Edited version of private ruling

Authorisation Number: 1011660622036

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Ruling

Subject: GST and supply of weight management program and product by exercise physiologist

Questions

1. Is the supply of treatment services delivered under a weight management program by a clinical exercise physiologist for which no Medicare benefit is payable subject to Goods and Services Tax (GST)?

2. Is your supply of the product a GST free supply when supplied to patients as an integral part of the treatment services delivered under the weight management program by a clinical exercise physiologist?

Answers

1. Yes, the supply of services delivered under a weight management program by a clinical exercise physiologist for which no Medicare benefit is payable is subject to GST.

2. No, your supply of the product is not a GST free supply when supplied to patients as an integral part of the treatment services delivered under the weight management program by a clinical exercise physiologist?

Relevant facts and circumstances

You are registered for GST.

You are a supplier of health management services.

You are now providing a weight management program (program) to assist in weight reduction for those individuals that are obese and overweight who generally have other health issues.

Medical practitioners or specialists will refer some patients to undertake this program.

You advised that specialists such as Orthopaedic, Fertility, Cardiologist and Rheumatologist are some of those who have referred patients to you to undertake the program.

You also advised that individuals can also self refer and choose to undertake the program.

You stated that you bill the individual for the costs of the program. You do not bill the referring medical practitioners or specialists at any stage. Further you do not have an agreement or contract with the medical practitioners or specialists or any other third party to deliver this program to the individual.

The program is delivered solely by your clinical exercise physiologist who is accredited through the Exercise and Sports Science Association and who has a provider number with Medicare and a raft of Health Insurers.

Your clinical exercise physiologist has a Masters degree in exercise physiology. Your clinical exercise physiologist is currently enrolled in a PhD.

The weight management program is a series of one on one consultation, delivered by your clinical exercise physiologist, over various lengths of program time.

The consultative process is a structured process that commences with a detailed history of the client. Health and lifestyle related issues, in addition to weight issues are then addressed with a strong cognitive behaviour strategy.

It is structured to match the client/patients needs over a period depending on their weight, medical history and co-morbidities present.

All patients who start the program have a Body Mass Index of over 25 (overweight) or 30 (obese). The average patient in the longer program has an average BMI of 38 so they are in the high health risk category.

The program is not delivered to individuals who have a BMI < 25. They do not qualify, nor is it suited to them. The program is designed for the medically overweight and obese individuals and there are strict criteria for entry into the program.

The program is multifaceted covering areas such as activity, stress, food intake, nutrition, assertiveness, sleep and lifestyle management.

Each individual follows their own pathway to managing the health and weight issues better.

During the one on one consultation, your clinical exercise physiologist may dispense the product to the patient if required. It is an integral part of the program and its use is dependent upon the patient's requirements.

A private health insurer has recently placed the program in their preventative health section of their rebate schedule as a stand alone service.

There is no Medicare rebate payable for the services provided under the program

The program is generally accepted by the medical profession as a necessary and appropriate treatment for the obese and overweight patient. You stated that you believe that it is appropriate treatment as you take a significant history and fully assess the patient suitability before any intervention is commenced. The intervention is a specific course of action to restore and improve the patient's physical health and this can sometimes lead to psychological health improvement. Your clinical data has been published in medical literature. You then supply treatment regime that is accepted by the medical profession as being appropriate for their patients.

You advised that you only require a private ruling on whether the program and product supplied as an integral part of the program is GST free under the health provisions only.

Reasons for decision

In considering whether a supply is subject to GST, regard must be had to section 9-5 of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) which states :

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.

From the information received, the supply of the program and the product will satisfy paragraphs 9-5(a) to 9-5(d) of the GST Act when you make the supply of the program and the product for consideration, in the course of your enterprise, the supply is connected with Australia as you carry on your business in Australia and you are registered for GST.

However, your supply will not be a taxable supply to the extent that it is GST-free or input taxed. The supply of the program and the product is not input taxed under any provisions of the GST Act or any other Act. Therefore, what is left to be considered is whether the supply of the program and the product is GST-free.

You advised that you only require a private ruling on whether the program and product supplied as an integral part of the program is GST free under the health provisions only.

Division 38 of the GST Act provides that certain supplies relating to health are GST-free. In your case, the relevant provisions to examine are section 38-7 and section 38-10 of the GST Act.

Medical services

Section 38-7 of the GST Act provides that a supply of a medical service is GST-free. The term medical service is defined in section 195-1 of the GST Act to mean:

(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. The supply of a medical service that falls within either the first or the second limb of the definition in section 195-1 of the GST Act is GST-free. The first limb merely requires that the supply is one for which the specified Medicare benefit is payable. Unlike the second limb, the supply does not have to be made by a medical practitioner or an approved pathology practitioner (as defined in section 195-1 of the GST Act). The second limb addresses services for which a Medicare benefit is not payable.

You advised that a private health insurer has recently placed the program in their preventative health section of their rebate schedule as a stand alone service. However, you advised that there is no Medicare rebate payable for the services provided under the program. A private health insurance rebate is not nor is it the same as a Medicare rebate as required under the definition of a Medical service in the GST Act. As no Medicare benefit is payable for the program, the first limb in paragraph (a) of the definition of a medical service in section 195-1 of the GST Act is not met and the services must be considered under the second limb in paragraph (b) of the definition of a medical service in section 195-1 of the GST Act .

Only those services supplied by or on behalf of a medical practitioner or approved pathology practitioner will qualify as a medical service under the second limb in paragraph (b) of the definition of a medical service in section 195-1 of the GST Act.

