Edited version of private ruling

Authorisation Number: 1011720266790

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: Goods and services tax and the supply of medical goods

Question 1

Do supplies of a set of products by you to parties other than hospitals and distributors (i.e. patients) qualify for GST-free status by virtue of either subsection 38-7(3) or subsection 38-10(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes. The supplies of a set of products by you to patients qualify for GST-free status if they are supplied to the patient either in the course of providing the patient with a GST-free supply of a medical service by a doctor or a GST-free supply of 'other health service' by a nurse acting on a doctor's instructions, and it is made at the premises at which the medical service is supplied.

Question 2

Do your supplies of dressing kits and plastic tubing qualify for GST-free status by virtue of subsection 38-45(1) of the GST Act?

Answer

Your supplies of dressing kits qualify for GST-free status under subsection 38-45(1) of the GST Act. However, the supplies of associated plastic tubing are not GST-free.

Relevant facts and circumstances

You are a provider of advanced healing technologies.

You are the proprietary owner of a wound closure therapy, which has been clinically demonstrated to promote wound healing in patients with complex and difficult to heal wounds.

You have provided copies of medical marketing literature providing technical information about the products and the dressing kits.

You supply a variety of dressing kits for a number of types of wounds and also wounds in a number of locations on the body

The dressing kits come in a variety of sizes - small, medium and large.

Where a doctor decides to treat a patient using the therapy, the therapy is mostly based in a hospital setting or sometimes in a doctor's rooms.

With shortages of hospital beds and the introduction of nurse practitioner to relieve the load on doctors it is anticipated that there will be a future trend toward commencing and managing treatment of advanced wounds outside a hospital setting.

At present, it is mostly the case that the patient will be an inpatient at a hospital where the treating doctor commences therapy.

The hospital will place an order for the therapy unit along with an order for appropriate dressings and you invoice the hospital.

You account for GST on the supply of products invoiced to hospitals...

Depending on the progress of a particular patient's wound, the doctor may decide to discharge the patient from hospital but to continue therapy in the community either at the patient's home or at a facility.

Where the patient is discharged from hospital and therapy is to be continued, a registered nurse specialising in wound care will carry out the doctor's instructions and send a referral to order a more portable type therapy unit for the patient.

Where the treating doctor has decided to continue therapy in the community it can be the case that the hospital will no longer pay for the rental of the therapy units or the dressing kits etc from the time of discharge. Instead, in some circumstances, the patient will be required to fund the therapy themselves, or payment of funding will be agreed with the patient's private health insurer or another relevant party.

Agreement on how the continuing therapy will be funded is determined before the doctor's decision to discharge the patient from hospital is finalized. If funding cannot be secured for ongoing therapy it may be necessary for the patient to remain hospitalised or for the doctor to consider alternative treatments.

At the time of that ruling the majority of patients received their therapy treatment in hospitals as inpatients.

However, more patients receive their therapy treatment in the community now due to the portability of units and the greater demand for hospital beds.

The Taxation Office issued a private ruling to you that you are not required to charge GST on the supply of advanced wound care therapy product in certain circumstances:

However it is not generally the case that you will invoice either a patient or a patient's health fund in relation to the supply of the therapy related products where the patient is being treated in a hospital setting or as an undischarged patient. Where a patient is in hospital, it is generally the hospital that places an order for the relevant goods and you will invoice the hospital with GST except in relation to supplies of certain dressing kits (which are treated as GST-free).

Reasons for Decision

Question 1

Under section 38-7(3) of the GST Act a supply of goods is GST-free if it is made to an individual in the course of supplying to them a medical service which is GST-free, and it is made at the premises at which the medical service is supplied.

It is understood from the facts provided that the supply of the therapy related products by a doctor to their patient will be made in the course of supplying to the patient a medical service, and that the supply will be made at the premises at which the medical service is supplied, either in the doctor's surgery or the patient's home. Therefore such a supply of the therapy related products by a doctor to their patient will be GST-free.

In circumstances where the supply of the therapy related products is made by you to a doctor the supply would be a taxable supply. The doctor would be able to claim an input tax credit for the GST paid. The doctor would not charge the patient GST on the use of the therapy system. The circumstances of the use of the therapy related products do not change. It is only the method of billing that has been altered to streamline the process. If you are requested by the doctor to bill the patient or the patient's health fund or some other entity directly this is merely an administrative arrangement under which the patient or some other entity acting on the patient's behalf agrees to pay you directly instead of paying that amount to the doctor for the GST-free services provided by the doctor. It is considered that where you bill the patient or the patient's health fund or some other entity directly, GST is not payable as it is a pre-arranged payment for a GST-free supply made to the patient by the doctor.

Under section 38-10(3) of the GST Act a supply of goods is GST-free if it is made to an individual in the course of supplying to them an 'other health service' which is GST-free, and it is made at the premises at which the 'other health service' is supplied. Nursing services are included as 'other health service' as they are identified as such at Item 10 in the table in section 38-10(3) of the GST Act.

It is noted that the use of therapy related products in community care would be supplied by a specially trained nurse and would be carried out under the instruction of a supervising medical practitioner. In this circumstance, the supply will be made at the premises at which the 'other health service' of nursing services is provided. Therefore such a supply of therapy related products by a nurse to their patient will be GST-free.

Question 2

Under section 38-45(1) of the GST Act a supply of goods is GST-free if the good is covered by Schedule 3 of the GST Act, which lists GST-free medical aids and appliances, or in regulation 38-45.01 of A New Tax System (Goods and Services Tax) Regulations 1999 (Regulations). Polyurethane film is listed at item 4 of regulation 38-45.01 of the Regulations. Polyurethane foam is listed at item 5 of regulation 38-45.01 of the Regulations. Thus the supplies of both of these products are GST-free. However, the supplies of associated tubing are not GST-free because this product is not listed under an item of Schedule 3 of the GST Act or an item of regulation 38-45.01 of the Regulations.