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Ruling

Subject: GST and supply of counselling services

Question 1

Is an Australian individual entity (you) making a GST-free supply under subsection 38-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when you supply counselling services directly to your clients?

Answer

No, you are not making a GST-free supply under subsection 38-10(1) of the GST Act when you supply counselling services directly to your clients. You are making a taxable supply under section 9-5 of the GST Act.

Question 2

Are you making a GST-free supply under subsection 38-10(1) of the GST Act, when you supply counselling services under an arrangement where you are requested by an organisation, to provide your services to either an individual employee or a group of employees of the organisation?

Answer

No, you are not making a GST-free supply of counselling services where you are requested by an organisation, to provide your services to an individual or a group of employees. Under this arrangement, you are making a taxable supply to the organisation itself, which is a third party payer.

Relevant facts and circumstances

You are a qualified counsellor and a member of the Australian Institute of Professional Counsellors.

You are registered for GST purposes in Australia for the other supplies that you make.

Your supply would be described as a supply of counselling services and this supply is not presently entitled to a Medicare rebate.

You are not a psychologist or a social worker or a recognised professional who is a member of either of these professional bodies.

You are supplying your mental health services (counselling services) to clients and are not sure if you should include GST in your supplies.

You may supply your counselling services directly to an individual recipient or to a group of individuals who each pay you directly for the services.

In addition you may be asked to deliver counselling services by a third party organisation. For example a government department may engage you to deliver workplace counselling to an employee or you may be asked to provide a therapeutic program to a group of employees.

You do not have specific agreements at this time with third parties, however you advise that the services will be arranged and paid for by the organisation and you would then provide the services to the individual employee or a group of employees of the organisation that engages you.

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 Division 38,

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

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

Reasons for decisions

Question 1

Detailed reasoning

GST is payable on any taxable supplies that you make. Under section 9-5 of the GST Act you make a taxable supply if:

· the supply is made for consideration;

· it is made in the course or furtherance of an enterprise that you carry on;

· it is connected with Australia; and

· you are registered, or required to be registered for GST.

However the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Accordingly, your supply of counselling services to individual clients will be a taxable supply if it meets all the requirements in section 9-5 of the GST Act.

From the facts given, your supply of counselling services satisfies all the requirements of paragraphs 9-5(a) to (d) of the GST Act, as follows:

· You make a supply of counselling services and in return you will receive consideration for the supply by way of payment;

· You supply the counselling services in the course or furtherance of your business (enterprise);

· You supply the counselling services through an enterprise that you carry on in Australia (and therefore the supply is connected with Australia); and

· You are registered for GST in Australia.

Hence, your supply of counselling services to individual clients or to a group of individual clients is taxable to the extent that it is not GST-free or input taxed.

The supply of counselling services by you does not satisfy any of the input taxed provisions under the GST Act. The GST-free provisions under the GST Act must also be taken into consideration.

GST-free

Subsection 38-10(1) of the GST Act deals with 'other health services' which are GST-free and states as follows.

A supply is GST-free if:

· it is a service of a kind specified in the table to subsection 38-10(1) of the GST Act or of a kind specified in the regulations; and

· the supplier is a *recognised professional in relation to the supply of services of that kind; and

· 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.

The 'other health services' must satisfy all these elements in order to be a GST-free supply.

The services listed in the table to subsection 38-10(1) of the GST Act are:

'Recognised professional' is defined in section 195-1 of the GST Act. A person is considered to be a recognised professional if, in relation to the supply of a service of a kind specified in the table above:

(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 a *Territory law prohibiting the supply of services of that kind without such permission, approval or registration; or

(b) the service is supplied in a State or Territory in which there is no State law or Territory law requiring such permission, approval or registration, and the person is a member of a professional association that has uniform national registration requirements relating to the supply of services of that kind; or…'

It is considered that 'appropriate treatment' will be established where the 'recognised professional' assesses the patient's state of health and determines a process to pursue, in an attempt to preserve, restore or improve the physical or psychological wellbeing of that patient insofar as that 'recognised professional's' particular area of training allows.

The counselling services that you have described are not GST-free as they do not satisfy paragraph 38-10(1)(a) of the GST Act. Counselling is not listed in its own right as a GST-free health service under section 38-10 of the GST Act. Consequently, this type of service, in its own right, will generally be a taxable supply.

The requirement in paragraph 38-10(1)(a) of the GST Act would be satisfied where the supplier, as a recognised professional, is supplying one of the services listed in the table in subsection 38-10(1) of the GST Act and counselling is a standard technique or a component of the supply of that listed service. For example, 'Psychology' or 'Social Work' are services in the table in subsection 38-10(1) of the GST Act for which counselling services may be considered a standard technique or a component of the supply.

However, in your case you will not be providing one of the 'other health services' listed within the table at subsection 38-10(1) of the GST Act. As outlined previously, your supply satisfies all the requirements of section 9-5 of the GST Act. As the supply is not GST-free under Division 38 of the GST Act or Division 40 of the GST Act, the supply of counselling services is a taxable supply.

