Edited version of private advice

Authorisation Number: 1051757151397

Date of advice: 30 September 2020

Ruling

Subject: GST and the late cancellation fees

Question

Is the late cancellation fee that you charged your NDIS client, relating to the cancelled supply of a psychology service, consideration for a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, the late cancellation fee that you charged your NDIS client is not consideration for a taxable supply under section 9-5 of the GST Act. It is consideration for a GST-free supply under paragraph 9-30(1)(b) of the GST Act where it relates to the cancelled supply of a GST-free psychology service.

Relevant facts and circumstances

You are a clinical psychologist and you are registered for GST.

You are providing services to a National Disability Insurance Scheme (NDIS) participant.

You consider your supply of psychological services to your NDIS client is GST-free under section 38-38 of the GST Act because all the requirements of that section are satisfied, including that the service you provide is of a kind provided under the Disability Services Minister's Determination: GST-free Supply (National Disability Insurance Scheme Supports) Determination 2017 (NDIS Determination).

You charge a late cancellation fee if the NDIS participant fails to attend a scheduled appointment.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 7

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

A New Tax System (Goods and Services Tax) Act 1999 Section 9-30

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

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

Reasons for decision

All legislative references in this ruling are to the GST Act, unless otherwise stated.

Under section 7-1, GST is payable on taxable supplies. Under section 9-5, you make a taxable supply if:

·         you make a supply for consideration

·         the supply is made in the course or furtherance of an enterprise that you carry on

·         the supply is connected with the indirect tax zone, and

·         you are registered or required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

You are registered for GST. You make the supplies for consideration; in the course or furtherance of an enterprise you carry on and the supplies are connected with Australia as the indirect tax zone.

You advised that you consider your supply of psychological services is GST-free under section 38-38 because all the requirements of that section are satisfied.

Note, psychology services may also be GST-free under section 38-10 of the GST Act. To be a GST-free health service under subsection 38-10(1), all of the following requirements must be satisfied:

a)    The health service is a listed health service; and

b)    The supplier of the health service 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 services of that kind as being necessary for the appropriate treatment of the recipient of the supply.

'Psychology' is a listed health service. Additionally, where you are a registered psychologist with the Australian Health Practitioner Regulation Agency (AHPRA), you will meet the requirement for being a recognised professional psychologist. Where this is the case, provided that your supply of psychology services is generally accepted in the psychology profession as being necessary for the appropriate treatment of the patient (in this case, an NDIS participant), the supply of the service will be GST-free under section 38-10. The benefit of the supply being potentially GST-free under section 38-10 is that the requirements that need to be met for the supply to be GST-free are more straightforward than under section 38-38. Unlike in section 38-38, there is no requirement for a written agreement between you and each NDIS participant to whom you make supplies nor is there the need to check whether the supply is of a kind covered by the NDIS Determination.

Working on the basis that that your supplies of psychology services are GST-free, we have to consider if the supply you made in relation to the late cancellation fee that you charged your NDIS client is GST-free or not.

Subsection 9-30(1) provides that a supply is GST-free if it is:

a)    GST-free under Division 38 or under a provision of another Act, or

b)    a supply of a right to receive a supply that would be GST-free under paragraph (a).

Goods and Services Tax Ruling 2009/3 Goods and services tax: cancellation fees (GSTR 2009/3) considers the GST consequences of cancellation fees and principally examines whether there is a supply for which a cancellation fee is the consideration.

Paragraphs 111 and 112 of GSTR 2009/3 states:

111. If the appointment is cancelled or there is a no show, the supplier is unable to make the intended supply. This is because the customer's attendance is integral to the making of that supply. The availability of the supplier to provide the services and of the customer to receive the services is a reciprocal arrangement. Although the intended supply is not made, a facilitation supply is still made by the supplier. The Commissioner considers that any cancellation fee charged is consideration for the facilitation supply. The GST status of this supply is to be determined independently of the GST status of the intended supply.

112. However, where the facilitation supply includes a right to receive a GST-free supply under Division 38 or another provision of another Act and the appointment is subsequently cancelled, the cancellation fee will be consideration for the right to receive a GST-free supply, which itself is a GST-free supply under paragraph 9-30(1)(b). An example is where at the time of making an appointment a patient and a medical practitioner make a contract giving the patient a right to medical services that would be GST-free under section 38-7.

Paragraph 111 of GSTR 2009/3 states the general rule that the GST status of a facilitation supply is to be determined independently of the GST status of the intended supply. However, paragraph 112 sets out an exception for situations where a facilitation supply includes the right to receive a GST-free supply under Division 38 (eg for GST-free medical services or other health services).

In your case, where your supply of psychological services is GST-free, the late cancellation fee you charged your NDIS client is consideration for the right to receive a GST-free supply. Therefore, in accordance with paragraph 9-30(1)(b) and paragraph 112 of GSTR 2009/3, the late cancellation fee is GST-free because it relates to a supply of a right to receive a supply that would be GST-free had it not been cancelled.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).