Edited version of your written advice

Authorisation Number: 1012749088799

Ruling

Subject: Goods and services tax (GST) and medical services

Question 1

Are you required to collect GST in relation to services you perform in Australia?

Answer

You were required to collect GST on income you earned from working in Australia in the past, apart from the income Public Hospital X paid you.

You were not required to collect GST on income you earned from Public Hospital X.

If you remain registered for GST, you will be required to continue collecting GST on income you earn from Company Y for work you do in Australia.

If you are required to be registered for GST during a particular contract period, you will be required to collect GST on the income you earn from Company Y under that contract for work you do in Australia. See reasons for decisions for further details.

If you are not required to be registered for GST during a particular contract period, you can cancel your GST registration. If you cancel your GST registration under such circumstances, you will not be required to collect GST on services performed under that contract.

You are not required to collect GST where an Australian public hospital contracts you to perform services.

If you work in Australia as an employee at some point in the future, GST will not be payable on the associated remuneration.

Question 2

Are you required to continue lodging Business Activity Statements (BAS) and reporting GST amounts in these forms?

Answer

For any period during which you are registered or required to be registered for GST, you will be required to lodge BAS and report GST amounts in these forms.

You are entitled to cancel your GST registration if your GST turnover is less than $75,000 a year. If you cancel your GST registration under such circumstances, you will not be required to continue lodging BAS and report GST amounts in these forms.

Relevant facts and circumstances

You have been registered for GST since a certain date.

You report GST on a quarterly basis.

You are a citizen of a foreign country. You live and work fulltime in that country and have no property or ties in Australia.

You are a medical practitioner and have over the last few years come over to Australian for a few weeks of every year to work as a contractor (locums doctor working shifts) in various rural Emergency Departments. These are arranged and generally paid by Company Y, a foreign locums company. Company Y does not have a base/branch in Australia.

You are registered to practice as a medical practitioner in Australia.

Your work in Australia involves treatment and assessment of patients.

You have not worked as an employee of any entity during the periods you have worked in Australia.

In a certain year, you worked for a short period of time in Public Hospital X (an Australian hospital), which for some reason paid you, withholding 40%+ in tax. You have never worked with them before and will never work with them again. You were not their employee. Every other job you have done in Australia you have done as a contractor and no tax withholdings were deducted by the payer.

You have no permanent establishment in Australia and have never even come close to spending 183 days in Australia in any twelve month period.

Some years, you earn over $75,000 from working in Australia as a medical practitioner. Some years, you earn less than $75,000 from working in Australia as a medical practitioner.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

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

A New Tax System (Goods and Services Tax) Act 1999 section 9-20

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 25-55(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 27-40(2)

A New Tax System (Goods and Services Tax) Act 1999 subsection 31-5(1)

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 38-60(3)

A New Tax System (Goods and Services Tax) Act 1999 Division 188

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

Taxation Administration Act 1953 Schedule 1 section 12-1

Taxation Administration Act 1953 Schedule 1 section 12-60

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decisions

Question 1

Summary

Where you perform services in Australia and Company Y pays you, you do not make a GST-free supply of a medical service under subsection 38-7(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) because medicare benefit would not be payable on the supply you make to Company Y and the supply you make to Company Y is not for the appropriate treatment of the recipient of the supply (Company Y).

Where you perform services in Australia and Company Y pays you, you do not make a GST-free supply under item 2 in the table in subsection 38-190(1) of the GST Act because consumption takes place in Australia.

Where you are paid by an Australian public hospital to provide services to patients, you make GST-free supplies under subsection 38-60(3) of the GST Act.

If you are registered or required to be registered for GST during the period of a contract that requires you to work in Australia and Company Y pays you, GST will be payable on the income you earn from Company Y because all of the requirements of section 9-5 of the GST Act would be met.

If you are not registered or required to be registered for GST during the period of a contract that requires you to work in Australia, GST would not be payable on the income you earn under that contract, because you would not be registered or required to be registered for GST.

If you work in Australia as an employee at some point in the future, GST will not be payable on the associated remuneration, because working as an employee is not an enterprise.

Detailed reasoning

GST is payable on taxable supplies.

An entity makes a taxable supply if it meets the requirements of section 9-5 of the GST Act, which states:

You make a taxable supply if:

(a) you make the supply for *consideration; and

(b) the supply is made in the course or furtherance 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.

However, the supply is not a *taxable supply to the extent that it is

*GST-free or *input taxed.

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

You meet the requirement of paragraph 9-5(a) of the GST Act. This is because you supply services for consideration.

Enterprise generally includes working as an independent contractor. Activities as an employee are excluded from the definition of enterprise.

