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Ruling

Subject: GST and supply of occupational therapy services

Questions

1. Is your supply of occupational therapy services GST-free?

2. When you travel to the premises of a client to supply your occupational therapy services and charge a fee for the travel, is this travel fee GST-free?

Advice

1. The supply of your occupational therapy services may be GST-free or taxable.

Where your supply of the occupational therapy services is covered by a Medicare benefit, this supply is GST-free under subsection 38-7(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) despite the fact that the fee you charge is in excess of the Medicare benefit schedule fee.

Where your supply of the occupational therapy services is not covered by a Medicare benefit and satisfies all the requirements in subsection 38-10(1) of the GST Act, your supply is

GST-free under that subsection. However, where all the requirements in subsection 38-10(1) of the GST Act are not satisfied, your supply of the occupational therapy services is a taxable supply.

Where your supply of the occupational therapy services is made to an insurer, an operator of a statutory compensation scheme or compulsory third party scheme or an Australian government agency, this supply is GST-free under section 38-60 of the GST Act to the extent that the underlying supply of occupational therapy services to the patient is GST-free under subsection 38-10(1) of the GST Act.

2. The travel is considered to be an integral component of your supply of the occupational therapy services to the clients at their premises.

Where your supply of the occupational therapy services is GST-free (addressed in question 1), the additional amount for the travel is also GST-free.

Where your supply of the occupational therapy services is taxable, the additional amount for the travel is also a taxable supply.

Relevant facts and circumstances

You are an occupational therapist and registered for the goods and services tax (GST).

You are a member of an association of occupational therapists and you are registered with the appropriate agency.

You provide assessment and treatment services for a range of different clients. Your work is varied and depends on each client's need. Examples include:

§ assessment of need to determine requirement for attendance care services, equipment or living environment;

§ assessment and prescription of wheelchair and seating systems;

§ assessment and provision of equipment to aid with activities of daily living, for example commodes, hospital beds;

§ assisting clients to transition from supported living to independent living;

§ assisting clients to engage in meaningful work or volunteer activities;

§ supporting clients to access holidays with care and equipment provided;

§ training care staff in manual handling and client care needs.

You have many patients with acquired brain injury, spinal injuries, cerebral palsy, muscular dystrophy, multiple sclerosis, other neurological disorders and diseases, and you provide assessment and treatments services to them. You assess the patients' functional abilities, living environment, community access needs, and equipment needs to promote independence and meaningful engagement in activities of daily living.

You generally see your patients in their own homes, nursing homes or supported living environments. You never see patients in your office. Further, you often charge for your travels in order to provide your occupational therapy services at their premises.

Supply to funding bodies/organisations

You are contracted by funding bodies/organisations(clients) which include an insurer, an operator of a statutory compensation scheme or compulsory third party scheme or an Australian government agency) for your services. You invoice them for your services and the payments are not covered by a Medicare benefit.

You are required to provide written reports with goals for treatment for the patients who were referred to you by the funding bodies/organisations as part of your duty. The reports are part of the whole approach to treatment and you work with the patient on achieving set goals while you liaise with team members of the funding bodies/organisations

Most of the patients with complex needs have a treating team which is made up of health professionals. You provide your report and liaise with the health professionals in the treating team as a close liaison with the health professionals is imperative for providing consistent treatment and developing goals for treatment.

The health professionals in the treating team have not contracted you for your services. It is the funding bodies/organisations who have contracted the health professionals for their services and you are working collaboratively with them since you are all working with the same patient hence ensuring that the patient receives consistent treatment.

The purpose of these reports is to provide detailed information to ensure treatment is consistent across the treating team. They are also required to ensure accountability for goals set and provide a structured framework for treatment. Reports are required to ensure funding is received for equipment provision and treatment of the patient and to ensure, that staff are safe in working with the patient.

You also provide more formal reports detailing the patient's functional abilities. In this instance, you are not working with the patient after submitting your report. This situation occurs very rarely.

Supplies to individuals

Some individuals are usually eligible to receive funding for purchase of equipment from an equipment funding body. In order to receive funding, a detailed equipment request report is required from you, explaining the individual's functional needs. You will invoice the individual directly for your service and the fee you charge is partly covered by a Medicare benefit and the excess amount is paid by the individual.

