Edited version of your private ruling

Authorisation Number: 1012375315505

This edited version of your ruling will be published in the public register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.

Ruling

Subject: GST and other health services

Question 1

From 1 July 2012, is GST payable on the supply of medical services to an injured worker where it is paid for by their self-insured employer?

Answer

No. The supply is GST-free.

Question 2

Is GST payable on the supply of reports and telephone calls to the insurer about the patient's injury?

Answer

Yes.

Relevant facts and circumstances

You operate a medical business and are registered for GST.

The patients generally choose you to provide the medical services. The services you provide are for the 'appropriate treatment' of the patient. You have treated your supply of medical services to the patient as GST-free.

Normally, you would issue the invoice in the patient's name and they would claim reimbursement from their insurer.

You have patients who have been referred to you by their General Practitioner (GP) who advises you that the patient has a work related injury. The patient would provide the name and address of their employer. You would then send the bill in the patient's name to the employer. If the employer is insured with Workcover, they would forward the bill to Workcover who would eventually pay for your services. However, if the employer is self-insured, they will pay for the bill themselves.

You recently provided services to a worker of Company X. You submitted to Company X the account made in the name of the worker. Company X has requested that you resubmit the account in their name with the injured worker's details written on the account. Company X will pay for the account and it is your understanding that Company X is self-insured for workers compensation purposes.

On occasions, you prepare reports and make phone calls to the insurers regarding the patient's injury.

You are aware that there have been recent changes in the GST status of health services that may impact on the supply of your services.

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 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 Section 38-60.

A New Tax System (Goods and Services Tax) Act 1999 Subsection 38-60(1).

A New Tax System (Goods and Services Tax) Act 1999 Section 78-105.

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

A New Tax System (Goods and Services Tax) Regulations 1999 regulation 78-105.01

A New Tax System (Goods and Services Tax) Regulations 1999 Schedule 10

Reasons for decision

Question 1

Summary

GST is not payable on the supply of medical services to an injured worker where it is paid for by their self-insured employer. The supply is GST-free.

Detailed reasoning

GST is payable on any taxable supply that you make.

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

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

In your case, the supply of medical services to the injured worker satisfies the requirements of paragraphs 9-5 (a), 9-5(b), 9-5(c) and 9-5(d). Furthermore, the supply of the physiotherapy services is not input taxed. It remains to be determined if the supply is GST-free.

A supply of other health services is GST-free under subsection 38-10(1) of the GST Act and it states:

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

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.

Meaning of 'the supplier is a recognised professional'

Section 38-10(1)(b) requires the supplier of the service of the kind specified in the Table to be a recognised professional.

Recognised professional is defined in section 195-1 of the GST Act as:

... a person is a *recognised professional, in relation to the supply of a service of a kind specified in the table in sub-section 38-10(1), 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 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

(c) in the case of services covered by Item 3 in the table - the service is supplied by an accredited service provider within the meaning of section 4 of the Hearing Services Administration Act 1997.'

On the information provided, you satisfy this requirement.

Meaning of '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 phrase 'appropriate treatment' is not defined in the GST Act. It is considered that appropriate treatment is provided where a recognised professional assesses the recipient's state of health and determines a course of treatment, in an attempt to preserve, restore or improve the physical or psychological wellbeing of the recipient. Appropriate treatment includes the principles of preventative medicine.

In addition, the legislation requires that the treatment be 'generally accepted' in the profession as being necessary for the treatment of the patient. The words 'generally accepted' in the profession indicate that it will ultimately be the profession that determines what services will be generally accepted.

You stated that the medical services that you provide to the injured worker are generally accepted by the profession as being necessary for the appropriate treatment of the worker.

However, paragraph 38-10(1)(c) of the GST Act requires that the supply be for the appropriate treatment of the 'recipient of the supply'. Therefore, in this case, it is necessary to determine who is, the 'recipient of the supply'.

Section 195-1 of the GST Act 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 services (the entity that supplies the health service and the patient), generally there is a single supply to which the GST Act applies and the recipient of that supply is the patient.

However, where there is a third party payer involved in the transaction, there may be one or more supplies for GST purposes. Therefore, it is necessary to determine what is being supplied and to whom. For example, tripartite arrangements may result in a supply of professional services to a third party payer by an entity that supplies health services with a further supply of treatment services to a patient.

A third party will be the 'recipient of a supply' by the health professional where:

· the third party engages the health professional to provide something to them or to someone else

· the third party, by agreement with the health professional, determines what is to be provided to them or to someone else, and

· there is a binding obligation between the third party and the health professional for the thing to be provided and the third party is liable to provide payment.

