Edited version of your written advice

Authorisation Number: 1051204604878

Date of Advice: 29 March 2017

Ruling

Subject: GST and your supply of physiotherapy services

Question 1

Is the supply of your physiotherapy services GST-free if it is provided to the residents of an aged care facility?

Answer

No, the supply of your physiotherapy services is not GST-free if it is provided to the residents of the aged care facility.

Question 2

Is the supply of your physiotherapy services GST-free if it is provided through home visits to clients who are registered with an Australian government agency?

Answer

Yes, the supply of your physiotherapy services is GST-free if it is provided through home visits to clients who are registered with the Australian government agency.

Issue 2

Question 1

Are you required to be registered for GST?

Answer

Yes, you are required to be registered for GST because the total value of your taxable and GST-free supplies of physiotherapy services meets the registration turnover threshold of $75,000.

This ruling applies for the following periods:

N/A

The scheme commences on:

N/A

Relevant facts and circumstances

You are registered for GST and you report GST on a cash basis in quarterly tax periods.

You estimated your annual turnover will exceed $75,000 for the income year.

You are a registered physiotherapist with the Physiotherapy Board of Australia.

You advised that you provide your physiotherapy services to the following:

1. Clients registered with the Australian government agency through home visits and you get paid by making a claim in the relevant agency portal.

2. Residents of the aged care facility you entered into an agreement where you are engaged to provide your physiotherapy services to its residents.

You also advised that you believe the aged care facility pays for your services on behalf of the residents, through the government funding it receives via the Aged Care Funding Instrument (ACFI).

You provided a copy of your agreement with the aged care facility. The copy you provided was unexecuted but you confirmed that it is the same as the duly executed contract you signed with the aged care facility.

The following relevant information was taken from the contract:

Contract term was for two years

You were listed as the 'Service Provider'

You as the 'Service Provider' will deliver direct and indirect services to the aged care facility as the 'Approved Provider'

Services include but are not limited to maintenance, supply and professional services

The aged care facility must pay you within sixty days after the receipt of a correctly rendered invoice.

You are appointed to provide:

Services as the aged care facility may request, and

Such services as the aged care facility and you may agree in writing from time to time.

A GST clause provides for GST where the following paragraphs clarified the agreed treatment of GST with regard to the related consideration:

… Unless GST is expressly included, the consideration expressed to be payable under any other clause in this Agreement does not include GST.

… To the extent that any supply made under or in connection with this Agreement is a taxable supply, the GST exclusive consideration otherwise payable for that supply is increased by an amount equal to that consideration multiplied by the rate at which GST is imposed in respect of the supply, and is payable at the same time.

A schedule lists the products and services you are providing, the minimum hours required and the hourly rate for your services as a specific amount '…plus GST'.

You also provided a copy of the invoice you issued. It was issued to the aged care facility for services rendered with a schedule listing the dates you were on site and the residents you attended to identified with their room numbers.

Relevant legislative provisions

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

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

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

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-10(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 Section 188-10

A New Tax System (Goods and Services Tax) Act 1999 Section 188-15

A New Tax System (Goods and Services Tax) Act 1999 Section 188-20

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

Reasons for decision

Issue 1

Subsection 38-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that a supply of a health service is GST-free if the following requirements are satisfied:

(a) It is a service of a kind specified in the table of the same subsection or in the regulation

(b) The supplier is a recognised professional in relation to the supply of services of that kind, and

(c) The supply would generally be accepted in the profession associated with supplying the services of that kind, as being necessary for the appropriate treatment of the recipient of the supply.

Physiotherapy is specified under Item 17 in the table of subsection 38-10(1) and you are a registered physiotherapist. In this regard, the physiotherapy services you supply would satisfy the first two requirements.

As a recognised professional physiotherapist, your supply of physiotherapy services will be GST-free where they are generally accepted in the physiotherapy profession as being necessary for the appropriate treatment of a patient. However, in order for the physiotherapy services you supply to satisfy this requirement, the patient must be the recipient of your 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.

Where there are only two parties involved in a transaction, generally there is a single supply. For example, where those parties are a health professional and a patient, the recipient of the single supply is the patient. That supply is a GST-free health service where the requirements of section 38-10 of the GST Act are met.

However, where there is a third party involved in the transaction, there may be one or more supplies for GST purposes. Therefore, it is necessary to determine what is being supplied and to whom.

Arrangements involving more than two parties are commonly referred to as tripartite arrangements. The Commissioner's views on these are expressed in Goods and Services Tax Ruling GSTR 2006/9: Goods and services tax: supplies. Analysis of these arrangements may reveal the following:

A supply is made to one entity but provided to another entity

Two or more supplies were made, and

A supply made and provided to one entity and consideration paid by a third party.

Paragraph 132 of GSTR 2006/9 explains that provided is used to contrast with made to distinguish between the contractual flow of the supply to the recipient (the entity to which the supply is made) and the actual flow of the supply to another entity (the entity to which the supply is provided).

