Edited version of your private ruling

Authorisation Number: 1012473298014

Ruling

Subject: GST and agency

Question

Are you acting as an agent for the health care provider for goods and services tax (GST) purposes when you collect and bank the patient fees into a clearing account under your name?

Advice

Yes, based on the information provided, you are acting as an agent for the health care provider for GST purposes when you collect and bank the patient fees into a clearing account under your name.

Relevant facts

You operate a health facility in Australia and are registered for GST.

You are responsible for the provision of professional rooms, health assistants, health equipment, supplies, office administration systems and procedures, collection of fees from patients and other matters (facilities) in relation to the operation of the health facility. You do not provide any medical services to patients.

The health care providers operating from the health facility are not your employees and they are all registered for GST either personally or through a related entity. They are all appropriately qualified to be accepted as recognised professionals in their field of health services. They do not provide any services to you.

As consideration for the provision of facilities, you receive a facility fee which is a percentage of the patients' fees received by the health care provider. Each health care provider is paid for the services that they personally provide to the patients.

You bank the patients' fees into a clearing account in your name. From this clearing account you pay the facility fee owed to you to your operating account and the remaining fund is paid to each respective health care provider on a fortnightly basis that is each health care provider is paid their patient fees less their management fee.

You have no entitlement to the collected fees held in the clearing account until the facility fee is calculated.

You issue a tax invoice to each health care provider which states the quantum of the facility fee plus GST.

When a patient visits the front desk prior to their departure from the health clinic, they are issued with a tax invoice that has the name of the practitioner on it, their Medicare number and the amount payable.

The services made by the health care providers are covered by Medicare to the extent of five treatments per year.

You have provided us with a Facilities Agreement and a copy of tax invoice issued to the health care provider.

Relevant legislative provisions

A New Tax system (Goods and Services Tax) Act 1999 Section 153-1

Reasons for decision

Goods and Services Tax Ruling GSTR 2000/37 (available at www.ato.gov.au) discusses the general law in relation to agency relationships.

According to paragraph 10 of GSTR 2000/37, an intermediary may be authorised by another party to do something on that party's behalf. Generally, the intermediary is called an agent and the party who authorises the agent to act on their behalf is called the principal.

In this instance, the principal is bound by the acts of an agent as a result of the authority given to the agent. In cases of actual authority, the relationship between a principal and an agent is a consensual one so that no party can claim to be a principal's agent unless both parties consent to the creation of the agency. Notwithstanding the absence of an express agreement, the parties, that is, the principal and agent, may conduct themselves in such a way that it is proper to infer that the relevant authority has been conferred on the agent.

Paragraph 28 of GSTR 2000/37 outlines factors that indicate whether an agency relationship exists. It provides that in most cases, any relevant documentation about the business relationship, the description used by the parties and the conduct of the parties will establish the existence of an agency relationship. That is, whether an agency relationship exists does not depend on the terminology adopted by the parties, but on the true nature of the relationship. The relationship between the parties is determined by an examination of the particular facts surrounding relevant transactions.

Are you acting as an agent for the health care provider when you collect and bank their patients' fees?

Based on the information received, we consider you are acting as an agent for the health care provider when you collect and bank their patients' fees into your bank account for the following reasons:

There is a consensual agreement between you and the health care provider that you will be acting on their behalf to collect the fees they charge to their patients when they provide their medical services to the patients. The health care provider therefore retains ownership of the fees even though for administrative purposes you bank them into a clearing account in your name for a period of time.

You do not provide any medical services to the health care provider's patients as under the agreement you are responsible for the provision of facilities which include collection of fees from the patients and in return you receive a facility fee for the provision of the facilities. Further, the health care provider is paid by the patients for the services that they personally provide to the patients. Accordingly, the patients' fees you collect are not consideration for any supply that you have made in your own right to the patients.

Summary

To summarise, the health care provider is making a supply of medical services to the patients and the consideration for this supply is the total of the patients' fees which you collect on their behalf in the capacity of an agent and not the net amount that you paid to them fortnightly from the clearing account.

Further you are making a supply of facilities to the health care provider and the consideration for your supply is the facility fee which you deduct from the collected patients' fees before remitting the rest of the patients' fees to the heath care provider.

It should be noted that you, as the issuer of the tax invoices to the patients, will need to determine the GST status of the supply of medical services made by the health care provider that is, whether it is a taxable or GST-free supply, to ensure a valid and correct tax invoice is provided to the patients.

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