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Edited version of your private ruling
Authorisation Number: 1012570868470
Ruling
Subject: GST and psychology services
Question
Are you making a GST-free supply of psychology services under subsection 38-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when a third party pays for those services?
Answer
Yes, you are making a GST-free supply of psychology services under subsection 38-10(1) of the GST Act when a third party pays for those services.
Relevant facts and circumstances
You are registered for goods and services tax (GST). You provide psychology services.
You have an agreement with a third party to provide psychology services to their patients. You provide these services out of rooms at an external location. You have entered into a deed of licence with the owner of the external location.
You have stated that the third party would have a separate agreement with the owner of the external location to be able to use the rooms for the third party's patients.
You applied to the third party to become a private practitioner of the third party. The third party receives referrals from schools, general practitioners etc. The third party makes sure the patients have had a mental health agreement plan and if they have not, the patient will be sent back to the general practitioner to obtain one. The third party's patients are between the ages of 12 to 25. Ten psychology sessions are subsidised by Medicare. The third party assesses and determines a patient's ability to pay and where they have been determined to be able to pay, the patient will pay an additional $25 above the Medicare benefit amount.
You now have a verbal agreement with the third party whereby you will provide three additional psychology sessions to the patients where they are deemed necessary and the third party will pay for these sessions. You are required to deem that additional sessions are necessary in the first instance. You would then approach the third party to justify the need for these additional sessions. The third party then makes a determination as to whether they will pay for these sessions. You will only provide the additional three sessions to patients who you have already been treating under the mental health treatment plan.
You provide an invoice to the third party for the additional three services that you provide to the third party's patients.
You have advised that you are registered with the relevant psychology profession and are a recognised professional in relation to psychology.
The third party is a government funded entity and is not a government entity itself.
Relevant legislative provision
A New Tax System (Goods and Services Tax) Act 1999 subsection 38-10(1)
Reasons for decision
Under subsection 38-10(1) of the GST Act, a supply is GST-free if:
· it is a service of a kind specified in the table in subsection 38-10(1) of the GST Act (the table) or specified in the A New Tax System (Goods and Services Tax) Regulations 1999
· the supplier is a recognised professional in relation to the supply of services of that kind, and
· 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.
Psychology is listed at Item 16 in the table. You are a recognised professional in relation to psychology. You provide psychology services that are generally accepted in the psychology profession as being appropriate treatment. However, it needs to be determined whether your supply of services in the circumstances described by you is appropriate treatment for 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 some circumstances, the recipient of the supply is not the patient of the practitioner but a third party such as an employer. Appropriate treatment will not include supplies undertaken for a third party that does not encompass the concept of treatment.
The information provided by you indicates that under the verbal agreement you have with the third party, where it is agreed that a patient requires additional three treatment sessions, the third party will pay for those sessions. That is, the patient is the recipient of your supply and the third party merely pays you on the patient's behalf. As such, it is considered that you are providing appropriate treatment to the recipient of the supply. Therefore, you are making a GST-free supply of psychology services under subsection 38-10(1) of the GST Act when the third party pays for those services.
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