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Ruling

Subject: GST and supply of remedial massage services

Question 1

Is your supply of remedial massage services a GST-free supply of medical service?

Answer

No.

Relevant facts and circumstances

You are a sole trader and have been trading under a specified registered business name for a few years as a remedial massager.

Your GST turnover has always been under the registration turnover threshold therefore you were not registered for GST. Due to changes in trading conditions it is expected that your GST turnover may meet the registration turnover threshold of $75,000. You are therefore looking at registering for GST.

Patients using the remedial massage services are not entitled to receive a Medicare benefit.

You are an accredited registered provider for the purposes of patients being entitled to claim under their private health insurance should they have the appropriate level of cover.

Patients are also referred to you by the medical profession including doctors, physiotherapists and chiropractors.

The Cancer Council and a specified hospital also refer patients to you as you have the necessary qualifications to assist cancer patients in their treatment.

You are also accredited as a workcover therapist to assist patients recovering from work related injuries.

You take a full medical history and record the patient's progress.

You undertake continuing education courses to keep your accreditation.

This is the only enterprise that you carry on.

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 23-5

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

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-7(1)

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

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

Summary

Your supply of remedial massage services is not a GST-free supply of a medical service as it does not meet the definition of 'medical service' under section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Further, the supply is not GST-free under any other provision of the GST Act or a provision of another Act.

Your supply of remedial massage services will be a taxable supply once you become required to be registered for GST.

Detailed reasoning

Section 9-40 of the GST Act provides that you must pay the GST payable on any taxable supply that you make.

Under section 9-5 of the GST Act, 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.

(* denotes a term defined in section 195-1 of the GST Act)

In your case, your supply of remedial massage services meets the requirements of paragraphs 9-5(a), 9-5(b) and 9-5(c) of the GST Act as:

· you supply your services for consideration

· the supply is in the course of your enterprise, and

· the supply is connected with Australia.

You advised that although you are not currently registered for GST, it is expected that your GST turnover may meet the registration turnover threshold.

Pursuant to section 23-5 of the GST Act, you will become required to be registered for GST when your GST turnover meets the registration turnover threshold of $75,000. When this happens, you will also meet the requirement of paragraph 9-5(d) of the GST Act.

When you become required to be registered for GST your supply of remedial massage services will be a taxable supply under section 9-5 of the GST Act unless it is GST-free or input taxed.

The supply of remedial massage services is not an input tax supply under the GST Act or a provision of another Act. Therefore what is left to determine is whether the supply is GST-free.

Subdivision 38-B of the GST Act sets out those health services the supply of which is GST-free. Of relevance are sections 38-7 and 38-10 of the GST Act.

Section 38-7 - Medical services

Generally, a supply of a medical service is GST-free under subsection 38-7(1) of the GST Act.

Section 195-1 of the GST Act defines 'medical service' as:

(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 parts. Any service that falls within either the first or second part of the definition is GST-free.

Remedial massage services are not services for which a Medicare benefit is payable. Hence, they are not covered under paragraph (a) of the definition of medical service in section 195-1 of the GST Act.

We need to consider whether these services are covered by paragraph (b) of the definition of medical service in section 195-1 of the GST Act.

The Australian Taxation Office's view on paragraph(b) of the definition of 'medical service' in section 195-1 of the GST Act is outlined in the Health Industry Partnership - issues register (Issues Register). Issue 1.a of the Issues Register states in part:

Explanation of definition's second limb

The second limb of the definition of '*medical service' contains a number of elements. All of these elements must be satisfied before a service will be a medical service under the second limb.

The first element is that the service must be supplied by or on behalf of a *medical practitioner (defined in section 195-1 of the GST Act as a person who is a medical practitioner for the purposes of the Health Insurance Act 1973) or an *approved pathology practitioner (defined in section 195-1 of the GST Act as a person who is a approved pathology practitioner for the purposes of the Health Insurance Act 1973).

The second element is that the service supplied must be generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

Meaning of 'service supplied by or an behalf of a *medical practitioner or *approved pathology practitioner',

The phrase 'on behalf of' for the purposes of the definition of '*medical service' means the performance of a component of the service provided by a practitioner that is not necessarily supervised by that practitioner. An example is where a laboratory technician assists in undertaking pathology testing of specimens.

However, 'on behalf of' does not include a service performed on referral by another person. A service performed on referral by another person, is not a component of the supply being provided by the first practitioner. The service being provided by the second person will be a separate supply, the GST-free status of which must be examined by reference to the supply by that second person.

Additionally, issue 1.a.11 of the Issues Register states in part:

1.a.11. Are massage services GST-free where a medical practitioner has referred the client?

