Answer:

No

Relevant facts and circumstances

You are registered for GST

You are required to be registered for GST as your annual GST turnover exceeds the threshold of $75,000

You hold a Bachelor degree in a service (Service 2) that is listed in the Table in section 38-10 of the GST Act.

Service 1 is not listed in the Table in section 38-10 of the GST Act.

You are a member of an association which covers Service 1.

We have obtained information from that association that there is no regulation or registration requirements for Service 1.

Furthermore, the providers of Service 1 have a background in science/biology rather than Service 1.

Obtaining a Medicare referral is not necessary except where the practitioner wants to access the Medicare system by performing studies which are interpreted and reported on by a physician (Medicare Item 12203)

In these cases however it is the physician who receives the benefit and he/she effectively 'shares' that benefit with you

Your rooms are not associated with a medical practitioner's surgery or rooms

You sell and hire the medical aids, appliances and accessories.

As part of your enterprise you also service, maintain and calibrate medical aids, appliances and accessories for your customers. Your customers may either seek these services direct or from a referral by a medical practitioner.

Scenario A:Testing for disorders using a device which you own on individuals referred to you by medical practitioners:

You have supplied a copy of an unsigned and undated contract (the Agreement) which refers to the sale to you of a Device from a medical practitioner (Dr X)

In this Agreement Entity D undertakes to 'organise scoring and reporting' of all studies undertaken by you for a number years from the date of the contract.

You conduct the studies as a result of referrals by independent medical practitioners to you directly or to Dr X.

The conducting of a study involves you seeing the patient and teaching them how to set up the device in their own home.

As at the time of your Ruling request, you send all your raw data produced by the device to Entity D for analysis.

You have advised that this is not a contractual arrangement - you do have the ability to use another site's software and/or another physician if that option were available.

The analysis of your data produced by Entity D's software, which you access by logging into Entity A's server from your office, enables you to produce a report for use by Dr X (Part A report).

Dr X uses your Part A report and their own expertise to produce their section of the final report. Together these two parts are sent to the referring doctor as a final report, being a diagnosis of and recommended treatment for the patient's condition.

The Agreement between you and Entity D does not specify any charges for your services, and you have stated that the charges you currently make are the result of an informal agreement between you and Entity D.

Scenario B: Producing reports for Entity D which are not linked to a study conducted by

you

You have advised that you also score and report on sleep studies (conducted by Entity D) on patients who you have not personally seen.

You receive $X from Entity A for each study on which you report, invoiced to them in your name.

Scenario C: Selling or hiring equipment to individuals with the disorder

You have advised that you also sell or hire out equipment in your own right in the course of treating the disorders.

When a patient's physician or GP has recommended a form of treatment, he/she can refer the patient to you for the treatment to be undertaken.

You provide instruction to the patient as to the setting up and use of the equipment, and then the patient attends at your premises for reviews.

If it is decided by the GP and patient to continue the treatment, the patient can hire or buy equipment from you.

You also carry out maintenance, calibration and repair on the medical equipment that you sell or hire to your customers. Your customers will seek these services from you either direct or by way of a referral from a medical practitioner.

Relevant Legislative Provisions

A New Tax System (Goods and Services Tax) Act 1999 Schedule 3

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 Division 38

A New Tax System (Goods and Services Tax) Act 1999 section 38-7

A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-10(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-10(1)(b)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 38-10(1)(c)

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-45(1)

A New Tax System (Goods and Services Tax) Regulations 1999 Schedule 3

Health Insurance Act 1973 subsection 3(17)

Reasons for decisions

Detailed reasoning

Under section 9-40 of the GST Act, you must pay the GST payable on any taxable supply that you make.

A taxable supply is defined by section 9-5 as follows:

You make a taxable supply if

(a) you make the taxable supply for consideration

(b) the supply is made in the course or furtherance of an enterprise that you carry on in Australia

(c) the supply is connected with Australia, and

(d) you are registered or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input-taxed.

The supplies which you make fulfil all the positive requirements for Section 9-5, so it is a question of whether they are GST-free or input-taxed.

GST-free supplies

Division 38 of the GST Act specifies what supplies are GST-free within the meaning of section 9-5.

Scenarios A and B

The relevant sections within subdivision 38-B are sections 38-7 and 38-10 which relate to medical services and other health services respectively.

38-7 Medical services

(1) A supply of a ^*medical service is GST-free.

