Edited version of your written advice

Authorisation Number: 1012931418361

Date of advice: 22 December 2015

Ruling

Subject: GST and Medical Services

Question

Is GST payable on the payment transferred by the Medical Practice to the Trustee of the Trust?

Answer

No, GST is not payable on the payment transferred by the Medical Practice to the Trust.

Relevant facts and circumstances

The Doctor is a beneficiary of the Trust.

The trustee of the Trust has entered into a Contract (the Contract) with a Medical Practice (the Medical Practice) in regards to the supply of services made by the Doctor.

According to the Contract:

Neither the Doctor, nor the practice entity through which the Doctor operates from is engaged as an associate medical practitioner.

Neither the Doctor, nor the practice entity through which the Doctor operates from is an employee.

Neither the Doctor nor the practice entity through which the Doctor operates from is responsible for all aspects of the patients' care and is entitled to bill their patients according to Medicare guidelines.

The Practice provides the full complement of services required to run the Doctor's practice and attend their patients. This includes, consulting rooms, medical equipment, nursing staff, reception staff, electricity, stationary, medical supplies, patient billing services and all other reasonable services to run the practice

The Doctor or the practice entity through which the Doctor operates from will pay the practice a management fee equal to X% (plus GST) of the Doctors' or the practice entity's receipted fees. The Doctor or the practice entity through which the Doctor operates from is primarily entitled to the gross amount of these fees and these should be included in their income tax reports.

However, for administrative purpose, the fees to the Doctor or the practice entity through which the Doctor operates from may be paid directly to the practice as their nominee and then paid on to the Doctor or the practice entity through which the Doctor operates from less the practices' management fee, or as otherwise agreed from time to time.

The practice is not the Doctor's or the practice entity's employer.

All medical record remain the property of the practice at all times but the Doctor has the right to access these files whilst an associate with the practice.

Relevant legislative provisions

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999

Section 38-7 of the A New Tax System (Goods and Services Tax) Act 1999

Reasons for decision

GST is payable on taxable supplies.

A taxable supply is defined in section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as follows:

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 the indirect tax zone; 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.

(terms marked with asterisks (*) are defined in section 195-1 of the GST Act).

Therefore, amongst other things, in order for GST to be payable on the amount of money that is transferred by the Medical Practice to the Trust, this money should represent consideration for a supply made by the Trust to the Medical practise.

We are of the view that the Trust is not making a supply to the Medical Practice. Accordingly the money transferred by the Medical Practice to the Trust is not consideration for a supply. This means that paragraph 9-5(a) of the GST Act is not satisfied and accordingly GST is not payable on this amount.

Our reasons are follows:

We have identified two supplies in this case:

1. supplies made to the patients

2. management services supplied by the Medical Practice to the Trust

1. Supplies made to the patients

The first issue in this case is determining who is making a supply to the patients. Goods and services tax ruling, Goods and Services Tax: supplies (GSTR 2006/9) states the following:

119. Examining the Agreement or other reciprocal legal relationships is the starting point in analysing an arrangement to determine who is making a supply to whom.

According to the terms and conditions of the Contract between the Trust and the Medical Practice, it is our view that the services rendered to the patients by the Doctor are made by the Trust. The fact that the Medical Practice retains the patient records alone does not determine who supplies services to the patients.

It is our view that the total amount of the fees collected by the Medical Practice from the patients represents consideration for these services rendered by the Doctor through the Trust to the patients.

In other words, we consider that the Medical Practice is acting as an agent for the Trust when it collects the patients' fees for the services it makes through the Doctor. For example:

• There is a Contract between the Medical Practice and the Trust that states that the Medical Practice will be collecting the fees for the services rendered by the Doctor. The Trust retains ownership of the fees even though for administrative purposes the Medical Practice collects the fees and may even bank them into their account for a period of time.

• Under the Contract, the Medical Practice is only responsible to provide administrative services to the Trust. Under the Contract, whilst the Medical Practice retains records of the patients, the Contract stipulates that the responsibility in regards to patient care and billing lies with the Trust.


• Under the Contract the Medical Practice is responsible for the provision of 'administrative services' which include the provision of professional rooms, health assistants and support staff, equipment, supplies, office administration systems and procedures, collection of fees for the services rendered by the Doctor from patients on the Trust's behalf, banking of the patients' fees and other matters in relation to the operation of the health facility.

• In return for the provision of the 'administrative services', the Medical Practice receives a management fee which is calculated as a percentage of the total patient fees received by the Trust for the services rendered by the Doctor.

Accordingly, these fees collected by the Medical Practice are not consideration for any supply that the Medical Practice has made in its own right to the patients. The fees merely represent consideration for the services made by Trust through the Doctor to the patients.

Accordingly, given that the full amount of the fees collected represent the Trust's income, the Trust needs to report the full amount of the fees collected from patients by the Medical Practice (that is 100% and not 70%) in its BAS. The Medical Practice does not have any GST consequences on this amount collected from the patients.

If these services supplied by the Trust come within the definition of a GST-free medical service, then no GST is payable on this amount by the Trust.

Section 38-7 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that a supply of a medical service is GST-free. A medical service is defined in section 195-1 of the GST Act as follows:

(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 or on behalf of a *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.

Accordingly, if the services that the Doctor provides through the Trust is a service for which a medicare benefit is payable, that service will be GST-free. The definition of a medical service only looks at the character of the service rather than 'who' has supplied the service.

Any other service supplied by the Doctor (that is, services for which a medicare benefit is not payable) will also be GST-free, if that service is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

2. Management services supplied by the Medical Practice

As provided in the Contract between the Medical Practice and the Trust, the Medical Practice supplies management services to the Trust for which the X% plus GST is consideration. Where all of the requirements of section 9-5 of the GST Act are satisfied, the Medical Practice will be liable to pay GST on the total amount retained by them for their management services.

Accordingly the balance of the fees returned to the Trust by the Medical Practice after deducting the management fees is merely a transfer of money which the Medical Practice has collected
on-behalf of the Trust and therefore does not represent consideration for a supply made by the Trust to the Medical Practice.

According to the Contract between the Medical Practice and the Trust, the Medical Practice has opted to collect the fees on-behalf of the Trust for administrative convenience.

If the Medical Practice did not collect the fees, the fees paid by the patients for the Doctors' services would have gone directly to the Trust.

The Trust would have separately paid the Medical practice the management fee of X% plus GST (this is a service like any other service that the Trust would have acquired from a third party).

The current arrangement that is in place between the Medical Practice and the Trust does not change this treatment of the supplies made by each party.

Note: This ruling does not address the GST consequences of any distributions made by the Trust to the Doctor.

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