Edited version of private advice

Authorisation Number: 1052134988693

Date of advice: 30 June 2023

Ruling

Subject: Prescription Cosmetic Services

Question 1

Is the supply of prescription medication and the injection of prescription medication for cosmetic services by You, a mixed supply for A New Tax System (Goods and Services Tax) Act 1999 (GST Act) purposes?

Answer

Yes, the supply of prescription medication and the injection of the prescription medication for cosmetic procedures is a mixed supply for GST Act purposes, as it contains separately identifiable non-taxable and taxable parts that are individually recognised.

This ruling applies for the following periods:

1 July 2021 to 30 June 2022

1 July 2022 to 30 June 2023

1 July 2023 to 30 June 2024

1 July 2024 to 30 June 2025

1 July 2025 to 30 June 2026

The scheme commenced on:

17 May 2022

Relevant facts and circumstances

•                     The Company (You) are registered with ABN XX for GST from 17 May 2022.

•                     You are a medical practitioner who supplies prescription medication for cosmetic medical procedures

•                     You use botulinum toxin (botox), dermal fillers and similar branded products in your practice.

•                     In making the supply of the cosmetic injectables, there is both the product component of the supply (being the injectable solution and medicine itself); as well as the service component of the supply (being the act or effort of administering the solution and medicine) and they are recognised separately on the invoice to the client.

•                     The cosmetic injectables (botox) provided are listed as prescription-only medicines under Schedule 4 of the Standard of the Uniform Scheduling of Medicines and Poisons (SUSMP).

•                     The process for supply is the client purchasing the botox, dermal fillers or similar product from the medical practitioner and then the medical practitioner will inject the patient with these products.

•                     Your clients receive the injectables for "beauty" or cosmetic reasons rather than for medical, reconstructive or therapeutic reasons.

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 38-7.

A New Tax System (Goods and Services Tax) Act 1999 section 38-50.

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

Reasons for decision

Section 38-50 of the GST Act outlines when a supply of drug or medicinal preparations is GST- free. Of relevance to the supply of cosmetic injectables is subsection 38-50(1) which states that a supply of a drug or medicinal preparations is GST-free if the supply is on prescription and:

(a) under a State law or a Territory law in the State or Territory in which the supply takes place, supply of the drug or medicinal preparation is restricted, but may be supplied on prescription; or

(b) the drug or medicinal preparation is a pharmaceutical benefit (within the meaning of Part VII of the National Health Act 1953)

However, a supply of a drug or medicinal preparation can only be GST-free under section 38-50, if the drug or medicinal preparation is for human use or consumption and the supply is to an individual for private or domestic use or consumption (subsection 38-50(7) of the GST Act). The drug or medicinal preparations you provide are for human use or consumption and the supplies are made to individuals for private or domestic use or consumption. As a result, requirements of subsection 38-50(7) of the GST Act are satisfied.

From the facts provided, all of the cosmetic injectables are listed as prescription-only medicines under Schedule 4 of the SUSMP. The SUSMP also known as Poisons Standard is a legislative instrument that consists of decisions regarding the classification of medicines and poisons into Schedules which are generally adopted for inclusion in the relevant legislation of the States and Territories. Schedule 4 of the SUSMP lists prescription-only medicines.

This means that the supplies of the cosmetic injectables are restricted under a State law or a Territory law in the State or Territory in which the supply takes place as prescription-only medicines. As a result, the requirement of section 38-50(1) is met. Your supplies of the cosmetic injectables listed in the facts are GST-free supplies as the requirements of both subsection 38-50(1) and 38-50(7) are met.

Supply of administering cosmetic injectables

The supply of administering cosmetic injectables will be a taxable supply under section 9-5 of the GST Act unless the supply is GST-free. Section 38-7(1) provides that a supply of medical service is GST-free. However, under subsection 38-7(2), a supply of a medical service is not GST-free under subsection (1) if:

•                     it is a supply of a professional service rendered in prescribed circumstances within the meaning of regulation 14 of the Health Insurance Regulations made under the Health Insurance Act 1973 (other than the prescribed circumstances set out in regulations 14(2)(ea), (f) and (g)); or

•                     it is rendered for cosmetic reasons and is not a professional service for which medicare benefit is payable under Part II of the Health Insurance Act 1973.