Ordinarily, it does not matter that the patient, who is the recipient of the supply, does not provide the consideration for the supply. Provided all the necessary elements of section 38-10 of the GST Act (especially the requirements in relation to 'recipient of the supply') are met it will be a GST-free supply.

In your case, you advised that the injured worker engages you to provide the medical services. Your arrangement with the self-insured employer to forward the account directly to them is merely for payment purposes (though the obligation to pay remains with the worker). In this instance, the recipient of the supply of medical services is the injured worker with consideration for these services being provided by the self-insured employer on behalf of the worker. Hence, the requirement of paragraph 38-10(1)(c) of the GST Act is satisfied and the supply of your medical service is GST-free.

Additional information

Where the recipient of the supply is a third party then the supply of the services will not be GST-free under section 38-10 of the GST Act.

From 1 July 2012, where the third party is an insurer, an operator of a statutory compensation scheme or compulsory third party scheme (scheme operator), or an Australian government agency, the supply to the other entity will be GST-free to the extent that the underlying supply of the health service to the patient is a GST-free health supply under Subdivision 38-B. For administrative ease however, the parties may agree for the supply to the payer, or supplies of a kind that include that supply, not to be treated as GST-free.

Subsection 38-60(1) of the GST Act states:

If:

(a)  a supply is a supply of a service to an insurer; and

(b)  the service is the supplier making one or more other supplies of goods or services to an individual; and

(c)  at least one of the other supplies is:

(i)  wholly or partly *GST-free under this Subdivision; and

(ii)  for settling one or more claims under an *insurance policy of which the insurer is an insurer;

the first-mentioned supply is GST-free to the extent that the other supplies mentioned in paragraph (b) are GST-free under this Subdivision.

Payments towards or under a workers' compensation scheme (and any settlement under such a scheme) are treated in the same manner as payments for an insurance policy (and a settlement of a claim under an insurance policy). This is only the case if the cover offered by the scheme is within the definition of an 'insurance policy' in section 195-1 or listed in Schedule 10 of the A New Tax System (Goods and Services Tax) Regulations 1999 (Schedule 10) as a 'statutory compensation scheme'. The table in Schedule 10 includes at item 16 Workers rehabilitation and compensation scheme under the Workers Rehabilitation and Compensation Act 1986 (SA).

Section 60 of the Workers Rehabilitation and Compensation Act 1986 (SA) provides that an employer may apply for registration as a self-insured employer.

Accordingly, if you enter into a binding obligation with a self-insured employer to provide services to a worker, and the self-insured employer is liable to pay for those services, you would have made a supply of these services to the insurance company. The supply may be GST-free if the requirements of 38-60 of the GST Act are satisfied.

Where a payer is not an insurer, a scheme operator or an Australian government agency, the supply to the payer will generally not be a GST-free health supply.

Question 2

Summary

GST is payable on the supply of reports and telephone calls to the insurer about the patient's injury.

Detailed reasoning

You advised that you supply reports and make phone calls to insurers about the patient's injury.

This supply satisfies the requirements of paragraphs 9-5 (a), 9-5(b), 9-5(c) and 9-5(d). Furthermore, the supply is not input taxed. However, the supply is not a taxable supply if it is GST-free.

Therefore it needs to be determined if the supply is GST-free under the GST Act.

In this instance, of relevance is section 38-10 of the GST Act.

As outlined in question 1 above, for the supply to be GST-free, paragraph 38-10(1)(c) of the GST Act requires that the services being provided are necessary for the 'appropriate treatment' of the 'recipient of the supply'.

You supply reports and phone calls to the insurer on the patient's state of health. The reports and phone calls are specifically for the insurer and not predominantly for the purpose of preserving, restoring or improving the physical or psychological wellbeing of the patient.

The insurer is recipient of the supply (of the reports and phone calls), and is not receiving 'appropriate treatment'. As such, paragraph 38-10(1)(c) of the GST Act is not satisfied. Hence, the supply is not GST-free under section 38-10 of the GST Act.

Section 38-60 will not apply in these circumstances as there is no appropriate treatment of an individual which would be GST-free under section 38-10 of the GST Act.

In addition, the supply is not GST-free under any other provisions of the GST Act.

Therefore the supply of reports and phone calls to the insurer is a taxable supply under section 9-5 of the GST Act. Accordingly, GST is payable on the supply.