In other instances, where you are contacted to work for an individual, you will invoice the individual directly. The fee is generally not covered by a Medicare benefit. The individual does not require the report but they will pay for it. It is usually by a third party that requires the report and you will send the report to them at the request of the individual. You are still involved with the treatment of the individual after submitting your report to the third party. This is to ensure the individual and staffs are safe, treatment is consistent and goals are attained. The report may also be something the individual then uses to receive funding for equipment or to facilitate changes to their living situation.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999, Section 9-15

A New Tax System (Goods and Services Tax) Act 1999, Subsection 38-7(1)

A New Tax System (Goods and Services Tax) Act 1999, Subsection 38-10(1)

A New Tax System (Goods and Services Tax) Act 1999, Section 38-60

A New Tax System (Goods and Services Tax) Act 1999, Section 195-1

Reasons for decisions

Question 1

GST is payable on a taxable supply. You make a taxable supply under section 9-5 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) if:

(a) you make the supply for consideration; and

(b) the supply is made in the course of an enterprise that you carry on; and

(c) the supply is connected with Australia; and

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

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

Your supply of the occupational therapy services satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act as:

(a) you make the supply for consideration;

(b) your supply is made in the course of an enterprise (business) that you carry on;

(c) your supply is connected with Australia as it is done through a business that you carry on in Australia and

(d) you are registered for GST.

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

There are no provisions in the GST Act that make your supply of occupational therapy services input taxed. The next step is to determine whether this supply is GST-free.

GST-free supply

Subdivision 38-B of the GST Act outlines the supplies of health services and goods which are GST-free. Relevant to your supply of occupational therapy services is subsection 38-7(1) and subsection 38-10(1) of the GST Act.

Subsection 38-7(1) of the GST Act

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

The definition of a medical service in section 195-1 of the GST Act includes a service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973. The second limb of this definition only applies when the medical service is supplied by (or on behalf of) a 'medical practitioner' or 'approved pathology practitioner' (and other requirements are satisfied).

In regards to where the actual fee is higher than the Medicare benefit schedule fee, chapter 1.a.8 of the Health Industry Partnership Issues Register (available at www.ato.gov.au) states:

1.a.8 Is the gap between the schedule fee and the actual fee subject to GST?

The gap will be GST-free if the service is one for which a Medicare benefit is payable. The fact that the amount charged is in excess of the schedule fee will not alter the GST-free status of the service.

You advised that the fees you charged to the individuals are partly paid by a Medicare benefit and partly by the individuals. In this instance, your supply of the occupational therapy services is

GST-free under subsection 38-7(1) of the GST Act where a Medicare benefit is payable for the service despite the fact that the amount you charge is in excess of the Medicare benefit schedule fee.

This position does not change whether the particular report you write as a result of your supply of occupational therapy services is provided to the individual or directly or indirectly to a third party.

Where no Medicare benefit is payable, your supply of occupational therapy services must be considered under subsection 38-10(1) of the GST Act.

Subsection 38-10(1) of the GST Act

A supply of health service is GST-free when it satisfies all the requirements in subsection 38-10(1) of the GST Act.

The requirements of subsection 38-10(1) of the GST Act are:

(a) the service is specified in the table in this subsection, or in the GST regulations; and

(b) the supplier is a recognised professional for the services in question; and

(c) the supply would generally be accepted, in the supplier's profession, as being necessary for the appropriate treatment of the recipient of the supply.

Accordingly, the next step is to examine each requirement of subsection 38-10(1) of the GST Act in order to establish whether your supply of the occupational therapy services is GST-free.

Requirement (a) - the service is specified in the GST Act or Regulations

Item 11 in the table of paragraph 38-10(1)(a) of the GST Act specifies 'occupational therapy' for the purposes of this paragraph. As you provide occupational therapy services, requirement (a) is satisfied.

Requirement (b) - the supplier is a recognised professional

To supply GST-free occupational therapy services, you must be a recognised professional for the services you provide.

Under section 195-1 of the GST Act a recognised profession is a person who is registered, permitted or approved under a 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.

You advised that you are registered with the appropriate agency and a member of the association of occupational therapists. In this instance, requirement (b) is satisfied.

Requirement (c) - the supply is treatment appropriate to the recipient

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.

Supply to be generally accepted

For a supply to be generally accepted, the particular service being provided (in this instance occupational therapy) and the circumstances in which it is provided must be generally accepted as appropriate in the occupational therapy profession. That is the occupational therapy profession ultimately determines which services are generally accepted as appropriate supplies of occupational therapy.

