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Ruling

Subject: Goods and services tax (GST) and a supply of salt therapy services

Issue 1

Is the supply of salt therapy services by an Australian entity (you) to customers in Australia GST-free under Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, your supply of salt therapy services to customers in Australia is a taxable supply under section 9-5 of the GST Act and you will be liable to pay GST on the supply.

Relevant facts and circumstances

You are an Australian entity which is registered for GST.

You supply complementary natural salt therapy service to customers in Australia to help relieve symptoms of asthma, hay fever, bronchitis, sinusitis, emphysema, cystic fibrosis and skin conditions.

The salt therapy is designed to relieve congestion, inflammation and allergies of the airways by means of the natural benefits of salt. Natural salt is a natural antihistamine, anti-inflammatory, anti-biotic and when inhaled in a dry form cleanses the respiratory system, detoxifies the body and promotes wellbeing. The salt therapy is delivered in ventilated sterile rooms that replicate salt caves, where individuals just relax and breathe in dry salt air.

The salt therapy is recognised in the Naturopathy profession.

The salt therapy is new to Australia but has much older roots. In ancient Greece, Hippocrates recommended the inhalation of salt water steam for relief from respiratory problems and medieval monks took patients deep into salt caves for therapy, crushing stalactites to infuse the air with fine salt particles. The practice all but disappeared for centuries but became popular first in Europe and then the United States about two decades ago.

Basically the salt therapy is the inhalation of very fine salt particles. In a modern salt therapy session, the client sits in a specially designed room constructed of salt blocks that mimic the interior of a salt cave. In order to infuse the atmosphere with salt particles, specific generators are used to grind salt into very fine particles.

You have rooms for both adults and children that operate at different concentration levels. The salt air will not damage clothing or leave a noticeable residue so no special clothing is required.

The salt machines used to provide the salt therapy -a nebulizer has received an Australian Register of Therapeutic Goods Certificate. The intended purpose of the specific generator is to grind down pharmaceutical salt to an aerosol form and then disperse this aerosol into a well ventilated room for the inhalation of human beings.

The salt therapy is used by people for many reasons. Some use it as a source of complementary treatment for their better well-being, such as seeing a massage therapist or chiropractor on a regular basis. Professional sports people use the salt therapy as assistance to their recovery process.

Medicare benefits are not payable for the salt therapy services.

You also offer consultations with regards to lung functions by means of Spirometry and lung inflammation testing which can then be reported to customer's general practitioner (GP). You have a dedicated member of each centre that will be fully certified to perform these tests. A Medicare rebate is available for Spirometry test.

A beneficiary of the trust (an individual) owns and administrates the salt therapy business.

The individual has completed certain health trainings in Australia: The individual is a full member of the "international institute for complementary therapists". However, the individual is not a naturopath and not a recognised member of an Australian Society.

You have also other employees to help you to provide the salt therapy services. However, they are not members of any professional naturopathy association.

You are in the process of getting private health insurance rebate status with one of the large health insurance providers.

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 38-7

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

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

Reasons for decision

GST is payable on a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:

You make a taxable supply if:

(a) you make the supply for *consideration

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

(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 *input taxed.

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

Based on the facts provided you satisfy the requirements of paragraphs 9-5(a) to 9-5(d) of the GST Act as follows:

· you supply the salt therapy services for consideration; and

· the supply is in the course or furtherance of an enterprise carried on by you;

· the supply is connected with Australia; and

· you are registered for GST.

There are no provisions in the GST Act under which your supply of the salt therapy services to the clients in Australia would be input taxed.

Therefore, what remains to be determined is whether your supply of salt therapy services to clients in Australia is GST-free.

GST-free

The supply of certain 'medical services' and 'other health services' are GST-free under subdivision 38-B of the GST Act.

Medical Service

Under Subdivision 38-B of the 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) are relevant in this case.

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

(b) 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.

Based on the facts provided there is no Medicare benefit payable for the salt therapy services and therefore, the supply does not satisfy the first limb of the definition of 'medical service' in section 195-1 of the GST Act.

Therefore, what remains to be determined is whether the supply satisfies the second limb of the definition of 'medical service' 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.

From the information provided, the individual is not a medical practitioner or an approved pathology practitioner. Furthermore, you and/or the individual do not supply the salt therapy services on behalf of a medical practitioner or an approved pathology practitioner. Hence, the supply of the salt therapy services does not also meet the requirements of the second limb of the definition of 'medical service' in section 195-1 of the GST Act.

Accordingly, the salt therapy services do not satisfy the requirements of definition of medical service in section 195-1 of the GST Act and is not GST-free medical services under subsection 38-7(1) of the GST Act.

Other health services

In addition to medical services, some other health services are GST-free under Subsection 38-10(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:

(a) 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

(b) 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

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

The table referred to lists the following 21 health services as 'other health services':

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 salt therapy is not a service specified in the table in subsection 38-10(1) of the GST Act. Therefore, the supply of the salt therapy does not satisfy paragraph (a) of subsection 38-10(1) 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 the 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.

A health practitioner will only be a recognised professional of a particular health service if they are members of that professional association that has uniform national registration requirements.

The fact sheet 'GST and acupuncture, naturopathy and herbal medicine services' (NAT 8090-10.2008) provides guidance in relation to the requirements for a recognised professional. It states that the naturopath does not need to be approved, permitted or registered to provide naturopathy services in any state or territory but they must be a member of a professional naturopathy association with uniform national registration requirements.

You advised us that the salt therapy is recognised in naturopathy. Naturopathy is a listed health service in the GST Act.

Based on the information provided, an individual is not a member of ATMS and are not accredited with ATMS to provide naturopathy. Therefore, your supply of the salt therapy services does not satisfy paragraph (b) of subsection 38-10(1) of the GST Act.

Furthermore, your supply of the salt therapy services is not necessary for the naturopathy treatment of the recipient of the supply. Hence, your supply of the salt therapy services does not satisfy paragraph (c) of subsection 38-10(1) of the GST Act.

Accordingly, your supply of the salt therapy services do not meet all the requirements of subsection 38-10(1) of the GST Act.

Furthermore, the supply of the salt therapy services by you to customers in Australia does not satisfy any other GST-free provisions.

Therefore, the supply of the salt therapy services by you to customers in Australia is a taxable supply under section 9-5 of the GST Act and you will be liable for GST on that supply.

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