Edited version of private ruling

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Ruling

Subject: GST and psychology services

Question 1

Is the supply of psychology services made by you to patients but paid by insurance companies (the insurer), a taxable supply?

Answer

No, the supply made by you to patients but paid by the insurer is not a taxable supply as the recipient of the supply is the patient.

Question 2

If the answer to question 1 is no, should the GST collected from insurance companies be refunded to those insurance companies?

Answer

There is no obligation on the Commissioner of Taxation (the Commissioner), to refund any overpayment of GST paid.

Relevant facts and circumstances

You are registered for GST

You are registered with the Australian Health Practitioner Authority (AHPRA). Prior to this you were registered with the NSW Psychologists Registration Board under the Psychologists Act 2001.

Referrals for psychological services for claimants of workers compensation are made to you either by the nominated treating doctor (NTD) or an approved rehabilitation consultant.

This is undertaken in accordance with an Injury Management Plan provided by the insurer.

You advise that the insurer had to approve all services provided to an injured worker. Since the change in Workcover NSW regulations in 2010 up to six sessions can be provided before a treatment plan is submitted for approval by the insurer.

There is no formal agreement between you and the insurer or the NTD.

Patients are referred to psychologists selected by the NTD.

You claim from the insurer for the psychological services and travel costs incurred.

You include GST in the amount charged to the insurer for all supplies made.

The insurer has advised you that it only agrees to pay for your services in situations where either the insurer or a third party acting on its behalf organises the treatment provided by you.

The insurer also advised you that if the NTD or the worker (patient) organised the treatment provided by you then it is GST-free.

Other insurers have accepted that you are making a taxable supply to them.

In order to provide these services to the patients the insurer now requires you to undertake a compulsory training course that you have not completed.

Because you have not undertaken this course the insurer will not pay you for services provided to patients referred to you.

The insurer has suggested that you seek payment from Medicare for any services provided to patients that are clients of the insurer.

The insurer is refusing to pay GST on the services you provide as they consider that the service is supplied to the patient and not to them as insurer.

The client was referred to you by the NTD and you received a confirmation letter from the NTD.

You received approval from the insurer to provide the services by letter.

You provided an invoice to the insurer which shows that the initial consultation date.

Additional facts provided by you in the form of an injury management plan (IMP) that is provided by the insurer that outlines the expectations of each of the participants which are as follows:

The worker

The worker is to:

· Attend all medical reviews with the NTD in accordance with the review date noted on the Workcover medical certificate until such time as a Final medical certificate is issued.

· Comply with all reasonable requests made by treatment providers as treatment and management options. Advise the insurer of any treatment recommendations made by the treatment providers and request approval from the insurer prior to proceeding.

· Comply with instructions provided by all approved treatment providers.

· Attend medical reviews, including independent medical reviews and case conferences arranged by the insurer or by its service providers.

The worker agrees that approval is sought prior to any proposed treatment, tests, referrals or services are arranged. If approval is not sought the insurer are not liable for the cost.

The worker is to ensure that an up to date medical certificate is maintained at all times and that it is forwarded to the insurer or the employer in a timely manner. If an up to date certificate is not kept it may jeopardise the weekly benefit entitlement.

If the insurer deems that the NTD is not prepared to participate in this plan the insurer will ask the worker to seek another treating doctor. If the worker seeks to change the NTD they may do so only if a written letter formalising the request and detailing the reasons for the request.

The NTD

Assesses the workers medical and functional capacity plus fitness for work at each review and provide Workcover medical certificates.

Liaise with the insurer regarding the services required to assist the worker with the recovery of the worker's work injury.

Monitor progress with treatment to ensure it is effective, appropriate and reasonably necessary in accordance with Workcover requirements and liaise with the insurer if treatment needs change or further investigations are required.

Ensure all referrals are forwarded to the insurer for approval. If approval is not sought then the insurer is not liable to cover the cost.

Ensure timely and appropriate upgrades are issued in line with medical information available.

Liaise with all key stakeholders to assist with coordinating treatment and return to work.

The psychologist

Provide appropriate and effective treatment.

If more than six sessions are required, submit a psychological management plan to obtain approval from the insurer's Workers Compensation for ongoing treatment.

Liaise with and be available where required to communicate with the insurer's case manager and other treatment providers.

If additional treatment is required submit a further psychological management plan to obtain approval from the insurer's Workers Compensation for ongoing treatment.

Employer

When the worker has been certified fit for duty, establish duties in line with stipulated restrictions.

Liaise with the NTD and other treatment providers to discuss current status.

Contact the insurer to discuss any issues that may arise and also advise the insurer of any non compliance issues.

Case manager (the insurer)

Monitor workers treatment to ensure it is effective and appropriate and assist to achieve maximum recovery from injury.

Ensure all recommended treatment is undertaken and liaise with all relevant parties regarding workers return to work.

Promptly approve reasonable and appropriate requests for treatment and/or investigations in a timely manner to promote a safe and durable recovery.

Review the need to arrange a case conference or refer to a Workcover Medical Injury Management Consultant, Independent Medical Assessor or an Accredited Rehabilitation Provider, in consultation with all parties if required.

Address any non compliance issues which may arise.

Question 1

Summary

The supplies made by you to the insurer are taxable supplies as the service is supplied to the insurer

Detailed reasoning

You are liable for GST on any taxable supply you make.

Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you make a taxable supply if:

(a) you make a supply for consideration

(b) the supply is made in the course or furtherance of an enterprise that you carry on

(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.