Under the circumstances you have set out, you are carrying on an enterprise when you work in Australia. Hence, you supply these services in the course or furtherance of an enterprise that you carry on. Therefore, you meet the requirement of paragraph 9-5(b) of the GST Act.

Where you perform services in Australia, you make supplies that are connected with Australia because the services are performed in Australia. Therefore, you meet the requirement of paragraph 9-5(c) of the GST Act.

Where you are registered or required to be registered for GST, you will meet the requirement of paragraph 9-5(d) of the GST Act.

Section 23-5 of the GST Act provides that an entity is required to be registered for GST if:

(a) the entity is carrying on an enterprise; and

(b) the entity's GST turnover meets the registration turnover threshold ($75,000 a year).

You are carrying on an enterprise. Therefore, you meet the requirement of paragraph 23-5(a) of the GST Act.

Goods and Services Tax Ruling GSTR 2001/7 provides guidance on determining GST turnover. In calculating GST turnover, past and projected turnover are taken into account.

Subsection 188-10(1) of the GST Act states:

You have a GST turnover that meets a particular *turnover threshold

if:

(a) your *current GST turnover is at or above the turnover threshold, and the Commissioner is not satisfied that your *projected GST turnover is below the turnover threshold; or

(b) your projected GST turnover is at or above the turnover threshold.

Subsection 188-15(1) of the GST Act states:

Your current GST turnover at a time during a particular month is the sum of the *values of all the supplies you have made, or are likely to make, during the 12 months ending at the end of that month other than:

(a) supplies that are *input taxed; or

(b) supplies that are not for consideration (and are not *taxable supplies under section 72-5); or

(c) supplies that are not made in connection with an *enterprise

that you *carry on.

Subsection 188-20(1) of the GST Act states:

Your projected GST turnover at a time during a particular month is the sum of the *values of all the supplies you have made, or are likely to make, during that month and the next 11 months, other than:

(a) supplies that are *input taxed; or

(b) supplies that are not for consideration (and are not *taxable supplies under section 72-5); or

(c) supplies that are not made in connection with an *enterprise

that you *carry on.

The income you earn from Company Y for work you do in Australia is included in your GST turnover calculations.

The income you earn from Australian hospitals is included in your GST turnover calculations if you are working as an independent contractor.

The income you earn from working outside Australia is not included in your GST turnover calculations because this income is remuneration for supplies of services that are not connected with Australia.

If your current and projected GST turnovers are $75,000 or more at a given time, your GST turnover will be $75,000 or more.

If your current GST turnover is $75,000 or more, but your projected GST turnover is under $75,000, your GST turnover will be under $75,000.

If your current GST turnover is under $75,000, but your projected GST turnover is $75,000 or more, your GST turnover will be $75,000 or more.

If your current and projected GST turnovers are under $75,000, your GST turnover is under $75,000.

If your GST turnover is $75,000 or more, you will meet the requirement of paragraph 23-5(b) of the GST Act. Under such circumstances, you will be required to be registered for GST because both requirements of section 23-5 of the GST Act will be met.

Your GST turnover will be $75,000 or more during any contract period in which you work in an Australian hospital as an independent contractor if you expect to earn $75,000 or more from Company Y or the hospital during the contract period for work done in Australia. Under such circumstances, you will meet the requirement of paragraph 23-5(b) of the GST Act.

Therefore, you will be required to be registered for GST during any contract period in which you work in an Australian hospital as an independent contractor if you expect to earn $75,000 or more from Company Y or the hospital during the contract period for work done in Australia, as both requirements of section 23-5 of the GST Act would be met.

As you have been registered for GST from the time you first worked as a medical practitioner in Australia to the current time, you have met the requirement of paragraph 9-5(d) of the GST Act up to this point.

There are no provisions of the GST Act under which your supplies of the services are input taxed.

Therefore, what remains to be determined is whether you make GST-free supplies.

Item 2 in the table in subsection 38-190(1) of the GST Act (item 2) provides that a supply of something other than goods or real property is GST-free if the supply is made to a non-resident who is not in Australia when the thing supplied is done; and

(a) the supply is neither a supply of work physically performed on goods situated in Australia when the work is done nor a supply directly connected with real property situated in Australia; or

(b) the non-resident acquires the thing in carrying on the non-resident's enterprise, but is not registered or required to be registered for GST.

Subsection 38-190(3) of the GST Act provides that a supply covered by item 2 is not GST-free if:

(a) the supply is made under an agreement entered into with a non-resident, and

(b) the supply is provided or the agreement requires to be provided to another entity in Australia.