The phrase on behalf of does not include a service performed as a result of referral by a medical practitioner or approved pathology practitioner. A service performed as a result of referral by another person, is not a component of the supply being provided by the first practitioner. It is a separate service, the GST status of which must be considered independently.

You advised that medical practitioners or specialists will refer some patients to you to undertake this program. Your clinical exercise physiologist provides the services under the program. As such, the services are not provided by or on behalf of a medical practitioner or approved pathology practitioner and the second limb in paragraph (b) of the definition of a medical service in section 195-1 of the GST Act is not met.

As the supply of the services under the program does not meet the definition of a medical service then the supply is not GST free under section 38-7 of the GST Act.

Subsection 38-7(3) of the GST Act provides that a supply of goods is GST-free if:

(a) it is made to an individual in the course of supplying to him or her a medical service the supply of which is GST-free; and

(b) it is made at the premises at which the medical service is supplied.

As has been determined above, the supply of the services under the program is not GST free as it is not a supply of a medical service as defined, as such, the supply of the product is not GST free under subsection 38-7(3) of the GST Act as it is not a supply of goods made to an individual in the course of supplying to him or her a medical service the supply of which is GST-free.

The other relevant provision to consider is section 38-10 of the GST Act.

Other health services

Subsection 38-10(1) of the GST Act provides that a supply of health services is GST-free if:

(a) it is a service of a kind specified in the table in this subsection or of a kind specified in the regulations; and

(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.

All three requirements in subsection 38-10(1) of the GST Act must be satisfied for a supply of health services to be GST-free under that subsection.

The Australian Taxation Office fact sheet: GST and other health services (NAT 4650) provides guidance on the GST treatment of certain health services. This fact sheet is available at www.ato.gov.au. Further, the Health Industry Partnership-Issues Register, also available at www.ato.gov.au provides a discussion on other health services at issue 2.a.

There are 21 health services listed in the GST Act:

The first requirement in paragraph 38-10(1)(a) of the GST Act is that you must supply one of the services listed in the table above. The second requirement in paragraph 38-10(1)(b) of the GST Act is that the supplier must be a recognised professional in relation to the supply of the listed services, that is, the listed service must be performed by a recognised professional of the listed service.

Section 195-1 of the GST Act provides that a recognised professional, in relation to the supply of services of that kind is a person who:

· is registered, permitted or approved under state or territory law to supply the listed health service, or

· if there is no relevant state or territory law, is a member of a professional association that has uniform national registration requirements relating to the supply of the health service.

The third requirement in paragraph 38-10(1)(c) of the GST Act is that the listed service supplied is generally accepted in that health profession associated with supplying services of that kind as being necessary for the appropriate treatment of the recipient of the supply.

Issue 2.a of the Health Industry Partnership-Issues Register provides that:

Where a person other than the recognised professional provides a component of the supply, for section 38-10 that component will not be GST-free unless that person is also a recognised professional, or the component of the supply is directly supervised by the recognised professional or is GST-free under another provision. It is considered that a person will be directly supervised where the *recognised professional:

· attends the patient at the commencement of the treatment and at the subsequent commencement of each new treatment, and

· is readily available for the whole of the time that the assistant is working with the patient, and

· that the *recognised professional be available to take appropriate action in the case of an emergency, and

· determines all of the appropriate treatment to be provided by the assisting person, and

· can satisfactorily prove that they monitor the services of the unqualified staff.

In your case, you have advised that your clinical exercise physiologist solely provides the services under the weight management program to assist in weight reduction for those individuals that are obese and overweight who generally have other health issues. The program is a series of one on one consultation that commences with a detailed history of the client. Health and lifestyle related issues, in addition to weight issues are then addressed with a strong cognitive behaviour strategy. The program is multifaceted covering areas such as activity, stress, food intake, nutrition, assertiveness, sleep and lifestyle management. Your clinical exercise physiologist is accredited through the Exercise and Sports Science Association. However, exercise physiology is not a listed service in the table above and accordingly the first requirement in paragraph 38-10(1)(a) of the GST Act has not been met. In addition, your clinical exercise physiologist may be providing some of the listed services such as dietary services under Item 7 and perhaps psychology under item 16 as part of the collection of services provided under the program however your clinical exercise physiologist is not a recognised professional in relation to the supply of those listed services as required by paragraph 38-10(1)(b) of the GST Act. Your clinical exercise physiologist may be qualified in exercise physiology but is not a recognised professional in one of the 21 health services listed in the above table.

As you do not meet all of the requirements of subsection 38-10(1) of the GST Act, then your supply of the collection of services under the program delivered solely by your clinical exercise physiologist is not GST-free.

Subsection 38-10(3) of the GST Act provides that a supply of goods is GST-free if:

(a) it is made to a person in the course of supplying to the person a service the supply of which is GST-free under subsection (1) (other than a service referred to in item 8, 9, 12 or 15 of the table in subsection (1)); and

(b) it is made at the premises at which the service is supplied.

As has been determined above, the supply of the collection of services under the program is not GST free under subsection 38-10(1) of the GST Act. As such, the supply of the product is not GST free under subsection 38-10(3) of the GST Act as it is not a supply of goods made to a person in the course of supplying to the person a service the supply of which is GST-free under subsection 38-10(1) of the GST Act.

Summary

As your supply of the program and the product is not GST-free under either section 38-7 or section 38-10 of the GST Act then your supply of the program and the product will be a taxable supply where all the requirements of section 9-5 of the GST Act have been met.