In your case the services you provide are for consideration, they are in the course of your psychology enterprise in Australia and you are registered for GST. Therefore, the supplies you make will be taxable unless they are either GST-free or input taxed. There is no provision in the GST Act or any other Act that would make your supplies input taxed.

Accordingly, what is left to be determined is whether the supply of your services is GST-free.

Subsection 38-10(1) of the GST Act allows for certain health services to be GST-free. This subsection provides that that a supply is GST-free if:

(a) it is a service of a kind specified in the table in this subsection, or a kind specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (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.

You provide psychology services and psychology is listed at item 16 in the table in subsection 38-10(1) of the GST Act.

You have advised that you are a practicing psychologist registered with the Australian Health Practitioner Authority. Therefore you meet the first two requirements listed above. The third requirement is that the supply is generally accepted, in the psychology profession, as being necessary for the appropriate treatment of the recipient of the supply.

Section 195 of the GST Act defines recipient in relation to a supply to mean the entity to which the supply was made. Where there are only two parties to the supply of your psychology services, for example, you and your patient, the recipient of the supply of your psychology services is your patient.

However, where there is a third party involved in the transaction, there may be one or more supplies for GST purposes. Therefore, it is necessary to determine what is being supplied to whom.

Where the third party is merely paying on behalf of your patient, the supply of your psychology services to your patient are still GST-free where all the necessary requirements of subsection 38-10(1) of the GST Act are satisfied. This is because your patient is still the recipient of the supply even though payment is made by a third party. Section 9-15 of the GST Act provides that it does not matter whether the payment is made by the recipient or by another party.

In some cases, the third party is not only providing payment for the supply of your psychology services, but is in fact the recipient of that supply. Where the recipient is a third party then your supply of psychology services are not GST-free. The provision of psychology services to, or for the benefit of a third party, does not come within the meaning of appropriate treatment of the recipient under subsection 38-10(1) of the GST Act. The supply will be subject to GST where the requirements of a taxable supply are met.

In this case the worker was referred to you by the NTD. You contacted the insurer seeking approval to provide your psychology services to the worker. Prior to providing your services you received approval from the insurer which also requested from you a written request for approval by the insurer for any further services to be provided. This is not a binding agreement between you and the insurer to provide psychology services to the worker. the insurer has provided you with written approval to pay for the services provided by you to the worker.

As the insurer has not chosen you to provide the services nor entered into a contractual relationship for the supply to be made to the worker and are only liable to pay for the supply of your services to the worker, they are not the recipients of a supply of your professional services to them. The supply, in this instance, that you make is made to the worker.

Therefore the last of the requirements of subsection 38-10(1) of the GST Act is satisfied. The supply made by you to the worker is a GST-free supply.

Please note that you have advised that as you have not completed a necessary course with the insurer that they no longer approve your services. Where you make additional services to the worker that is not approved by the insurer you are making the supply to the worker. Subsection 38-10(1) of the GST Act provides that a supply of other health services is GST-free if it is a service of a kind specified in the table in that subsection. Item 16 in the table relates to psychology services, therefore any services that you provide to the patient is GST-free. In this instance the recipient of your supply is the worker and that supply is GST-free.

Question 2

Summary

There is no obligation on the Commissioner to refund any overpayment of GST paid.

Detailed reasoning

Subsection 105-65(1) of Schedule 1 to the Taxation Administration Act 1953 (TAA) provides that where goods and services tax (GST) is incorrectly included in the price of a non-taxable supply, the ATO is not obliged to refund or credit the overpaid amount to the supplier.

In your situation you are concerned that you may have incorrectly treated supplies made as taxable when in fact the correct GST status of the supplies is GST-free.

Where you have incorrectly included GST in a supply made we need to consider the circumstances within which this has occurred. We need to establish the status of the recipient of the supply and their GST status and whether the recipient has an entitlement to claim an input tax credit.

You have stated that the insurers who pay for the supplies you make have accepted the supplies are taxable except for the one insurer. You have indicated that the one insurer does not acknowledge that it is the recipient of the supply that you make and that the recipient is the worker to whom the service is provided. As indicated in question 1 above it is considered that the services that you provide are a supply made to the worker and that the service is a GST-free supply.

Where you have incorrectly classified a GST-free supply as a taxable supply the Commissioner can use his discretion to refund you the amount of GST overpaid in certain circumstances.

To correct such a situation you would need to refund the amount of GST paid by the recipient of the supply and issue an adjustment note to the recipient showing the supply as a GST-free supply.

You would then be able to apply to the Commissioner for a refund of the GST that you paid in error. There is no obligation on the Commissioner to refund any overpayment made by you to the ATO.

MT Ruling MT 2010/1 provides guidance in relation to this situation and whether you would be entitled to a refund of the GST overpaid.

Paragraph 121 of MT 2010/1 provides that a refund will only be paid if the Commissioner is satisfied that the recipients of the supply on which GST was overpaid have been reimbursed. It also provides that then recipients of the supply must not be registered or required to be registered.

In your situation the recipients of the supply are registered for GST. Where you have incorrectly paid GST for supplies made to those recipients the Commissioner is not obliged to provide a refund of overpaid GST to you. The discretion will not generally be exercised where it produces an unreasonable result. This may occur where, for example, a supplier reimburses a registered recipient but the Commissioner is unable to reclaim the overclaimed input tax credit from the recipient. Refer to paragraph 128 (e) of MT 2010/1.

In these situations the registered recipient of any taxable supply you make would generally be entitled to a claim for an input tax credit. This is a normal business to business transaction and the recipient would not be out of pocket if you did not make any adjustments and as you have paid the GST collected from the recipient you are not making a windfall gain where you do not seek a refund from the ATO.