(2) However, a supply of a ^*medical service is not GST-free under subsection (1) if:

(a) 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 1973 (other than the prescribed circumstances set out in regulations 14(2)(ea), (f) and (g)); or

(b) 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. 

* denotes a term defined in the Dictionary, starting at section 195-1 of the GST Act.

'Medical services' are defined in section 195-1 of the GST Act to mean:

(a) a service for which medicare benefit is payable under Part II of the Health Insurance Act 1973; or

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

'Medical practitioner' is further defined to mean a person who is a medical practitioner for the purposes of the Health Insurance Act 1973 (HI Act).

The Commissioner has issued a fact sheet: GST and medical services (NAT 4649-07.2010) which provides guidance on what constitutes a supply of medical services.

Where a Medicare benefit is payable for the service then the supply is GST-free.

Where there is no Medicare benefit for the service then the supply will be GST-free under section 38-7 if and only if a medical practitioner performs it or it is performed on his/her behalf, and it is generally accepted by the medical profession as a necessary and appropriate treatment for the patient'.

You are not a medical practitioner for the purposes of the HI Act, and a Medicare benefit is not payable for your services.

Therefore you need to show firstly that your services are performed 'on behalf of' a medical practitioner, and also that they are 'generally accepted by the medical profession as a necessary and appropriate treatment for the patient'.'

Do you supply your services on behalf of a medical practitioner?

Subsection 3(17) of the HI Act states that:

a service is taken to be rendered on behalf of a medical practitioner if, and only if:

(a) it is rendered by another person who is not a medical practitioner, and who provides the service, in accordance with accepted medical practice, under the supervision of the medical practitioner; and

(b) it is not a service of a kind specified in regulations made for the purposes of this paragraph.

The Commissioner's Fact Sheet states that services will be performed on behalf of a medical practitioner where:

· the service is billed in the name of the medical practitioner

· it is part of the health service provided by the practitioner; and

· the practitioner is involved in at least part of the particular health service.

The example given in the Fact Sheet is that of a nurse in the medical practitioner's surgery, who performs medical procedures in the course of the practitioner's treatment of the patient. The nurse does not charge the patient separately, and she is an integral part of the practitioner's on-site treatment process, for which the practitioner charges on one account.

Considering the first two scenarios described:

Scenario A: Testing for disorders using a Device which you own on individuals referred to you by medical practitioners:

Service 1 which you supply does not satisfy the first requirement of the Commissioner's Fact Sheet because you charge independently from the referring doctor, in your own right and not on behalf of Dr X or any other medical practitioner.

Secondly, although you have an agreement with Entity D regarding the use of the equipment which you acquired from that entity, and the entity has provided you with guidelines as to the correct procedures for using this equipment in the carrying on of your practice, we do not consider that this amounts to supervision of the performance of your services by Dr X as is required by subsection 3(17) of the HI Act.

The other requirement of the second limb of the definition of medical service is that the supply is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

Appropriate treatment is established where a practitioner assesses the recipient's state of health and determines a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of the recipient and includes subsequent supplies for the assessed process.

The Australian Oxford Dictionary, 2002, Oxford University Press, Melbourne defines treatment as,

inter alia, the application of medical care or attention to a patient'.

You provide the information which allows a physician to make a report regarding the diagnosis and treatment of a particular patient of theirs. Your services do not amount to treatment of these individuals, even though they are a component part of the physician's treatment of them.

Therefore, we do not agree that your services amount to 'treatment' of the recipients of your supply of Service 1.

Because we consider that you fail to satisfy all requirements as discussed, we consider that these particular supplies are not GST-free under Section 38-7 of the GST Act as 'medical services'.

Scenario B: Producing reports for Dr X which are not linked to a study conducted by you

Medical reports you supply to Entity D are billed by you to Entity D at the agreed rate of $X per report

We understand that there is no Medicare benefit payable for the reports supplied by you to Entity D. As such, the service does not fall within the first limb of the definition of medical service as provided in section 195-1 of the GST Act.

Therefore, it is necessary to determine whether you are making a supply under the second limb of the definition of medical service provided in section 195-1 of the GST Act, i.e. whether you are making a supply which is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

Section 195-1 of the GST Act defines 'recipient' in relation to a supply to mean the entity to which the supply was made.

In this scenario Entity D is the recipient of the supply of your services.

As such, you are not supplying 'appropriate treatment' to Entity D, the recipient of the supply, which is incapable by its very nature of 'receiving appropriate medical treatment'. Therefore, you are not making a GST-free supply under subsection 38-7(1) of the GST Act where you are contracted to supply your services to Entity D.

