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Ruling

Subject: GST and supply of professional services to another medical specialist

Question

Are you (an On Call Medical Professional), making a taxable supply when you bill the Primary Medical Professional for the supply of the professional service on behalf of the Primary Medical Professional?

Answer

Yes you are making a taxable supply of professional services to the Primary Medical Professional.

Relevant facts and circumstances

You are an Medical Professional. Your company is registered for goods and services tax (GST).

You write on behalf of a number of Medical Professionals (including yourself) who each operate independently and practice from separate locations. Each Medical Professional operates through a company and each is registered for GST purposes.

Old Billing Arrangement

Previously you provided care on a 24 hour roster with another three Medical Professionals. Each Medical Professional booked their own patients per month and the 'On Call Medical Professional' billed the patient's private health fund directly using the Medicare item number.

There was no fee or consideration when the On Call Medical Professional provided the service to the Primary Medical Professional.

You sought a private ruling at the time which clarified that section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) was not satisfied as you did not make a supply for consideration. Therefore the service provided to the Primary Medical Professional by the On Call Medical Professional was not a taxable supply and was not subject to GST.

Proposed new billing arrangement

The Medical Professionals now work collaboratively on a 24 hour roster. Each Medical Professional books different numbers of patients, thus you have moved to a more equitable system of billing.

The 'Primary Medical Professional' books and bills all of the patients referred to them each month.

When a service is provided, the patient is seen by whichever Medical Professional is rostered to be on call at that time (On Call Medical Professional) who may or may not be the Primary Medical Professional.

Where the service is not delivered by the Primary Medical Professional, the delivery is billed in the Primary Medical Professionals name, listing the name of the On Call Medical Professional and using the Medicare item number for the service.

The patient's private health fund pays the Primary Medical Professional in full.

The Primary Medical Professional then pays the On Call Medical Professional a proportion of the fee as consideration for providing the service of delivering the service (on their behalf).

You advise that the Health Insurance Commission does not require a referral between the Primary Medical Professional and the On Call Medical Professional for providing these services on a roster basis.

The Primary Medical Professional accepts full responsibility for the services provided by the On Call Medical Professional. Indeed the Primary Medical Professional is medically and legally implicated if there is an adverse outcome during the provision of care for the patient.

In addition the Primary Medical Professional provides the care on a daily basis seeing the patient every day until discharge.

To claim their portion of the fee, the On Call Medical Professional invoices the Primary Medical Professional for the supply of a service.

You have asked us to rule on whether or not the On Call Medical Professional is making a taxable supply when they bill the Primary Medical Professional for the supply of the professional service on behalf of the Primary Medical Professional.

You do not have an agreement in writing for these arrangements.

Relevant legislative provisions

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

Section 38-7 of A New Tax System (Goods and Services Tax) Act 1999

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

Subsection 38-7(2) of A New Tax System (Goods and Services Tax) Act 1999

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

Reasons for decision

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

(a) the supply is made for consideration;

(b) the supply is made in the course or furtherance of an enterprise that you carry on;

(c) the supply is connected with Australia; and

(d) 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 services to the Primary Medical Professional 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 services satisfies all the requirements of paragraphs 9-5(a) to (d) of the GST Act, as follows:

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

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

· You supply the 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 professional services to the Primary Medical Professional is taxable to the extent that it is not GST-free or input taxed.

The supply of 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

Section 38-7 of the GST Act provides that a supply of a medical service is GST-free.

Under section 195-1 of the GST Act, a medical service is defined to mean:

· a service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973; 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.

However, under subsection 38-7(2) of the GST Act, a medical service is not GST-free under subsection 38-7(1) of the GST Act if:

· it is a supply of a professional service rendered in prescribed circumstances within the meaning of regulation 14 of the Health Insurance Regulations made under the Health Insurance Act 1973 (other than prescribed circumstances set out in regulations 14(2)(ea), (f) and (g); or

· it is rendered for cosmetic reasons and it is not a professional service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973.

Therefore, provided subsection 38-7(2) of the GST Act is not satisfied it is appropriate to consider subsection 38-7(1) of the GST Act.

The definition of a 'medical service' has two limbs. Any service that falls within either the first or second limb of the definition is GST-free.

Explanation of definition's first limb

A service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973, is GST-free under the first limb of the definition. Any service, for which a Medicare benefit is not payable, must be addressed under the second limb of the definition. For the first limb it should be noted that unlike the second limb, the supply does not have to be made by a *medical practitioner or *approved pathology practitioner (as those terms are defined in section 195-1 of the GST Act).

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 an 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 on 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.

Meaning of 'generally accepted in the medical profession as being necessary for the appropriate treatment'

The above requires interpretation as to what is meant by 'generally accepted' and 'appropriate treatment'.

'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. 'Appropriate treatment' includes the principles of preventative medicine.

In addition, the definition requires the treatment must be generally accepted in the medical profession as being necessary. The particular service being provided by the *medical practitioner or *approved pathology practitioner and the circumstances in which it is provided must be generally accepted by the medical profession. The words 'generally accepted in the medical profession' indicate that it will ultimately be the medical profession that determines what services will be generally accepted.

Meaning of 'the *recipient of the supply'

Section 195-1 defines '*recipient' in relation to a supply 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 such as an employer. 'Appropriate treatment' will not include supplies undertaken for a third party that does not encompass the concept of treatment.

For example, an insurance company is a third party who may be the actual '*recipient of the supply', where an assessment of a person is made for insurance purposes. There is no actual treatment involved and such a supply will be taxable.

Your situation

In your situation, the On Call Medical Professional (you) has an arrangement with the Primary Medical Professional that you will care for their patient when you are rostered to be on call. You are making a supply of professional services on behalf of the Primary Medical Professional. The Primary Medical Professional bills the patient and receives payment from the health fund. You are then required to bill the Primary Medical Professional for your services, and you receive consideration from the Primary Medical Professional for this supply. When you provide your services to another Doctor, this is not a component of the supply of a medical service being provided by the Primary Medical Professional to the patient. The service being provided by the second person (you) will be a separate supply, the GST-free status of which must be examined by reference to the supply itself.

You are making a separate supply of professional services and the Primary Medical Professional is the recipient of this supply, thus you are making a supply to an entity (not to the patient). As such, the supply is not for the appropriate treatment of the 'recipient' of the supply. The services you supply to the entity (Primary Medical Professional) do not fall under paragraph (b) of the definition of 'medical service' in section 195-1 of the GST Act. Therefore, the supply of your services is not GST-free under section 38-7 of the GST Act.

You are not making a GST-free supply of medical services when you supply your services to the Primary Medical Professional and in return receive consideration for this supply.

There are no other provisions in the GST Act under which the supply of your services to the Primary Medical Professional is GST-free.

As the supply of your professional services satisfies all the requirements of section 9-5 of the GST Act, you are making a taxable supply and you are liable to remit GST equal to 1/11^th of the professional fees you charge the Primary Care Medical Professional.