Regulations

As outlined above, section 38-10 of the GST Act lists health services of a kind that are GST-free. This section also refers to GST-free services which are of a kind specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (regulations). At this stage no regulations have been made under section 38-10 of the GST Act, and it is not within the Tax Office's power to do so. These are a matter for Parliament.

The kind of health services which are GST-free reflects the policy of the Government. To have a health service added to this list requires a policy decision from the Government. In most cases this will require a change to the current policy which is reflected in the GST legislation. As part of the Government's tax policy making process they rely on advice from the Treasury. In the case of health services they would also rely on the Health portfolio for advice. In addition any changes that affect the GST base will need the approval of the States and Territories. You would generally need to write to the Treasurer to clarify the Government's position in relation to the GST treatment of particular health services.

Question 2

Detailed reasoning

The GST status of any services provided by you to an employer will depend on the true nature of the individual arrangements that you enter into with each employer. If the employer engages you, and instructs you on the nature of the supply to be made and you have entered into a binding obligation to make that supply, then you will be making a supply to the employer.

Accordingly, your supply of counselling services to the employer organisation clients will be a taxable supply if it meets all the requirements in section 9-5 of the GST Act.

From the facts given, your supply of counselling services satisfies all the requirements of paragraphs 9-5(a) to (d) of the GST Act, as follows:

· You make a supply of counselling services and in return you will receive consideration for the supply by way of payment;

· You supply the counselling services in the course or furtherance of your business (enterprise);

· You supply the counselling services through an enterprise that you carry on in Australia (and therefore the supply is connected with Australia); and

· You are registered for GST in Australia.

Hence, your supply of counselling services to the employer organisation is taxable to the extent that it is not GST-free or input taxed.

GST-free

Assuming paragraphs 38-10(1)(a) and 38-10(1)(b) of the GST Act are satisfied, it will be necessary to consider whether the supply satisfies the requirements of paragraph 38-10(1)(c).

In order for a supply to be GST-free, paragraph 38-10(1)(c) requires that:

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.

As stated above, section 195-1 states:

recipient, in relation to a supply, means the entity to which the supply was made.

It is considered that where services are provided at the request of a third party, it is necessary to correctly identify who is the recipient of the supply.

In relation to consideration, subsection 9-15(2) states:

It does not matter whether the payment, act or forbearance was voluntary, or whether it was by the recipient of the supply.

Therefore, the fact that a supply is paid for by an entity will not necessarily mean that they will be the recipient of the supply. However, in some circumstances the recipient of the supply is not the person undergoing a procedure. For example, an insurance company would be the recipient of the supply where an assessment of a person for insurance purposes is conducted at the direction of the insurance company.

It is considered that where a service is supplied, at the request of an entity and for the benefit or use by that entity in the course or furtherance of an enterprise they carry on, the recipient of the supply will be that entity, notwithstanding that the supply may involve another individual. In these circumstances it is considered that the supply would not be generally accepted in the profession associated with supplying services of that kind, as being necessary for the appropriate treatment of the recipient of the supply.

Goods and Services Tax Ruling GSTR 2006/9 on supplies (GSTR 2006/9) further explains this situation at paragraphs 161 to 164 as follows:

Example 5: occupational therapist

161. A, an occupational therapist, is engaged by B, a company, to assess the needs of C, its employee. C suffers from multiple sclerosis and needs to use a wheelchair. A and B enter into an agreement which requires A to undertake an assessment of C's condition, to give recommendations in a report to B and for B to pay for the service.

162. A's supply of services is made to B. Although C may benefit from these services, it is B who contracts for the supply of these services and is the recipient of the supply.

163. This supply is not GST-free under subsection 38-10(1). This is because paragraph 38-10(1)(c) requires the supply to be generally accepted in the relevant profession as being necessary for the appropriate treatment of the recipient of the supply. B is the recipient of the supply. The supply is not for the treatment of B. Paragraph 38-10(1)(c) is not satisfied.

164. If C engages the occupational therapist to supply its services and B merely pays the therapist on behalf of C, the recipient of the occupational therapist's services is C. This supply will be GST-free if all of the requirements of subsection 38-10(1) are satisfied.

In summary, you advise that you will be appointed by an employer organisation to provide counselling services to individual employees or to groups of employees. We consider that where you supply your services at the request of the employer organisation, then that employer is the recipient of the supply, despite the fact that you conduct counselling sessions for the benefit of the employees.

As outlined previously, your supply satisfies all the requirements of section 9-5 of the GST Act. The supply of counselling services is not GST-free under Division 38 of the GST Act as it is not listed as an 'other health service' and is not an input taxed supply under Division 40 of the GST Act. Therefore you are making a taxable supply of counselling services to the employer organisation.

Other Information

All publications mentioned in this ruling are available on our website at www.ato.gov.au