Edited version of your written advice

Authorisation Number: 1051293450620

Date of advice: 10 October 2017

Ruling

Subject: GST and excess GST paid on Medicare rebates

Question 1

Are the supplies of professional services provided to your clients by accredited specialists (your employees) GST-free where you receive a Medicare rebate for those services?

Answer

Yes, under Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) the supplies of professional services provided to your clients by accredited specialists are GST-free where a Medicare rebate is received for those services.

Question 2

Does Division 142 of the GST Act (Division 142) apply to restrict the refund of excess GST remitted on Medicare rebates received for the supply of specialist services?

Answer

No, Division 142 does not apply to restrict the refund of excess GST remitted on Medicare rebates received for the supply of specialist services.

Relevant facts and circumstances

You are registered for GST.

You are a health and wellbeing services organisation. You promote the overall wellbeing, self-esteem, independence, self- responsibility and health awareness of people in the community.

You employ accredited professionals who provide specialist services. The treatments you provide include relevant focussed strategies.

The recipients of your specialist services have typical specific health issues. The services are provided so as to improve the patient’s overall health.

The focussed specialist strategy services are provided to patients referred by medical practitioners.

The services are provided by X of your employees who are qualified specialists and each have a Medicare service provider number.

The payments for these services are all covered under the Medicare benefits schedule.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Division 38

A New Tax System (Goods and Services Tax) Act 1999 Division 142

Reasons for decision

Section 38-7 provides that a supply of a ‘medical service’ is GST free. A medical service is defined in section 195-1 as a service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973.

The Health Insurance Act 1973 governs the Medicare payments eligible to an individual under the Medicare Benefits Schedule (MBS).

The MBS provides a Medicare benefit where General Practitioners (GPs) provide a GP specific health treatment plan (GPHTP).

GPs that have provided a GPHTP for a patient can refer that patient to an accredited specialist registered with Medicare to provide focussed relevant strategies. If the relevant MBS eligibility criteria are met and the specialist has a Medicare provider number, a Medicare benefit is available for the professional service.

As the focussed specialist strategies provided by your employees, who are accredited specialists, meet the MBS eligibility criteria and Medicare rebates are paid for the services we consider that these services are GST-free under subsection 38-7.

In the alternative, subsection 38-10(1) provides that a supply of health services, other than medical services, is GST-free if all of the following requirements are met:

(a) it is a service of a kind specified in the table in subsection 38-10(1), and

(b) the supplier is a recognised professional (as defined in section 195-1), in relation to the supply of services of that kind, and

(c) the supply is generally accepted in the relevant profession as being necessary for the appropriate treatment of the recipient of the supply (as defined in section 195-1).

Paragraph 38-10(1)(a) of the GST Act

‘Psychology’ is specifically listed under Item 16 in the Health services table in subsection 38-10(1) and therefore the requirement of paragraph (a) is satisfied.

Paragraph 38-10(1)(b) of the GST Act

For the purposes of paragraph 38-10(1)(b) a recognised professional must provide the service. A person is a ‘recognised professional’, as defined in section 195-1, if:

● the service is supplied in a State or Territory in which the person has a permission or approval, or is registered, under a State law or a Territory law prohibiting the supply of services of that kind without such permission, approval or registration, or

● the service is supplied in a State or Territory in which there is no State law or Territory law requiring such permission, approval or registration, and the person is a member of a professional association that has uniform national registration requirements relating to the supply of services of that kind.

All specialists must meet a minimum standard of education and training and have been assessed as a suitable person to hold general registration in the specialist profession. On the information provided, the X specialists you employ to provide these services satisfy the recognised professional requirement.

The requirement of paragraph 38-10(1)(c) is that the supply must be generally accepted in the profession as necessary for the appropriate treatment of the recipient of the supply.

For a supply to be generally accepted, the particular service being provided by the health professional and the circumstances in which it is provided must be generally accepted in the profession associated with supplying services of that kind.

'Appropriate treatment' is not defined in the GST Act. Appropriate treatment of the recipient will be established where the health practitioner assesses the recipient's state of health and determines a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of the recipient and will include subsequent supplies for the assessed process. Appropriate treatment also includes the principles of preventative medicine.

The term ‘recipient’ is defined in section 195(1) to mean ‘in relation to a supply, means the entity to which the supply was made’. Where there are two parties to the supply of the services (the specialist and the patient), generally there is a single supply to which the GST Act applies and the recipient of that supply is the patient.

In the information provided, you said that the specialist services by your employees are provided so as to improve the patient’s overall health, to help them cope with particular events and circumstances and to create strategies enabling them to deal with the consequences of these events.

It is likely to be generally accepted in the specialist profession that the services provided by your staff are necessary for the appropriate treatment of the recipient of the supply. Therefore, paragraph 38-10(1)(c) is satisfied and the supply of specialist services are GST-free under section 38-10.

Refund of excess GST

Based on the information provided we have determined that the supplies of specialist services for which Medicare rebates are payable are GST-free supplies under Division 38.

Under Division 142, an amount of GST that has been taken into account in an assessed net amount, but which is not in fact payable is considered ‘excess GST’.

Division 142 is designed to ensure that excess GST is not refunded if this would give an entity a windfall gain. For example, where a supplier passed on an amount of GST but has not reimbursed the recipient, there will be no entitlement to a refund.

Therefore, you will only be able to get the refund of the excess GST if:

1) it has not been passed on to the recipient; or

2) it has been passed on to the recipient, and the recipient has been reimbursed.

Goods and services tax: the meaning of the terms 'passed on' and 'reimburse' for the purposes of Division 142 of the A New Tax System (Goods and Services Tax) Act 1999 (GSTR 2015/1) discusses that whether or not the excess GST has been passed on is a question of fact and must be determined taking into account the particular circumstances of each case.

It also says that the policy and scheme of the GST Act more generally, gives rise to an expectation that the excess GST will be passed on in most cases.

Paragraph 28 of GSTR 2015/1 provides a list of matters relevant to determining whether GST has been passed on. These are:

(i) the manner in which the excess GST arose

(ii) the supplier’s pricing policy and practice

(iii) the documentary evidence surrounding the transaction, and

(iv) any other relevant circumstances.

An amount of excess GST may arise in a variety of situations.

Therefore, based on all the facts provided, we consider that you have not passed on the GST to your clients. Accordingly, an amount of excess GST will be refundable to you in accordance with Division 142.

Refund of the excess GST

As you are entitled to a refund of the excess GST you can now choose to revise each of the individual business activity statements for the relevant tax periods. Alternatively, you can choose to correct the errors for all of the relevant tax periods in the next original business activity statement that you lodge (in accordance with the ‘Correcting GST errors guide’).

As you have reported and paid excess GST for the relevant tax periods you have a ‘credit error’. In your case, you are within the four year period of review time limit in which to revise the credit error for these tax periods. Therefore, provided you have not already corrected this error in a previous return and you are not subject to a compliance activity, such as an audit, you can simply claim the full amount in your next activity statement.

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