Question 1

Services provided to residents of the aged care facility

Based on the information you provided, you are engaged by the aged care facility to provide your physiotherapy services to its residents through a contract which sets out your agreement to deliver your services to the aged care facility as requested.

Paragraph 155 of GSTR 2006/9 further explains that under the GST health provisions in Subdivision 38-B, subject to certain exceptions, the supply is only GST-free where an individual receiving that service or specific health treatment is the recipient of that supply. This outcome results from the specific wording in some health provisions, whilst in other provisions, it is due to the nature of the services themselves. Where this requirement is imposed, a GST-free supply of a health service cannot be made to a business entity or a non-profit body.

In this case, there is only one supply you are making but there are two entities involved. We determine that you are providing your supply of physiotherapy services to the residents but you are making your supply to the aged care facility. With the aged care facility as the recipient of your supply of services, your supply cannot be an appropriate treatment of the recipient.

As such, your supply of services to the aged care facility does not satisfy the third requirement under subsection 38-10(1) of the GST Act and is not a GST-free supply. It is a taxable supply under section 9-5 of the GST Act.

Question 2

Services provided to clients registered with the Australian government agency

Based on the information you provided, you are engaged by the Australian government agency to supply your physiotherapy services to clients through home visits and you get paid through the Australian government agency's portal.

Paragraph 156A of GSTR 2006/9 provides that under certain multi-party arrangement, an entity may make a GST-free supply of goods or services to an individual which results in the supplier making a further supply to a third party. The supply made to the third party will not be GST-free under provisions within Subdivision 38-B that require the individual receiving the relevant goods or services to be the recipient of the supply. However, in some cases, the supply will be GST-free under 38-60 of the GST Act.

From 1 July 2012, section 38-60 of the GST Act provides that where you supply a service to any of the following entity types of making other supplies of GST-free health services to individuals, the supply of this service to that entity will also be GST-free:

An insurer settling a claim under an insurance policy

An operator of a statutory compensation scheme

An operator of a compulsory third party scheme, or

An Australian government agency.

In this case, under section 38-60 of the GST Act, your supply to the Australian government agency will be GST-free because the Australian government agency is an Australian government agency and you are supplying a service to the Australian government agency of making other supplies to individuals which are GST-free health services.

Therefore, your supply of physiotherapy services through home visits to the clients registered with the Australian government agency is a GST-free supply.

Issue 2

Question 1

Section 23-5 of the GST Act provides that an entity is required to be registered for GST if it is carrying on an enterprise and its GST turnover meets the registration turnover threshold. The registration turnover threshold is $75,000 for businesses and $150,000 for non-profit bodies.

Section 188-10 of the GST Act provides that your GST turnover will meet the registration turnover threshold if:

Your current GST turnover is at or above the registration turnover threshold of $75,000, or

Your projected GST turnover is at or above the registration turnover threshold of $75,000.

To work out your registration turnover threshold, you need to calculate both your current and projected GST turnovers where:

Current GST turnover is the total value of all your supplies that had been made or likely to be made during the 12 months ending from the current month's end, and

Projected GST turnover is the total value of all your supplies that had been made or likely to be made in the current month plus those in the next 11 months.

However, in working out the total value of all your supplies, you have to exclude supplies that are input taxed, not made for consideration, not made in connection with the business you carry on, not connected with Australia or made from one member to another member of the same GST group.

Further supplies are disregarded where you made them by way of transfer of ownership of your capital assets or solely as a consequence of ceasing an enterprise, substantially and permanently reducing the size and scale of an enterprise.

We determined in Issue 1 that you make a mixture of taxable and GST-free supplies of physiotherapy services and your supplies are not any of those excluded from the calculation of GST turnover.

In addition, you advised that your annual turnover will exceed the GST registration turnover threshold of $75,000. As such, we determine that you are required to be registered for GST.

Additional information

Date of effect of GST registration

Section 25-1 of the GST Act provides that you must apply for registration within 21 days after becoming required to be registered for GST.

Where you are registered for GST, we consider it would be prudent if you can determine if you were required to be registered as at your GST registration date or at an earlier date.

To do this, you can work it out by taking into consideration both your current and projected GST turnovers as explained above in Issue 2. In the event where you determine that you are required to be registered for GST at a date earlier than that to your current GST registration date, you can apply for the backdating of your GST registration to the date when you became required to be registered for GST, provided the start date is no longer than four years from the date you request the backdating.

Funding through ACFI

You advised that the aged care facility pays you on behalf of its residents as it receives funding through ACFI.

Our research showed that the ACFI is a resource allocation instrument and it assesses core care needs as a basis for allocating funding. While based on the differential resource requirements of individual persons, the ACFI is primarily intended to deliver funding to the financial entity providing the care environment. This entity for most practical purposes is the residential aged-care home. When completed on all residents in the facility, the ACFI provides sufficient precision to determine the overall relative care needs profile and the subsequent funding.

Therefore, we do not consider that the aged care facility pays you on behalf of its resident as the funding it receives through ACFI is intended for the aged care facility in providing the care for its residents.

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