Conclusion

We have reached the conclusion that your services as described in scenarios A and B are not 'medical services' for the purpose of Section 38-7 of the GST Act.

Other health services

Section 38-10 of the GST Act deals with situations where a 'health service' other than a medical service will be GST-free:

38-10 Other health services

(1) 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.

Health services
Item	Service
1	Aboriginal or Torres Strait Islander health
2	Acupuncture
3	Audiology, audiometry
4	Chiropody
5	Chiropractic
6	Dental
7	Dietary
8	Herbal medicine (including traditional Chinese herbal medicine)
9	Naturopathy
10	Nursing
11	Occupational therapy
12	Optometry
13	Osteopathy
14	Paramedical
15	Pharmacy
16	Psychology
17	Physiotherapy
18	Podiatry
19	Speech pathology
20	Speech therapy
21	Social work

Section 38-10 of the GST Act requires that the service/supply

i) must be of a kind specified in the table at paragraph 38-10(1)(c);

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

iii) the supply must be generally accepted in the relevant profession as being necessary for the appropriate treatment of the recipient of the supply (as defined in section 195-1).

Section 38-10(i): Meaning of 'a service of a kind specified in the table'

The Health Industry Partnership - Issues Register (the Register) includes a discussion of the Commissioner's view on subdivision 38-B of the GST Act, prepared and updated in consultation with the health sector.

The Register states that:

to qualify the service must be the provision of one of those actual services listed and not just something similar to one of the services. Support for this argument is found in the Table where it lists both 'Audiology' and 'Audiometry' at Item 3. If it were intended that it was sufficient that the supply of a service be simply similar to one mentioned in the table, one of the terms 'Audiology' or 'Audiometry' would be superfluous. Similarly, further down the table there is the inclusion of 'traditional Chinese herbal medicine' under 'Herbal medicine' in Item 8 of the table. One of these terms would be superfluous if the list was not strictly interpreted as the actual service listed in the table.

There are no relevant regulations for the purposes of determining the GST status of 'other health services' which are not listed, and therefore the services listed in section 38-10 of the GST Act are the only services which are GST-free.

The Table does not specifically include services of the kind you supply.

We consider that the only one of the listed services (Item X) may be applicable to your circumstances and activities.

The Register provides some examples of how to interpret this part of section 38-10 of the GST Act.

In particular, it discusses whether massage therapy would be GST-free. In answer to that question, it states that massage therapy could be provided as a component or the whole of a number of the listed services: Physiotherapy, Acupuncture, Chiropractic, Nursing, Occupational Therapy, etc.

This view of interpreting section 38-10 of the GST Act suggests that the service being provided needs to be at least a component part of one of the listed services.

In your case, we need to determine whether the diagnosis/treatment of the disorders is an accepted and normal part of the practice of Item X.

You are a trained practitioner of Item X.

Although we agree that the service you provide is now an accepted field of medical practice, it is generally associated with medical practitioners or scientists/technicians, not practitioners of Item X.

Conclusion

In this event, we consider that your activities do not fall within the broad category of Item X, and that therefore they do not satisfy paragraph 38-10(1)(a) of the GST Act.

Section 38-10((1)(b): Meaning of 'the supplier is a recognised professional'

The Register states that:

Section 38-10(1)(b) requires the supplier of the service of the kind specified in the Table to be a recognised professional. Recognised professional is defined in section 195-1 of the GST Act as:

'... a person is a recognised professional, in relation to the supply of a service of a kind specified in the table in sub-section 38-10(1), 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, or

· 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 within the meaning of section 4 of the Hearing Services Administration Act 1997.'

In relation to paragraph (a) above, many State and Territory laws regulate the registration of persons for the services listed in the Table. It is considered that the word 'prohibiting' includes a law that regulates the holding out of the provision of certain services. Such restrictions will be sufficient for the purposes of paragraph (a) of the definition of 'recognised professional' and to constitute an act 'prohibiting the supply'.

Where a person other than the recognised professional provides a component of the supply, for section 38-10 of the GST Act that component will not be GST-free unless that person is also a recognised professional, or the component of the supply is directly supervised by the recognised professional or is GST-free under another provision. It is considered that a person will be directly supervised where the recognised professional:

· attends the patient at the commencement of the treatment and at the subsequent commencement of each new treatment,

· is readily available for the whole of the time that the assistant is working with the patient,

· that the recognised professional be available to take appropriate action in the case of an emergency,

· determines all of the appropriate treatment to be provided by the assisting person, and

· can satisfactorily prove that they monitor the services of the unqualified staff.