Goods and Services Tax Ruling GSTR 2004/7 provides guidance on determining whether the recipient of a supply is in Australia for the purposes of item 2.

Paragraph 31 of GSTR 2004/7 discusses the meaning of 'not in Australia'. It states:

31. The requirement that the non-resident in item 2, or the recipient in item 3, is not in Australia when the thing supplied is done is a requirement, in our view, that the non-resident or recipient is not in Australia in relation to the supply when the thing supplied is done.

Paragraphs 37 and 41 of GSTR 2004/7 discuss the situation where the recipient is a non-resident company. They state:

37. A non-resident company is in Australia if that company carries on business (or in the case of a company that does not carry on business, carries on its activities) in Australia:

(a) at or through a fixed and definite place of its own for a sufficiently substantial period of time; or

(b) through an agent at a fixed and definite place for a sufficiently substantial period of time.

41. A non-resident company is in Australia in relation to the supply if the supply is solely or partly for the purposes of the Australian presence, for example, its Australian branch. If the supply is not for the purposes of the Australian presence but that Australian presence is involved in the supply, the company is in Australia in relation to the supply, except where the only involvement is minor.

Goods and Services Tax Ruling GSTR 2005/6 discusses the situation where a supply is made to one entity but the supply is provided to another entity.

Paragraphs 59 to 61 of GSTR 2005/6 state:

59. The word 'provided' is used in subsection 38-190(3) to contrast with the term 'made' in item 2. In the context of section 38-190, the contrasting words indicate that if a non-resident contracts for a supply to be provided to another entity, the place of consumption should be determined with regard to the entity to which the supply is provided, not the entity to which the supply is made.

60. The example in the Explanatory Memorandum accompanying the Bill⁹ that introduced subsection 38-190(3) illustrates this. In that example, non-resident parents contract for the supply of education services to be provided to their children in Australia. The contractual flow of the services is to the parents, while the actual flow of the services is to the children. The supply is made to the parents (non-residents) and provided to another entity, each child, in Australia.

61. Thus the expression 'provided to another entity' means, in our view, that in the performance of a service (or in the doing of some thing), the actual flow of that supply is, in whole or part, to an entity that is not the non-resident entity with which the supplier made the agreement for the supply. The contractual flow is to one entity (the non-resident recipient) and the actual flow of the supply is to another entity.

Paragraph 100 of GSTR 2005/6 discusses the situation where the providee is a resident individual. It states:

100. If a supply is provided (or is required to be provided) to a resident individual who is physically in Australia when the thing supplied is done, the supply is provided to that individual in Australia. The requirement in paragraph 38-190(3)(b) is satisfied and subsection 38-190(3) negates the GST-free status of the supply (assuming the other requirements of that provision are satisfied).

Paragraph 96 of GSTR 2005/6 discusses the situation where the providee is a non-resident individual. It states:

96. If a supply is provided (or is required to be provided) to a non-resident individual who is physically in Australia when the thing supplied is done and that individual's presence in Australia is integral to, as distinct from being merely coincidental with, the provision of the supply, we consider that the supply is provided to that individual in Australia. The requirement in paragraph 38-190(3)(b) is satisfied and subsection 38-190(3) (assuming the other requirements of the provision are satisfied) negates the GST-free status of the supply.

You supply services to Company Y as it contracts you to perform services.

Services are not goods or real property.

Company Y is a non-resident company that is not in Australia.

Your supply to Company Y is not a supply of work physically performed on goods situated in Australia where the work is done nor a supply directly connected with real property situated in Australia.

However, you supply your services under an agreement you have with a non-resident.

Additionally, the actual flow of your supplies is to the patients who are in Australia. Therefore, the supply you make is provided to 'another entity' for the purposes of subsection 38-190(3) of the GST Act. Where the patients are residents of Australia, your supply will be regarded as being provided to third parties in Australia because the patients are resident individuals who are physically in Australia. Where the patients are not residents of Australia, your supplies will be regarded as being provided to third parties in Australia because the physical presence of these individuals in Australia is integral to the provision of the supply. Therefore, where Company Y pays you for your services, your supply is provided to another entity (an entity other than the non-resident entity with whom you have an agreement to make supplies) in Australia.

Hence, you do not make GST-free supplies under item 2 where Company Y pays you because the exclusion at subsection 38-190(3) of the GST Act applies.

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

Medical service is defined in section 195-1 of the GST Act as:

(a) a service for which medicare benefit is payable under Part II of the Health Insurance Act 1973; or

(b) any other service supplied by on behalf of 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.

You are a medical practitioner.

In accordance with the principles in paragraphs 157 to 160 of Goods and Services Tax Ruling GSTR 2006/9, where Company Y contracts you to perform services, Company Y is the recipient of a supply that you make but this supply is provided to the patients. There is no treatment of Company Y.

