Edited version of your private ruling

Authorisation Number: 1012569627249

Ruling

Subject: Other health services

Question 1

Is the supply of written reports to Financial Decisions Makers and Treatment Decision Makers a GST-free supply?

Answer

Yes, the supply of written reports constitutes a GST-free supply.

This ruling applies for the following periods:

N/A

The scheme commences on:

N/A

Relevant facts and circumstances

· You are a dentist providing dental services to patients who would otherwise be unable to receive dental services due to their particular disabilities.

· Before performing dental procedures on patients who do not have legal capacity, you are required by law to provide written advice to the Financial Decision Makers and Treatment Decision Makers and to obtain their informed consent.

· The report states the findings of an oral examination of the patient and your recommendations for their dental care and treatment.

· The reports are for the sole purpose of providing appropriate treatment to the patient.

· In the absence of such reports, and the subsequent consent from Financial Decision Makers and Treatment Decision Makers, you are not legally permitted to treat the patient.

· You charge a fee for the provision of the reports.

· The Financial Decision Makers pay for the cost of the reports and the dental treatment of the patients.

· The reports are not billed separately, but included in the overall fee for the dental treatment of the patients. The cost of the reports are itemised in the invoice provided to the Financial Decision Makers.

· The cost of the written report is less than 20% of the ensuing dental work undertaken.

Relevant legislative provisions

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

Reasons for decision

The written reports that you supply to Financial Decision Makers and Treatment Decision Makers are not a standalone item but a prerequisite to the supply of dental treatment to patients lacking legal capacity.

Whether a supply that consists of multiple parts has both taxable and non-taxable components, or is to be considered only either taxable or non-taxable, depends on whether it is classed as a mixed supply or a composite supply.

Goods and Services Tax Ruling 2001/8 Goods and services tax: apportioning the consideration for a supply that includes taxable and non-taxable parts (GSTR 2001/8) explains how you can determine whether a supply includes taxable and non-taxable parts under the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act).

GSTR 2001/8 at paragraph 16 describes a mixed supply as 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. A composite supply is described at paragraph 17 of GSTR 2001/8 as a supply that contains a dominant part and includes something that is integral, ancillary or incidental to that part. A composite supply is treated as a supply of a single thing.

Paragraph 21 to 22 of GSTR 2001/8 state two methods of determining whether something is integral, ancillary or incidental to a dominant part. According to the first method, you may choose to treat something (or things taken together) as integral, ancillary or incidental if the consideration that would be apportioned to it (if it were a separately identifiable part of a mixed supply) does not exceed the lesser of: $3.00; or 20% of the consideration for the total supply. Alternatively, if you choose not to apply this approach, then you need to make an objective assessment about whether the thing is integral, ancillary or incidental.

The cost of the written report is less than 20% of the dental work undertaken as a result of the recommendations made in the report. This means that the method for determining whether a part of a supply is integral, ancillary or incidental to a dominant part stated in paragraph 21 of GSTR 2001/8 is satisfied.

Having regard to the second method of classifying parts of a supply, by making an objective assessment, you characterise a supply as mixed or composite by considering the essential character or features of the transaction (paragraph 41 GSTR 2001/8). You must consider all of the circumstances of the transaction to ascertain its essential character (paragraph 40A GSTR 2001/8).

A commonsense, practical approach to characterisation is endorsed by the courts in a number of cases that are cited at paragraphs 44A to 44C of GSTR 2001/8. Stone J in Saga Holidays v Commissioner of Taxation focused on the 'social and economic reality' of the supply.(Saga Holidays v. Commissioner of Taxation 2006 ATC 4841; (2006) 64 ATR 602.) The court in Westley Nominees Pty Ltd v Coles Supermarkets Pty Ltd made an assessment of what the expenditure was calculated to effect from a practical and business point of view. (Westley Nominees Pty Ltd v. Coles Supermarkets Pty Ltd [2006] FCAFC 115; 2006 ATC 4363; (2006) 62 ATR 682.) The Full Federal Court in Commissioner of Taxation v Luxottica Retail Australia Pty Ltd said that, while 'supply' is a broadly defined term, it nevertheless invites a commonsense, practical approach to characterisation.( Commissioner of Taxation v Luxottica Retail Australia Pty Ltd (2011) 79 ATR 768; 2011 ATC 20-243 at [15].)

At paragraph 45 of GSTR 2001/8 it is stated that in many circumstances, it will be a matter of fact and degree whether the parts of a supply are separately identifiable, and retain their own identity.

Paragraph 59 GSTR 2001/8A lists some indicators of a part being integral, ancillary or incidental. A part may be integral, ancillary or incidental if:

· 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.

The written report that you supply contributes to the proper performance of the contract to supply the dominant part, being the provision of dental treatment to patients who lack legal capacity. You are not legally permitted to supply patients with the dental treatment that they require unless a written report is first provided to Treatment Decision Makers and Financial Decision Makers.

Furthermore, the supply of the written report is not an aim in itself. You provide the written reports for the sole purpose of enabling you to make the dominant supply, that is, the supply of dental treatment to patients who lack legal capacity.

The written report is not, therefore, separately identifiable from the dominant supply and should be treated as composite with the dominant supply.

The supply of dental treatment is GST-free under subsection 38-10(1) of A New Tax System (Goods and Services Tax) Act 1999 (the GST Act). The supply of dental services is specified in the table in subsection 38-10(1) of the GST Act at Item 6. You are a qualified dental practitioner and you supply services that would generally be accepted in the dental profession as being necessary for the appropriate treatment of the recipients of the supply.

On this basis we conclude that the supply of written reports that is ancillary to the supply of dental treatment is a GST-free supply.

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