Medical service is defined in section 195-1 of the GST Act as:

•                     a service for which a medicare benefit is payable; or

•                     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.

The administration of cosmetic injectables you supply does not qualify for a Medicare benefit. However, administration of cosmetic injectables is a service that is supplied by or on behalf of a medical practitioner that is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

As a result, administration of cosmetic injectables satisfies the second limb of the definition of 'medical service' in section 195-1 of the GST Act as it is provided by or on behalf of the medical practitioner and is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply. However, subsection 38-7(2)(b) states that a medical service will not be GST-free if the service is rendered for cosmetic reasons and is not a professional service for which medicare benefit is payable. Administration of cosmetic injectables is a service for which no medicare benefit is payable and it is also a service that is rendered for cosmetic reasons. As a result, the supply of administration of cosmetic injectables is not GST-free but is a taxable supply under section 9-5 of the GST Act.

Mixed supply

As you are making a supply that is partly taxable (administering of cosmetic injectables) and partly GST-free (cosmetic injectables), you will need to apportion, on a reasonable basis, the fee received for the cosmetic injectables between the taxable and non-taxable parts of the supply. Section 9-80 of the GST Act is about supplies which are partly taxable and partly GST-free and describes how to calculate the value of the part of the supply that is a taxable supply.

Goods and Services Tax Ruling GSTR 2001/8 provides guidance on how to apportion consideration for a supply that includes taxable and non-taxable parts. Paragraphs 92 to 96 of GSTR 2001/8 state:

92. Where, as in the case of supplies covered by section 9-75, there is no legislative provision specifying a basis for apportionment, you may use any reasonable method to apportion consideration to the separately identifiable taxable part of a mixed supply. However, the apportionment must be supportable by the facts in the particular circumstances and be undertaken as a matter of practical commonsense.

93. What is a reasonable method of apportioning the consideration for a mixed supply depends on the circumstances of each case. In some cases, there will be only one reasonable method you may use.

94. Depending on your circumstances, you may use a direct or indirect method when apportioning the consideration for a mixed supply.

95. The method you choose should be based on a consideration of all the circumstances and not because it gives you a particular result. You may need to use different methods, or a combination of methods, for different supplies to ensure the appropriate amount of GST is payable. You need to keep records that explain all transactions and other acts you engage in that are relevant to supplies you make, including supplies that are GST-free and input taxed.53

96. Where consideration is apportioned in a manner that cannot be justified in terms of reasonableness, the general anti-avoidance provisions of the GST Act may have application

In your circumstances, it would be considered unreasonable to conclude that all of the consideration received for the cosmetic injectables treatment relates to the GST-free supply of cosmetic injectables (product) and that no part of consideration is apportioned to the taxable service of administration of cosmetic injectables. Example 13B of GSTR 2001/8 (paragraph 81ZI) illustrates unreasonable apportionment where a supply is a mixed supply of a drug and administration of a drug:

Example 13B - unreasonable apportionment

81ZI. Felicity is a registered medical practitioner who provides cosmetic medical procedures using certain drugs. She provides a cosmetic procedure using a drug that is GST-free, but the supply of the medical service is taxable. The procedure usually takes between 15 and 30 minutes to carry out.

Felicity invoices the patient but only applies consideration to the GST-free supply of the drug. The medical service is not considered to be incidental to the supply of the drug because it is an important part of the cosmetic procedure and it has considerable value because of the level of professional skill and time involved. The supply by Felicity is a mixed supply and the consideration is in respect of both parts. It is unreasonable in these circumstances that no consideration relates to the medical service. There is no commercial reason for Felicity to not apply any of the consideration to the taxable medical supply.

Therefore, to determine the value of the taxable part of the supply, you can use any method of apportionment as long as that method is fair and reasonable. In line with Example 13B of GSTR 2001/8, the service of administering the cosmetic injectable by a medical practitioner or nurse, on behalf of a medical practitioner, is an important part of the cosmetic treatment and has considerable value because of the level of professional skill and time involved. The method of apportionment relied on will need to reflect this in order for it to be considered fair and reasonable.

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