Edited version of private ruling

Authorisation Number: 1011796455329

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Ruling

Subject: GST and supply of health services

Question

Are you making a taxable supply of your services, in the form of assessment, recommendation and case management services where they are made to an insurer?

Answer

Yes, your supply of your services to insurers is a taxable supply.

Relevant facts and circumstances

You are registered for GST.

You provide case management services for individuals with particular health conditions.

You are a registered nurse, however your business activities do not directly involve nursing.

Usually clients are referred to you by insurance companies.

After assessing the clients you then prepare a report, which includes funding requests for rehabilitation services and if required, further coordination services.

Your services are billed to the insurer.

There are some cases where you bill the client directly when they have received settlement and require your support. These clients contract with you directly and settle their own accounts. You do not require advice regarding these supplies.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 - Section 9-5.

A New Tax System (Goods and Services Tax) Act 1999 - Section 9-40.

A New Tax System (Goods and Services Tax) Act 1999 - Section 38-10.

A New Tax System (Goods and Services Tax) Act 1999 - Subsection 38-10(1).

A New Tax System (Goods and Services Tax) Act 1999 - Paragraph 38-10(1)(a).

A New Tax System (Goods and Services Tax) Act 1999 - Paragraph 38-10(1)(b).

A New Tax System (Goods and Services Tax) Act 1999 - Paragraph 38-10(1)(c).

Reasons for Decision

Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states that GST is payable on taxable supplies you make.

Section 9-5 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.

This means that where the above elements are satisfied you will be making a taxable supply except to the extent that it is GST-free or input taxed. It is considered that the provisions of the GST Act dealing with input taxed supplies will have no application to the specified services you provide.

Section 38-10 'Other health services'

Under Subdivision 38-B of the GST Act, the supply of certain health related goods and services are GST-free. The supply of health services are GST-free where the requirements of subsection 38-10(1) of the GST Act are satisfied.

Subsection 38-10(1) of the GST Act states that:

A supply 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 the elements of subsection 38-10(1) of the GST Act must be satisfied in order for a supply to be GST-free under the subsection.

First requirement

Item 10 in the table in subsection 38-10(1)(a) lists 'Nursing' as a specified service for the purposes of this paragraph. While you are a qualified nurse, you advised that your services do not involve any nursing services.

As you do not provide nursing services, or any of the other health services listed in the table in subsection 38-10(1) of the GST Act, this requirement is not satisfied. Therefore, your services will not be GST-free.

Although it is not necessary to consider the remaining requirements for completeness, we provide the following explanation regarding the other requirements of section 38-10 of the GST Act.

Second requirement

Section 195-1 of the GST Act defines a person as a 'recognised professional', in relation to supplies of nursing services, if:

(a) the service is supplied in a State or Territory in which the person has a permission or approval, or is registered, under a State law or Territory law prohibiting the supply of services of that kind without such permission, approval or registration.

As nurses are required to be registered by law in all States and Territories, the provision of nursing services by registered or enrolled nurses will satisfy the recognised professional requirement under paragraph (a), above. As you are a registered nurse, this requirement would be satisfied if your supply was one of nursing services.

Third requirement

This paragraph requires interpretation as to what is meant by 'generally accepted' and 'appropriate treatment of the recipient'.

It is considered that for a supply to be 'generally accepted', the particular service being provided and the circumstances in which it is provided must be generally accepted by the nursing profession as being necessary for the appropriate treatment of the recipient of the supply. That is, it will be the nursing profession that ultimately determines what services will be generally accepted.

It is considered that appropriate treatment will be established where the practitioner assesses the recipient's state of health and determines a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of the recipient and will include subsequent supplies for the assessed process. For example, a supply of nursing care to a person requiring treatment to dress a wound is considered to be appropriate treatment.

It is important to note that for this requirement to be met the recipient of the supply must be the person treated.

To determine the recipient of the supply, it is necessary to examine the contractual relationship between the parties and whether there is a binding obligation for the recognised health professional to supply the health services to the patient or to another business entity. When a business entity (or third party) is the recipient of the health service then the service will not be GST-free.

Recipient of the Supply

Section 195-1 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 the treatment services (the recognised health professional and the patient) the recipient of the supply of the services will be the patient. However, sometimes a third party such as a community health organisation or an insurance company, may contract a recognised health professional to provide health services to a patient. In such circumstances, the third party is the recipient of the health service even though the patient receives the actual treatment.

It is considered that the third party will be the recipient of a supply where:

the third party engages the health professional to make, or to be available to make, a supply to them or to someone else; and

the third party, by agreement with the health professional, determines the nature of the supply to be made to them or to someone else; and

there is a binding obligation between the third party and the health professional for the supply and the third party is liable to provide payment.

Accordingly, where an insurer engages you, instructs you on the nature of services to provide and has a binding obligation with you to provide services to a particular patient, it is considered that you are making a supply to the insurer. Such supplies are business entity to business entity transactions and are subject to GST. This is irrespective of whether the physical treatment is provided to the patient.

This situation should be distinguished from arrangements where a third party merely pays for services on behalf of a patient who is, for the purposes of the GST Act, the actual recipient of the supply of the services. Section 9-15 of the GST Act provides that where a supply is made to a patient, it does not matter whether that patient provides the consideration for the supply. Provided all the other necessary elements of subsection 38-10(1) of the GST Act are met, the supply will be GST-free.

The above explanation is provided in relation to determining the recipient of the supply.

In summary:

As your supply meets all of the requirements of a taxable supply you will be liable for GST when you supply the case management services to insurers.

As the case management services you supply are not a component of 'nursing' or one of the 'other health services' listed in the table in subsection 38-10(1) of the GST Act the supply of your services would not be GST-free even if the supply is made to the patient. As all of the requirements of a taxable supply are met, you will be liable for GST.

Further information regarding GST-free supplies of 'other health services' is contained in the Health Industry partnership Issues Register - issue 2 and Goods and Services Tax Ruling GSTR 2006/9 which are available on our website: www.ato.gov.au