Edited version of private ruling

Authorisation Number: 1011514679903

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Ruling

Subject: GST and psychology services paid for by a third party

Question

Are you making a GST-free supply of psychology services when you provide services to patients and the service is being paid for by a third party?

Answer: Yes.

You are making a GST-free supply of psychology services when you provide services to patients and the service is being paid for by a third party.

Relevant facts and circumstances

You are registered for goods and services tax (GST). You are a registered clinical psychologist in New South Wales.

You have an arrangement with a third party whereby you provide services to patients who are referred to you. The arrangement consists of:

· A patient will attend the third parties premises. The third party will do their own assessment on the patient and if relevant will refer them to their general practitioner (GP) to determine if they would benefit from psychology services.

· The patient visits their GP and if appropriate the GP will complete a mental health care plan for the patient. The mental health care plan is either given to the patient to give to the third party or faxed direct to them from the GP.

· The mental health care plan entitles the patient to initially six sessions of psychology services under medicare.

· The third party contacts you and provides details of the patient requiring treatment and will book the appointment with you.

· You go to the offices of the third party to provide the psychology services.

· At the end of the six psychology services you send back a report to the GP and in this report you may recommend another six services (if appropriate).

· If the GP approves the additional six services, the process starts again. The patient may be entitled to up to 18 services under the mental health care plan; however the last six services require special consideration.

· In some cases the patient has their own psychologist and they are under no obligation to seek your services.

· There is an internal agreement outlining the arrangement above, however there is no contractual obligation on the third party to use your services or for you to provide the services to the patients.

· You invoice the third party for the total amount of the psychology service and make a note of the gap payment at the bottom of the invoice.

· The medicare cheque (which is received by the third party in your name) is forwarded to you and the gap amount is paid direct to you by the third party.

The psychology services you provide to patients are generally accepted in the psychology profession as being appropriate treatment. You always do an initial assessment and from that initial assessment you determine the most appropriate treatment.

Reasons for decision

Summary

It is considered that you are making a supply of your psychology services to the patient and these services are being paid for by a third party. As such, we consider that you are making a GST-free supply of psychology services under subsection 38-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you provide services to patients and the service is being paid for by a third party.

Detailed reasoning

A supply of a health services is GST-free under subsection 38-10(1) of the GST Act if:

a) it is a service of a kind specified in the table in subsection 38-10(1) of the GST Act or specified in the A New Tax System (Goods and Services Tax) Regulations 1999

b) the supplier 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.

Service specified in table

'Psychology' is listed at item 16 in the table in subsection 38-10(1) of the GST Act (Item 16). You provide clinical psychology services, therefore paragraph 38-10(1)(a) of the GST Act is satisfied.

Recognised Professional

For you to be a recognised professional in relation to the supply of psychology services you are required to have permission, approval or be registered under a State law or a Territory law prohibiting the supply of psychology services without such permission, approval or registration. You have stated that you are registered under the relevant State or Territory legislation prohibiting the supply of psychology services without such registration. As such, you satisfy paragraph 38-10(1)(b) of the GST Act.

Appropriate treatment of recipient of supply

You have stated that the services you provide are generally accepted in the psychology profession as being appropriate treatment. These services also need to be for the appropriate treatment of the recipient of the supply. Therefore, the recipient of your supply must be the patient receiving the treatment and not a third party such as an employer, insurance company or other entity.

You are providing services to the patient and receiving payment from the third party. Goods and Services Tax Ruling GSTR 2006/9 discusses the meaning and characteristics of a supply. Part 3 of GSTR 2006/9 discusses multi-party arrangements, commonly known as tripartite arrangements.

Proposition 14 outlined in GSTR 2006/9 discusses when a third party may pay for a supply but not be the recipient of the supply. Paragraph 177 states that subsection 9-15(2) of the GST Act provides that the payment does not have to come from the recipient of a supply.

To determine if the third party is a third party payer or the recipient of a supply regard needs to be had to the true character of the transaction and by looking at all of the transactions entered into and the circumstances in which the transactions are made.

You have not entered into any contractual arrangement with the third party for the supply of psychology services. The third party is under no obligation to refer patients to you and you are under no obligation to take on new patients. You have merely entered into an arrangement with the third party for the payment of services that you supply to the patients. As such, the recipient of your supply of psychology services is the patient. Therefore, as your supply of psychology services are generally accepted in the psychology profession as being appropriate treatment of the recipient of the supply, your supply satisfies paragraph 38-10(1)(c) of the GST Act.

Consequently, you are making a GST-free supply of psychology services under subsection 38-10(1) of the GST Act when you provide services to patients and the service is being paid for by a third party.