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Edited version of private ruling
Authorisation Number: 1011418353477
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Ruling
Subject: GST and medical services
Questions
1. Are you making a GST-free supply of a medical service when supplying your medical tests when they are paid by the patient?
Answer: No.
You will not be making a GST-free supply. You will be making a taxable supply of a medical service.
2. Are you making a GST-free supply of a medical service when they are paid by the pathology unit on behalf of the patient?
Answer: No.
You will not be making a GST-free supply. You will be making a taxable supply of a medical service.
Relevant facts
You run a Laboratory where you conduct various tests on patients referred by their general practitioners (doctors).
The testing is regarded in the medical profession as an integrated approach to the treatment of a variety of conditions.
You are not an approved pathology practitioner as you do not collect the actual sample and staff are involved only in the testing of the sample and not the collection.
At present the service is not covered by a Medicare benefit and you have the ability to set your own pricing.
The process by which the patient undertakes the test is as follows:
· The patient goes to their doctor who advises that the test should be conducted.
· The patient then goes to a pathology unit where the collection of the sample is taken.
· The sample is sent to you from the pathology unit.
· You conduct the tests on the sample.
· You will then send the results back to the patient's doctor.
In approximately 70% of cases the payment for the tests will be made directly by the patient to you. In the other 30% of cases, the payment for the tests will be made by the pathology unit on behalf of the patient. In other words, the pathology unit will get the money from the patient and pay you, on behalf of the patient so once again the patient is paying for the supply.
The patient's doctor may advise that the test be conducted however if the patient decides not to get the test then there is no obligation and the test will not be conducted. Hence, the patient may decide not to have the test undertaken. If the patient decides to have the test they can request that the results be provided to another medical practitioner of their choice and not the referring doctor.
The testing services are provided on behalf of the patient and the legal obligation is to supply the testing services for the patient and the invoice is made out to the patient.
The patient must be referred by a doctor to have the tests conducted.
Section 9-40 of the of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) GST Act provides that you must pay the GST payable on any taxable supply you make.
Section 9-5 of the GST Act states that you make a taxable supply if:
(a) you make the supply for consideration; and
(b) the supply is made in the course or furtherance of an enterprise that you carry on; and
(c) the supply is connected with Australia; and
(d) you are registered, or required to be registered.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
Therefore, where the requirements of paragraphs (a) to (d) of section 9-5 are satisfied, you will be liable for GST on supplies you make unless the supply is GST-free or input taxed. It is considered that the provisions of the GST Act dealing with input taxed supplies have no application to the supplies that you make.
Subsection 38-7(1) of the GST Act provides that a supply of a medical service is GST-free.
'Medical service' is defined to mean in section 195-1 of the GST Act:
(a) a service for which medicare benefit is payable under Part II of the Health
Insurance Act 1973; or
(b) 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 definition of a 'medical service' has two limbs. Any service that falls within either the first or second limb of the definition, is GST-free.
A pathology service for which a Medicare benefit is payable is GST-free. In regard to the test that you have identified, no Medicare benefit is payable. Therefore it is necessary to consider the second limb of the definition of medical service in order to determine whether this service is GST-free.
A service supplied by or on behalf of a medical practitioner, or an approved pathology practitioner for which no Medicare benefit is payable, will be GST-free provided it is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.
Supplied by or on behalf of a medical practitioner or an approved pathology practitioner.
According to the ATO Health Industry Partnership- Issues Register it states at point 1.a under 'Medical Services':
Meaning of 'service supplied by or an behalf of a *medical practitioner or *approved pathology practitioner',
The phrase 'on behalf of' for the purposes of the definition of '*medical service' means the performance of a component of the service provided by a practitioner that is not necessarily supervised by that practitioner. An example is where a laboratory technician assists in undertaking pathology testing of specimens.
However, 'on behalf of' does not include a service performed on referral by another person. A service performed on referral by another person, is not a component of the supply being provided by the first practitioner. The service being provided by the second person will be a separate supply, the GST-free status of which must be examined by reference to the supply by that second person.
From the facts of your case you are not performing a service on behalf of the medical practitioner as 'on behalf of' does not include the referral from the doctor. Furthermore from the facts of your case you are not an approved pathology practitioner. Consequently you do not satisfy the second limb of the definition of a medical service either.
Therefore you are not making a GST-free supply under subsection 38-7(1) of the GST Act. You are making a taxable supply under section 9-5 of the GST Act when supplying your medical services as you are registered for GST and are making supplies for consideration in the furtherance of the enterprise that you carry on in Australia.