Because medicare benefit would not be payable on the supply you make to Company Y, you do not make a supply of a medical service to Company Y under paragraph (a) of the definition of medical service in section 195-1 of the GST Act.

In accordance with the principles in paragraphs 157 to 160 of GSTR 2006/9, because the supply you make to Company Y is not for the appropriate treatment of the recipient of the supply (Company Y), you do not make a supply of a medical service to Company Y under paragraph (b) of the definition of medical service in section 195-1 of the GST Act.

Therefore, you do not make a GST-free supply to Company Y under subsection 38-7(1) of the GST Act.

There are no other provisions of the GST Act under which your supplies of services to Company Y are GST-free.

As all of the requirements of section 9-5 of the GST Act are met, you have been making taxable supplies of services to Company Y. Therefore, GST is payable on your past supplies of services to Company Y where you have performed these services in Australia.

Subsection 38-60(3) of the GST Act states:

If:

(a) a supply is of a service to an Australian government agency; and

(b) the service is the supplier making one or more other supplies of goods or services to an individual; and

(c) at least one of the other supplies is wholly or partly GST-free under this Subdivision,

the first-mentioned supply is GST-free to the extent that the other supplies mentioned in paragraph (b) are GST-free under this Subdivision.

Subsection 38-60(3) of the GST Act and subsection 38-7(1) of the GST Act are contained in the same Subdivision.

Where an Australian public hospital, such as Public Hospital X contracts you to provide services to patients, you make a supply of services to an Australian government agency. Therefore, the requirement of paragraph 38-60(3)(a) of the GST Act is met.

The supply you make to the hospital is a supply of a service of making one or more other supplies of services to individuals. Therefore, the requirement of paragraph 38-60(3)(b) of the GST Act is met.

You are making GST-free supplies of medical services under subsection 38-7(1) of the GST Act, to the patients of the Australian public hospitals because:

• you are a medical practitioner, and

• the services you supply to the patients would be generally accepted in the medical profession as being necessary for the appropriate treatment of the recipients of those supplies.

Therefore, you meet the requirement of paragraph 38-60(3)(c) of the GST Act.

Hence, you made a GST-free supply of services to an Australian government agency under subsection 38-60(1) of the GST Act under your contract with Public Hospital X because all of the requirements of subsection 38-60(3) of the GST Act were met. Therefore, GST was not payable on your supplies of services to Public Hospital X.

Future contracts

Where your GST turnover from supplies that are connected with Australia is $75,000 or more and you work in Australia as an independent contractor and Company Y or a hospital pays you for this work, you are required to be registered for GST.

If you are paid by Company Y for work you do in Australia and you are registered or required to be registered for GST during the contract period, GST will be payable on the income you earn from that contract, because all of the requirements of section 9-5 of the GST Act would be met.

Where your GST turnover from supplies that are connected with Australia is less than $75,000 and you work in Australia as an independent contractor and Company Y or a hospital pays you for this work, you are not required to be registered for GST

You are entitled to cancel your GST registration if your GST turnover is less than $75,000 because you would not be required to be registered for GST under such circumstances and you have been registered for GST for more than 12 months.

If you cancel your GST registration and you are not required to be registered for GST during the period of a given contract, you will not meet the requirement of paragraph 9-5(d) of the GST Act. Under such circumstances, GST would not be payable on the income you earn from Company Y for work done in Australia during that period, as not all of the requirements of section 9-5 of the GST Act would be met,

Where an Australian public hospital pays you for your services, you make a GST-free supply of services to an Australian government agency under subsection 38-60(3) of the GST Act. Hence, GST is not payable on your supplies of services to Australian public hospitals.

If you work in Australia as an employee at some point in the future, GST will not be payable on the associated remuneration, because working as an employee is not an enterprise.

Question 2

In accordance with subsection 31-5(1) of the GST Act, if an entity is registered or required to be registered for GST, it must give to the Australian Taxation Office a GST return (BAS) for each tax period.

For any period during which you are registered or required to be registered for GST, you are required to lodge BAS and report GST in these forms (even if the GST amounts are zero).

If you are not registered or required to be registered for GST during a given quarter, you will not be required to lodge BAS and report GST in those forms for that period.

If you cancel your GST registration, you will be required to lodge BAS for tax periods ending before the registration cancellation date of effect. You will have a concluding tax period, which will end on the day before the cancellation date of effect.

Additional information

If you are entitled to cancel your GST registration, you can do this by ringing 13 28 66. Type in How to cancel your GST registration into the search box of www.ato.gov.au

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