Appropriate treatment

In addition, the service must be for the appropriate treatment of the recipient. A treatment is appropriate where the professional assesses the recipient's state of health and determines a course of action intended to preserve, restore or improve the physical well being of the recipient. An appropriate treatment is a part of this course of action and any subsequent supplies in the same process.

However, not all consultations are treatments. If the professional consults a patient for the purposes of preparing a report, this is not treatment, and nor is the preparing of the report itself. For example an insurance company is a third party and may be the actual recipient of the supply where an assessment of a person is made for insurance purposes and there is no appropriate treatment involved.

Consultations that do not involve appropriate treatment do not satisfy requirement (c). For example if an examination and report completion is undertaken as a requirement of the Regulatory Authority or State or Federal law, the examination is not considered to constitute appropriate treatment for the recipient of the supply.

Recipient of the supply

A supply of health service is generally GST-free when supplied to the individual requiring that treatment or specific health services. Therefore, it is necessary to determine the recipient of the supply made by the health practitioner.

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

When there are two parties to a supply of health services (the health practitioner and the patient), the patient is generally the recipient of the supply. However, the recipient of the supply may not be the patient if there is a third party involved in the transaction.

Where the third party involved is only paying the health practitioner on behalf of the patient for the supply of health services made to the patient, the patient is still the recipient of the supply. For example, a parent pays for the occupational therapy services you have made to their child for their appropriate treatment. In this instance requirement (c) will be met as the child is the recipient of the supply. Your supply will be GST-free under subsection 38-10(1) of the GST Act. This is because section 9-15 of the GST Act provides that it does not matter whether payment is made by the recipient or by another party.

However, in some cases the third party is not only providing payment for the supply of the health services but is in fact the recipient of that supply. Under multi-party arrangements, we consider that a third party is the recipient of a supply when:

§ the third party engages you to make, or to be available to make, a supply to them or to someone else; and

§ that third party, by agreement with you, determines the nature of the supply to be made to them or to someone else; and

§ there is a binding obligation between that third party and you for the supply and the third party is liable to provide payment.

Where all of the above elements are satisfied there will be a supply made by the health practitioner to the third party in addition to any supply that is made where a patient receives the health services. In this instance, the supply to the third party by the health practitioner is a business to business transaction as the third party is the recipient of the supply. Hence, the supply to the recipient is not for the 'appropriate treatment of a patient' and requirement (c) is therefore not met. The supply made by the health practitioner to the third party is not GST-free under subsection 38-10(1) of the GST Act.

However, from 1 July 2012 section 38-60 of the GST Act provides that where a supply of a health service made to an individual is a GST-free supply of health service that supply will also be

GST-free where the recipient of the supply is either:

§ an insurer settling a claim under an insurance policy;

§ an operator of a statutory compensation scheme;

§ an operator of a compulsory third party scheme;

§ an Australian government agency.

Application of requirement (c) and summary of subsection 38-10(1) of the GST Act

Supply to individuals

Where your supply of the occupational therapy services (including medical examination and writing of the report) is accepted in the occupational therapy profession as necessary and appropriate to treat the individual who is the recipient of your services, your supply of occupational therapy services is GST-free under subsection 38-10(1) of the GST Act.

However, where your supply of occupational therapy services is for the purposes of preparing a report and the actual preparation of the report is to be used for other purposes other than the individual receiving appropriate treatment from you, requirement (c) in subsection 38-10(1) of the GST Act is not met. In this instance, your supply of occupational therapy services to the individual is not GST-free under subsection 38-10(1) of the GST Act. Your supply will be a taxable supply.

In both situations, the position does not change whether the particular report is provided to the individual or directly or indirectly to a third party.

Supply to funding bodies

When you make supplies of the occupational therapy services to the funding bodies, the funding bodies are the recipients of your supplies since there is a binding obligation between you and them when the funding bodies engage you for your supplies and the funding bodies are liable to make payments to you.

We understand that you provide your reports to other health professionals engaged by the funding bodies and liaise with them while working with the patient. In this instance, the funding bodies are still the recipient of your supply since the health professionals in the treating team did not contract you for your services. The purpose of you liaising and exchanging of information with the health professionals in the treating team is to ensure a consistent treatment is provided to the patient and develop goals for treatment.

