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Edited version of private ruling
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Ruling
Subject: GST and medical services
Subject
Issue 1
Question 1
Is GST to be remitted by the medical service on the amounts paid by the medical service to the doctors?
Advice/Answers
No.
Relevant facts
You are a fully registered and accredited medical practice.
You are registered for GST, and you are a public benevolent institution entitled to various tax concessions.
Medicare income is receipted by you. You pay amounts to the doctors.
Recipient created tax invoices are produced by you for the doctors.
Reasons for decision
Issue 1
Question 1
Summary
GST is to be reported and remitted by the doctors who are registered for GST, rather than you, on the amount of fees you pay to them. You are the recipient of their supply of professional services.
Detailed reasoning
You have stated in your ruling application that you are registered as a public benevolent institution and are therefore GST exempt. It is important to note that whilst you hold income tax and fringe benefits tax exemptions, for GST purposes there is not an exemption but rather a range of concessions that may apply (none of which are relevant in these circumstances).
Where a non-profit organisation is registered or required to be registered for GST, the price of most sales of goods and services and anything else will be inclusive of GST. Similarly, the organisation may be entitled to claim GST credits on the purchases it makes in carrying out its activities.
As you are registered or required to be registered for GST, you generally include GST in the price of most goods and services and anything else you sell. However, there are other types of sales where your organisation does not include GST in the price. These are called GST-free sales and input taxed sales.
Under section 38-7 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), a supply of a medical service is GST-free. For the purposes of the GST Act, a medical service is defined as:
• a service for which a medicare benefit is payable, or
• 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 term 'recipient', in relation to a supply, is defined to mean the entity to which the supply was made. In some circumstances, the 'recipient of the supply' is not the patient of the practitioner but is a third party. In such circumstances, the service supplied by the practitioner is not GST-free as there cannot be appropriate treatment of the recipient of the supply. Also, 'appropriate treatment' will not include supplies made for a third party, where there is no actual treatment of the patient involved.
There are usually two different arrangements that may be entered into between medical centres, medical practitioners and patients in respect of contract medical services. The different arrangements between doctors and medical centres are discussed in detail below.
First arrangement
The medical practitioner (not being an employee) provides services to a medical centre and, as a result of that provision, services are provided to a patient. In this situation, there are two supplies:
• a supply from the medical centre to the patient, and
• a supply from the medical practitioner to the medical centre.
The supply from the medical centre to the patient is provided by the medical practitioner on behalf of the medical centre and is a GST-free supply unless it is an excluded medical service.
In relation to the supply by the medical practitioner to the medical centre, the medical centre is the recipient of the supply and not the patient. Therefore, this supply is not GST-free as there cannot be appropriate treatment to the recipient of the supply. This service is subject to GST if the medical practitioner is registered for GST.
Second arrangement
The medical practitioner provides services to the patient and the medical centre provides administrative services to the medical practitioner. In this situation, there are two supplies:
• a supply from the medical practitioner to the patient, and
• a supply from the medical centre to the medical practitioner.
The supply from the medical practitioner to the patient is GST-free unless it is an excluded medical service.
The provision of administrative services by the medical centre to the medical practitioner is subject to GST if the medical centre is registered for GST.
Your circumstances
From the information provided, the arrangement you have with your doctors is similar to the first arrangement described above. This is because you are a charitable institution, and you do more than simply providing administrative services to doctors. You are providing GST-free medical supplies to patients.
You have also indicated that you produce a tax invoice for the doctors, and that this is a recipient created tax invoice (RCTI). This means that you are preparing the tax invoice on behalf of the doctors and you are the recipient of their supply. It is headed with the doctor's name and ABN and details of the amount of consideration, including GST, that is payable to them.
In this situation, the doctors supply their services to the medical centre and the medical centre supplies medical services to patients. It is the supply of medical services by the medical centre to the patient that is GST-free.
Even though the doctors physically provide services to patients, they do this on behalf of the medical centre. As the medical centre is the recipient of the doctor's supply and not the patient, the doctor's supply of services to the medical centre are not GST-free. These professional services are not services for which a medicare benefit is payable, or for treatment of a patient.
The doctor's supply of services to the medical centre is a taxable supply where all of the requirements of section 9-5 of the GST Act are satisfied. That is, where the supply is made for consideration, it is made in the course of the doctor's enterprise, it is connected with Australia and the doctor is registered for GST.
Where the supply made by the doctors to the medical centre is a taxable supply, they are required to supply a tax invoice to the medical centre. This can be satisfied by you providing them with a RCTI.
GST payable by the doctors will be 1/11th of the consideration the doctors receive for their services.
Being registered for GST means that your organisation may claim GST credits on the purchases you make in carrying out your activities. You can claim GST credits where the acquisitions are in relation to a supply that you make that is GST-free. Where you hold a tax invoice from the doctors (or an RCTI) for the services they provide to you, you may claim the GST amounts as a GST credit.