A referral, in itself, will not render the subsequent supply GST-free. A massage service will be a GST-free *medical service if either: a Medicare benefit is payable; or it is undertaken by a *medical practitioner (as defined in the GST Act) and the practitioner is skilled in the provision of this supply and such treatment is generally accepted by the profession as being appropriate treatment.

Based on the information provided, you are not a medical practitioner or an approved pathology practitioner for the purposes of the Health Insurance Act 1973.

Further, as stated in issue 1.a of the Issuers Register, a supply of remedial massage performed by you on referral is not a component of the supply being provided by the referring practitioners. The service being provided by you is a separate supply, the GST-free status of which must be determined by examining the circumstances of your supply.

As your supplies of remedial massage services are not supplied by, or on behalf of, either of the practitioners mentioned within the definition of a 'medical service', the supply of these services is not GST-free under section 38-7 of the GST Act.

Section 38-10 - Other health services

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

(1) 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 above requirements must be satisfied for the supply of remedial massage services to be GST-free.

Issue 2.a of the Issues register states in part:

Meaning of 'service of a kind specified in the table'

To qualify the service must be the provision of one of those actual services listed and not just something similar to one of the services. Support for this argument is found in the Table where it lists both 'Audiology' and 'Audiometry' at Item 3. If it were intended that it was sufficient that the supply of a service be similar to one mentioned in the table, one of the terms 'Audiology' or 'Audiometry' would be superfluous. Similarly, further down the table there is the inclusion of 'traditional Chinese herbal medicine' under 'Herbal medicine' in Item 8 of the table. One of these terms would be superfluous if the list was not strictly interpreted as the actual service listed in the table.

As stated above, to satisfy the requirement of paragraph 38-10(1)(a) of the GST Act, the service must be the provision of one of those actual services listed and not just something similar to one of those services. Remedial massage therapy is not specifically listed in the table or in any regulations. Therefore, remedial massage therapy in itself does not satisfy the first requirement in subsection 38-10(1) of the GST Act.

A supply of remedial massage services may still be GST-free where the supplier is supplying one of the services listed in the table in subsection 38-10(1) of the GST Act and remedial massage is a standard technique or a component of the supply of that listed service.

Issue 1.a.11 of the Issues Register states in part:

…, under 'Issue 2' of this Log, a supply of a massage service is not a listed service for section 38-10 and will not be GST-free under that section unless it is:

a. supplied by a '*recognised professional' as defined in section 195-1

b. is in relation to one of the table listed services such as 'Physiotherapy'

c. is 'generally accepted in that profession as being necessary for the appropriate treatment of the *recipient of the supply'.

Further, issue 2.a.9 of the Issues Register states in part:

2.a.9. Is massage therapy GST-free?

The question requires a consideration of sections 38-7 and 38-10.

Massage therapy may be GST-free if supplied by a *medical practitioner pursuant to section 38-7 provided all the elements of that section are satisfied (see Issue 1.a.9 of this document) and the practitioner is skilled in the provision of that service.

As to whether massage therapy by other health professionals will be GST-free initially depends on whether the treatment is within a service of a kind specified in the Table at section 38-10(1). Those services in the Table which may include massage therapy as being the entire supply is 'Physiotherapy' and those which may include massage therapy as a component of the overall supply include 'Acupuncture', 'Chiropractic', 'Nursing', 'Occupational therapy', 'Osteopathy', 'Naturopathy' and 'Physiotherapy'.

In order to be GST-free, all of the elements of section 38-10 must be satisfied. In particular the supply must generally be accepted in the profession associated with the service as being necessary for the appropriate treatment of that particular patient by that recognised professional (bearing in mind their training in providing massage therapy).

By way of an example, if a registered physiotherapist provides remedial massage therapy as a component of physiotherapy treatment for a patient and the supply of remedial massage therapy is generally accepted within the physiotherapy profession as being necessary for the appropriate treatment of the patient, then the supply would be GST-free. However, this is not the case in your situation.

Whilst you are a qualified remedial massage therapist who is recognised as a professional in your industry, remedial massage therapy is not listed in the table in subsection 38-10(1) of the GST Act. Furthermore, you are not a recognised professional in relation to any of the other services listed in the table in subsection 38-10(1) of the GST Act. Therefore, the requirement in paragraph

38-10(1)(a) of the GST Act is not met.

As your supply of remedial massage services does not meet all the requirements of subsection

38-10(1) of the GST Act the supply of your services is not GST-free. Additionally, the supply of your services is not GST-free under any other provision of the GST Act or under a provision of another Act. Therefore, the supply of your remedial massage services is a taxable supply under section 9-5 of the GST Act once your GST turnover meets the registration turnover threshold.

For further information on when your GST turnover meets the registration turnover threshold refer to Goods and Services Tax Ruling GSTR 2001/7 which is available on our website at www.ato.gov.au