Further Supplementary Explanatory Memorandum(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)
Chapter 2 - Changes to the GST treatment of health
2.1 This Chapter explains the amendments and requests for amendments to Division 38-A of the ANew Tax System (Goods and Services Tax) Bill 1998 (the Bill) that relate to health. In particular, the amendments will:
- extend the list of other health services that are currently GST-free to include the following health services:
- herbal medicine (including traditional Chinese herbal medicine); and
- provide that certain goods are GST-free if they are of a kind determined by the Minister for Health;
- extend the GST-free treatment to cover Schedule 2 (S2) pharmaceutical drugs and medicinal preparations;
- provide that certain analgesic drugs and medicinal preparations supplied in small quantities are GST-free where they are also determined by the Minister for Health as being GST-free; and
- extend the GST-free treatment of certain disability services.
2.2 The remainder of this Chapter will explain these amendments and requests for amendments in more detail.
2.3 Generally speaking, a supply of medical services is GST-free if it is provided by, or on behalf of, a medical practitioner or an approved pathology practitioner, and it is a service that is generally accepted in the medical profession as being necessary for the treatment of a patient. Section 38-5 of the Bill and paragraphs 5.8 to 5.12 of the Explanatory Memorandum to the Bill provide more information on this.
2.4 Generally, other health services will also be GST-free if they are listed in the table at subsection 38-10(1). The table includes health services such as dental, nursing, chiropractic and physiotherapy.
2.5 Briefly, the supply of a health service by a health practitioner covered under the table at subsection 38-10(1) will only be GST-free where:
- the services are necessary for the treatment of the patient;
- the services are of the type normally supplied in that profession;and
- the practitioner is a member of a relevant professional body subject to State government professional registration or uniform national professional self-regulation (ie. the practitioner is a recognised professional in relation to the supply of services).
2.6 Generally, goods that are supplied in the course of a health service will also be GST-free if supplied to a person in the course of supplying a service listed in the table and the supply is made at the premises at which the service is supplied (subsection 38-10(3)). However, there are exceptions to this general rule. For example, a supply of a health service by an optician to a patient is generally GST-free, however, a supply of contact lenses and solution by the same health practitioner is not (paragraph 38-10(3)(a)).
2.7 Further information on the GST treatment of these other health services can be found in section 38-10 of the Bill and paragraphs 5.8 to 5.15 of the Explanatory Memorandum to the Bill.
2.8 The Government will amend the Bill to expand the list of other health services under subsection 38-10(1). Requests 2 and 3 to the Bill insert the following health services into the table at subsection 38-10(1):
- acupuncture [Request 2 to the Bill] ;
- herbal medicine (including traditional Chinese herbal medicine) [Request 3 to the Bill] ; and
- naturopathy [Request 3 to the Bill] .
2.9 Subject to the transitional arrangements outlined below, a supply of a health service will only be GST-free if the supply meets all of the conditions imposed under subsection 38-10(1) (refer to paragraph 2.5 above). For example, a supply of a health service by an acupuncturist will only be GST-free if it is necessary for the treatment of the patient and is of a type normally supplied in that profession.
2.10 The Government has introduced new transitional arrangements that will apply to a supply of the health services outlined above. The transitional arrangements are set out in new section 19A . [Request 8 to the Transition Bill]
2.11 Under these transitional arrangements, the Government has deferred the requirement that a supplier of these health services be a recognised professional before the supply of the health service is GST-free [new subsection 19A(1)] . This requirement has been deferred for 3 years which will allow the providers of these health services to meet the requirements set out under paragraph 38-10(1)(b).
2.12 During this 3 year period, a supply will only be GST-free if the person making the supply of these health services is appropriately qualified [new subsection 19A(2)] . The definition of appropriate qualifications will be outlined in the regulations [new subsection 19A(3)] . Under the regulations, the requirements may relate to one or more of the following:
- educational qualifications;
- membership of a professional body; and/or
- any other qualifications.
2.13 Request 4 to the Bill inserts new subsection 38-10(3A) into the Bill. Under this subsection, a supply of goods that relate to the supply of naturopathy or herbal medicine health services is GST-free if:
- it is made to a person in the course of supplying the health service; and
- it is supplied, and used or consumed, at the premises at which the service is supplied.
[Request 4 to the Bill and Amendment 6 to the Bill]
2.14 Request 6 to the Bill inserts new section 38-47 into the Bill to allow certain supplies of health goods to be GST-free. A supply of a good will be GST-free under new subsection 38-47(1) if it is of a kind determined by the Health Minister.
2.15 A supply is not GST-free under new subsection 38-47(2) if the supplier and the recipient have agreed that the supply is not to be treated as GST-free supply. This would occur where a business purchases these goods and may prefer to claim an input tax credit. [Request 6 to the Bill and Amendment 11 to the Bill]
2.16 The main rules that deal with drugs and medical preparations are found in section 38-50 to the Bill. Briefly, the following drugs and medicinal preparations are GST-free:
- Pharmaceutical Benefits Scheme (PBS) drugs and medicinal preparations which are sold on prescription;
- drugs and medicinal preparations supplied on prescription where the supply is prohibited except on prescription (medications covered under Schedule 4 and 8 of the Standard for the Uniform Scheduling of Drugs and Poisons (SUSDP));
- drugs or medicinal preparations that can only be sold within a pharmacy under the advice of a pharmacist, or supplied by a medical practitioner or dental practitioner (medications covered under Schedule 3 of the SUSDP); and
- drugs or medicinal preparations under the Repatriation Pharmaceutical Benefits Scheme (RPBS).
2.17 The Bill will be amended to insert new subsection 38-50(2A) . This will include into the list of GST-free drugs and medicinal preparations, those drugs and medicinal preparations that are generally only supplied at a pharmacy (medications covered under Schedule 2 of the SUSDP). [Request 7 to the Bill]
2.18 The Bill will also be amended to insert new subsection 38-50(4) . This will include into the list of GST-free drugs and medicinal preparations, analgesics with a single active ingredient which would be supplied under Schedule 2 of the SUSDP if the same analgesic were supplied in a larger quantity. An example is paracetamol tablets in a packet size of not more than 25 tablets. For an analgesic to be GST-free under this provision, it must also be of a kind determined by the Health Minister to be GST-free. [Request 8 to the Bill and Amendment 10 to the Bill]
2.19 Request 5 to the Bill removes paragraph (b) from section 38-40 that deals with specialist disability services. This amendment broadens the scope of disability services to ensure all services funded under the Disability Services Act 1986 , or under a complementary State or Territory law, will be GST-free.
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