You have advised that you are a member of an association (Association 1) for the purposes of Service 1 and that because of this you are a recognised health professional. You are also a member of another association (Association 2) which covers Service 1.

The President of Association 1 has advised us that there is currently no regulation, restriction or registration requirements for the practice of Service 1 in Australia. Neither Association 1 or Association 2 have "uniform national registration requirements".

Accordingly, we cannot rule that you are a 'recognised professional' for the purposes of section

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

Section 38-10(1)(c) of the GST Act: Meaning of '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 third requirement is that the service must be generally accepted in the professions associated with supplying services of that kind as being necessary for the appropriate treatment of the recipient of the supply. 'Appropriate treatment' is not defined in the GST Act.

We consider that 'appropriate treatment' will be established where the recognised professional assesses the recipient's state of health and determines a process to pursue, in an attempt to preserve, restore or improve the physical or psychological wellbeing of that recipient insofar as that recognised professional's particular area of training allows and will include subsequent supplies for the determined process.

'Appropriate treatment' includes the principles of preventative medicine. Such treatment must be generally accepted in the profession associated with supplying services of that kind, as being necessary. 'Appropriate treatment' will not include supplies undertaken for a third party, which does not encompass treatment.

As can be seen from the above, the words 'appropriate treatment' are interpreted the same way for section 38-10(1)(c) of the GST Act as the term appears in the definition of 'medical service' for section 38-7 of the GST Act.

Accordingly, the services which you supply to clients in your own right are not considered to be GST-free under section 38-10 of the GST Act.

Conclusion

We have reached the conclusion that your services as described in Scenarios A and B are not 'other health services' for the purposes of section 38-10 of the GST Act.

You are registered for GST and the described supplies satisfy the other positive limbs of section 9-5 of the GST Act.

These supplies are not GST-free under division 38 of the GST Act nor input-taxed under division 40 of the GST Act.

Therefore, you are making taxable supplies for the purposes of section 9-5 of the GST Act when you undertake to supply Service 1 or provide a report, under your agreement with Entity D, to enable Entity D to conduct medical examinations on and determine appropriate treatment for its patients.

Scenario C: Sale, hire and repair of medical aids and appliances

Sale and hire of medical aids and appliances

You have advised that you supply medical appliances and accessories, by way of sale or lease, in the manner described in Scenario C.

Supplies of certain medical aids and appliances are GST-free where the requirements of subsection 38-45(1) of the GST Act are met.

Those requirements are:

the item must be covered by Schedule 3 to the GST Act or specified in

Schedule 3 to the GST Regulations

· the item must be specifically designed for people with an illness or disability, and

· the item must not be widely used by people without an illness or disability.

You have advised that you sell and/or hire the following a number of products as part of your enterprise.

Some of those are covered by Schedule 3 to the GST Act, are specifically designed for people with an illness or disability and not widely used by people without an illness or disability.

Therefore, as all of the requirements under subsection 38-45(1) of the GST Act have been satisfied the sale or hire of these products is GST-free.

For those products not listed in Schedule 3 to the GST Act and not covered by Schedule 3 to the GST Regulations, subsection 38-45(1) of the GST Act is not satisfied and hence your sale or hire of these products is taxable.

Repair, maintenance and calibration of medical aids and appliances

You also carry out maintenance, calibration and repair on medical equipment that you sell or hire. This service includes both a labour component and the supply of spare parts to the medical aids and accessories.

The supply of spare parts will be GST-free only if they are specifically designed and supplied as spare parts for medical aids or appliances that are GST-free under subsection 38-45(2) of the GST Act. Furthermore, if you are repairing a GST-free medical aid or appliance with a part that is specifically designed, any incidental labour or incidental parts that are not specifically designed are also GST-free.

The supply of parts and the labour to repair and maintain medical aids and appliances will be taxable where -

· the part is not specifically designed as a spare part for a GST-free medical aid or appliance and which are not merely incidental to the supply of GST-free specifically designed spare parts;

· consumables, such as oil or glue, which are used in the repair or service that are not merely incidental to the supply of the GST-free specifically designed spare part;

· specifically designed spare parts for the GST-free medical aid or appliance that is merely incidental to the supply of the labour component of the repair service (that is, where the main supply is labour); or

· the labour component of the repair service where it is not merely incidental to the supply of a specifically designed spare part for the GST-free medical aid or appliance.

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