ATO Interpretative Decision
ATO ID 2004/51
Goods and Services Tax
GST and laser vision correction surgeryFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is the entity, an ophthalmic surgeon, making a GST-free supply under subsection 38-7(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it makes a supply of laser vision correction surgery to a patient?
Decision
Yes, the entity is making a GST-free supply under subsection 38-7(1) of the GST Act when it makes a supply of laser vision correction surgery to a patient.
Facts
The entity is an ophthalmic surgeon. The entity carried out laser vision correction surgery on a patient.
The surgery corrects the vision of the patient by using an excimer laser to modify the surface of the cornea.
A medicare benefit is not payable for the laser vision correction surgery.
An ophthalmic surgeon satisfies the definition of a medical practitioner in section 195-1 of the GST Act.
The patient individually engages and pays the entity to supply the laser vision correction surgery.
Reasons for Decision
Under subsection 38-7(1) of the GST Act, a supply of a 'medical service' is GST-free.
Section 195-1 of the GST Act defines a 'medical service' to mean:
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- a service for which a medicare benefit is payable under Part II of the Health Insurance Act 1973; or
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- 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.
There is no medicare benefit payable for the laser vision correction surgery. As such, the procedure does not fall within the first limb of the definition of medical service in section 195-1 of the GST Act.
Where surgery is carried out by an ophthalmic surgeon, laser vision correction surgery is considered to be 'appropriate treatment' to correct vision impairment in a patient. Also, as the patient individually engages and pays the entity to supply the laser vision correction surgery, the patient is the recipient of the supply. Therefore, laser vision correction surgery is a 'medical service' under the second limb of section 195-1 of the GST Act.
However, under subsection 38-7(2) of the GST Act, a supply of a medical service is not GST-free under subsection 38-7(1) of the GST Act if:
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- it is a supply of a professional service rendered in prescribed circumstances within the meaning of regulation 14 of the Health Insurance Regulations1975 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 a medicare benefit is payable under Part II of the Health Insurance Act 1973.
Laser vision correction surgery is not one of the services excluded under regulation 14 of the Health Insurance Regulations and therefore, the first element under subsection 38-7(2) of the GST Act does not apply.
The second element of subsection 38-7(2) of the GST Act provides that a medical service is not GST-free if it is rendered for cosmetic reasons and no medicare benefit is payable for that service. There is no medicare benefit payable for the laser eye surgery. Therefore, if the service is performed for cosmetic reasons, it is not GST-free.
The term 'cosmetic reasons' is not defined in the GST Act. The Macquarie Dictionary 1997 defines 'cosmetic' as:
serving to beautify: imparting or improving beauty, especially of the complexion, designs to effect a superficial alteration while keeping the basis unchanged.
A 'medical service' will be 'rendered for cosmetic reasons' if it is predominantly performed for, or is rendered for the purpose of permitting, the improvement of the personal appearance of a patient, such as a face-lift. Whether a service is for cosmetic reasons must be evaluated on a case by case basis. Procedures that alter or enhance a patient's appearance but have no medical or reconstructive purpose are considered to be cosmetic and are taxable.
However, a procedure that is performed for medical or reconstructive reasons is not cosmetic and is GST-free. An example of this is skin grafting performed on a burn victim.
The entity carries out laser vision correction surgery on a patient to correct the vision of the patient and the entity uses an excimer laser to modify the surface of the cornea.
Laser surgery performed to correct a patient's vision, changes the function, but not the appearance of the eye. The laser vision correction surgery will improve the patient's vision. Therefore, the medical service is performed for medical reasons, not for cosmetic reasons and the second element in subsection 38-7(2) of the GST Act also does not apply.
As neither of the elements in subsection 38-7(2) of the GST Act applies, the entity's supply of laser vision correction surgery is not excluded from being GST-free.
Therefore, the entity is making a GST-free supply under subsection 38-7(1) of the GST Act when it makes a supply of laser vision correction surgery to a patient.
Date of decision: 17 April 2003
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
subsection 38-7(1)
subsection 38-7(2)
section 195-1
Part II Health Insurance Regulations 1975
regulation 14
subregulation 14(2)(ea)
subregulation 14(2)(f)
subregulation 14(2)(g)
Other References:
Health Industry Partnership - Issues Register
The Macquarie Dictionary, 1997, 3rd edition, The Macquarie Library Pty Ltd, New South Wales
Keywords
Goods & services tax
GST free
GST health
Section 38-7 - medical services
ISSN: 1445-2782