As your supply of the occupational therapy services is made to either an insurer, an operator of a statutory compensation scheme or compulsory third party scheme or an Australian government agency, your supply of the occupational therapy services in this instance is GST-free under section 38-60 of the GST Act to the extent that the underlying supply of occupational therapy services to the patient is GST-free under subsection 38-10(1) of the GST Act.

The underlying supply of occupational therapy services to the patient is GST-free under subsection 38-10(1) of the GST Act where the supply of occupational therapy services (including examination and report writing) is directly related to the treatment services you are providing to the patient and the service is accepted in the occupational therapy profession as necessary and appropriate to treat the patient.

However, where the outcome of your supply of occupational therapy services to the funding bodies is undertaken to be used for other purposes other than the patient receiving appropriate treatment from you (for example, the purpose of the report is to provide detailing instructions for the carers in order to ensure their safety during their daily activities), requirement (c) in subsection 38-10(1) of the GST Act is not met since there is no 'appropriate treatment of the recipient of the supply' involved when the supply is made. In this instance, your supply of the occupational therapy services to the funding bodies is not GST-free under subsection 38-10(1) and section 38-60 of the GST Act.

Question 2

For GST purposes, a mixed supply is a supply that has to be separated or unbundled as it contains separately identifiable taxable and non-taxable parts that need to be individually recognised.

Where a supply contains a dominant part and the supply also includes something that is integral, ancillary or incidental to that dominant part, then the supply is a composite supply. A composite supply is the supply of a single thing. For GST purposes, a composite supply is either a taxable or non-taxable supply.

Goods and Services Tax Ruling (GSTR 2001/8) which is available at www.ato.gov.au explains how to identify a mixed or composite supply. In regards to a composite supply paragraphs 58 and 59 of GSTR 2001/8 state:

58. You will need to consider all of the facts to determine whether the supply that you make has any parts that are integral, ancillary or incidental.

59. No single factor (by itself) will provide the sole test you use to determine whether a part of a supply is integral, ancillary or incidental to the dominant part of the supply.

Having regard to all the circumstances, and taking a commonsense and practical approach, indicators that a part may be integral, ancillary or incidental include where:

· you would reasonably conclude that it is a means of better enjoying the dominant thing supplied, rather than constituting for customers an aim in itself; or

· it represents a marginal proportion of the total value of the package compared to the dominant part; or

· it is necessary or contributes to the supply as a whole, but cannot be identified as the dominant part of the supply; or

· it contributes to the proper performance of the contract to supply the dominant part.

In regards to a health practitioner charging the patient a higher fee because of the requirement to travel to another place for that treatment, chapter 2.a.20 of the Health Industry Partnership Issues Register states:

Where the practitioner is required to travel to the premises of a client and it is an integral component of the appropriate treatment that the service is to be performed at those premises, any additional charge for the reason that the practitioner is required to perform those services at those premises will be embodied in the supply of that that service being a medical or other health service. Accordingly, the additional amount will be GST-free provided all of the other necessary elements of sections 38-7 or 38-10 are met.

An example of where travelling to a patient's premises will be part of the appropriate treatment is where a patient is immobilised due to back injury and a 'recognised profession' in physiotherapy' travels to the patient's resident to provide the appropriate treatment.

Another example is where an occupational therapist travels to a patient's employment premises to consider and advise upon the physical work environment of the patient as part of the appropriate treatment of the patient.

Where the practitioner undertakes travel to provide the treatment as a matter of convenience, then that component of the supply is not GST-free. Section 9-80 is applicable as it relates to 'The value of taxable supplies that are partly GST-free or input taxed'.

In your circumstance, the travel to the premises of the patients is necessary in order for you to be able to provide your supply of occupational therapy services to the patients. In this instance, we consider your travel to the premises is an integral component of your supply of occupational therapy services made to the clients. Accordingly, any additional charge for the reason that you are required to be able to perform your services at the patient's premises will be embodied in your supply of occupational therapy services made to the clients since you are considered making a supply of a single thing (supply of occupational therapy services) in this circumstance.

Accordingly, where your supply of the occupational therapy services to the clients is GST-free, the travel that you make to provide this supply is also GST-free.

However, if at any time you undertake the travel to provide the treatment as a matter of convenience, then the travel time is no longer a component of the supply of the occupational therapy services that you make to the client/patient. The travel fee will be consideration for a taxable supply and you will be liable to pay GST for the travel fee.

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