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Edited version of your written advice
Authorisation Number: 1012836599069
Date of advice: 8 July 2015
Ruling
Subject: Goods and services tax (GST) and managing a medical centre
Question
Does a GST liability arise from you retaining a percentage of the patient fees to cover centre operating expenses?
Answer
No.
Relevant facts and circumstances
You are registered for GST.
You run a medical centre. You engage practitioners of different modalities. The centre handles the administration of consults and the daily management of the centre. Your practitioners are engaged to provide high quality health services in their areas of expertise and registration by applicable professional or statutory governing body.
The centre handles the administration of bookings, patient payments, receipting, rebooking.
Payment is taken into the centre's account. On a weekly basis contractors invoice the centre for the percentage of the consult fee. The contractors pay their own insurances, registrations, ongoing professional development etc. The amount retained by the centre is for the management and administration of the centre.
You also handle the administration and pay for the stock in the dispensary which holds health supplements and liquid herbal medicine. Prescribing practitioners who prescribe as part of their consult invoice the centre Y% of the purchase price.
You have a written contract with each practitioner (the written contract).
You are referred to as the principal in the written contract. The health practitioner is referred to as the contractor in the written contract.
The written contract contains the following terms:
• The contractor agrees to provide the services described in an item of the Schedule (the services) to the principal subject to the terms and conditions of this Agreement'.
• The contractor is to be available for a minimum of (specified number of) consultations on each full day the contractor is engaged by the principal. Half days as agreed are pro rata the number of patient consults.
• Subject to a specified clause, the contractor will supply and maintain in good working order all of the equipment and tools required to carry out the services and the principal is under no obligation to supply any equipment to the contractor.
• The principal will provide all towels used in the delivery of the services and, where applicable, all massage oils required for the delivery of the services.
• Where applicable for delivery of the services, the contractor must use the equipment and tools provided by the principal referred to in a specified clause.
• The principal shall provide, and the contractor shall use:
• the principal's reception and administration services;
• forms, including patient intake forms, that the principal considers necessary for the operations of the principal's business; and
• business cards consistent with the branding of the principal's business for which the contractor will pay the principal a one-off sum of X (at cost).
• All patients who attend the premises are patients of the principal.
• In consideration of the services provided by the contractor the principal shall pay to the contractor the fees calculated by reference to the rates specified in an item of the Schedule (the Fees).
• An item of the Schedule states:
Fees
X% of all patient fees paid for consultations with the nominated representative, and Y% of all dispensary sales prescribed by the contractor/nominated representative; generated by the contractor in the week preceding the issuing of the tax invoice.
• An item of the Schedule states
Nominated Representative
<<Name of Contractor>>
• An item of the Schedule states:
Regulatory Body
Eg Australian Health Practitioner Regulation Agency.
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 9-40
A New Tax System (Goods and Services Tax) Act 1999 section 38-7
A New Tax System (Goods and Services Tax) Act 1999 section 38-10
Reasons for decision
Summary
You are not making a supply to health practitioners for consideration where you retain a percentage of the patient fees. Therefore, no GST is triggered by retaining part of the patient fees.
Detailed reasoning
GST is payable on your taxable supplies.
You make a taxable supply where you satisfy the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999, 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 the GST Act)
The specified remuneration for the health practitioner's supply of services to you is an agreed percentage of patient fees (the percentage set out in an item of the Schedule, for example, X%) plus Y% of all dispensary sales. You do not offset a management fee against the agreed practitioner remuneration set out in the item of the Schedule. Therefore, we do not consider that the balance left over to cover the management and operation of the centre is consideration for a supply you make to a health practitioner of management and administration services. Hence, you do not meet the requirement of paragraph 9-5(a) of the GST Act by retaining a part of the patient fees.
Therefore, as you do not meet the requirements of section 9-5 of the GST Act, you are not making a taxable supply to the health practitioner. Hence, retaining a portion of the patient fees to cover centre operating expenses and to provide your profit margin does not trigger a GST liability.
Additional information
The patient fee is consideration for your supply of health services to patients (which you sub-contract the health practitioners to perform). Whether you are making GST-free supplies of health services to patients is a separate issue to the issue considered in this ruling.
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