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Ruling

Subject: GST and provision of psychology services

Question 1

Is the supply of premises and administrative services by you to the psychologists a taxable supply?

Answer

Yes, the supply of premises and administrative services by you to the psychologists is a taxable supply.

Question 2

Is the supply of psychology services by the psychologists to clients GST-free?

Answer

Yes, the supply of psychology services by the psychologists to the clients is GST-free.

Question 3

Is the payment you make to the psychologists for a GST-free supply that the psychologists make to you?

Answer

No, the payment you make to the psychologists is not for a GST-free supply that the psychologists make to you. The payment is for a taxable supply of professional services that the psychologists make to you.

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You have entered into Service Agreements (the Agreement, a copy of which was provided) with independent psychologists (the psychologists) to provide psychology services to clients as stated in the Agreement. The engagement of the psychologists is not an exclusive arrangement. The psychologists are free to practice elsewhere provided that their obligations under the Agreement are not affected and you are not disadvantaged.

As part of the provision of their services, the psychologists are required to keep appropriate client records and notes and meet reporting obligations.

The Agreement provides that the psychologists are required to issue an invoice to you for payment of their services. The payment for their services will be as per the schedule to the Agreement.

You have facilities with several rooms which you rent to the psychologists. You also employ a receptionist and provide administrative services to the psychologists.

You issue tax invoices to the psychologists for your supply of the facilities and administrative services.

You also issue invoices to the clients for the psychology services and the clients pay you for the services they receive. The psychologists own provider numbers are included on those invoices.

The psychologists are legally and ethically responsible for their client. Each psychologist has their own professional indemnity insurance and is responsible for their professional registration.

The psychologists are registered for GST.

Relevant legislative provisions

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

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 Section 195-1

A New Tax System (Goods and Services Tax) Act 1999 Section 11-20

A New Tax System (Goods and Services Tax) Act 1999 Section 11-5

A New Tax System (Goods and Services Tax) Act 1999 Section 11-15

Reasons for decisions

Question 1

Section 7-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that GST is payable on a taxable supply. Section 9-40 of the GST Act provides that an entity must pay the GST payable on any taxable supplies that it makes.

Section 9-5 of the 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 the GST Act)

You are registered for GST and make your supply of the premises and administrative services to the psychologists in the course of carrying on your enterprise in Australia. You charge the psychologists for your supply and as such, all the requirements of section 9-5 of the GST Act are satisfied.

There is no provision in the GST Act which would make your supply of the premises and administrative services GST-free or input taxed. Therefore, the supply is a taxable supply on which GST is payable.

Question 2

From the information provided, the supply of psychological services by the psychologists satisfy paragraphs 9-5 (a) to (d) of the GST Act. That is, the psychologists are registered for GST and make the supply of the psychology services for consideration in the course or furtherance of an enterprise that they carry on in Australia.

The provisions of the GST Act dealing with input taxed supplies are not relevant to supplies of psychology services. The relevant provisions of the GST Act to be considered are those that relate to GST-free supplies under Subdivision 38-B of the GST Act.

Of particular relevance to this case is subsection 38-10(1) of the GST Act which 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 three of the requirements must be satisfied for a supply of psychology services to be GST-free under subsection 38-10(1) of the GST Act.

Paragraph 38-10(1)(a) of the GST Act

'Psychology' is a service that is specified at item 16 in the table in subsection 38-10(1) of the GST Act. As such, the first requirement is satisfied.

Paragraph 38-10(1)(b) of the GST Act

For the purposes of this paragraph, a recognised professional must provide the psychology service.

Section 195-1 of the GST Act provides that a person is a recognised professional, in relation to a supply of services of a kind specified in subsection 38-10(1) of the GST Act (psychology services), if:

'(a) the service is supplied in a State or Territory in which the person has 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'.

A person practicing psychology is a 'recognised professional' if they are registered under a State or Territory law prohibiting the supply of psychology services without such registration. As such, a psychologist who is registered under the relevant State or Territory Act is a recognised professional under paragraph 38-10(1)(b) of the GST Act .

Paragraph 38-10(1)(c) of the GST Act

To satisfy the final requirement, the service must generally be accepted in the profession associated with supplying services of that kind (in this case, the psychology profession) as being necessary for the appropriate treatment of the recipient of the supply.

A psychologist will provide 'appropriate treatment' to a client where they assess the client's state of health and determine a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of that client and includes subsequent supplies for that assessed process.

Paragraph 38-10(1)(c) of the GST Act also requires that the appropriate treatment be for 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'.

The specific wording in paragraph 38-10(1)(c) of the GST Act means that the supply of a psychology service is only GST-free under subsection 38-10(1) of the GST Act where an individual receiving the service is the recipient of the supply.

Where there are only two parties to the supply of a psychology service, the client and the psychologist, the client will be the recipient of the supply of the service. This means that where a client engages a psychologist to provide psychology services to them, the requirement in paragraph 38-10(1)(c) of the GST Act is satisfied.

In the present case, the clients engage you, a provider of psychology services to supply psychology services to them. The independent psychologists make their supply through you and it is you that issues invoices to the clients. In this case, the supply of the psychology services is to the clients and paragraph 38-10(1)(c) of the GST Act is satisfied.

As all the requirements of subsection 38-10(1) of the GST Act are satisfied, the supply of psychology services by the psychologists to the clients is GST-free.

Question 3

In some cases, psychologists may have agreements with third parties under which there is a binding obligation on the psychologist to provide services to a client for which the third party is liable to pay. In these cases, the third party is the recipient of the supply. Depending on the arrangement, the psychologist may also be making supplies to both the third party and the client.

Under the Agreement you have with the psychologists, you engage the psychologists to provide psychological services to clients attending at your premises. The psychologists are required to issue invoices to you for the services they provide and are paid by you as per the schedule to the Agreement. It is considered that under the Agreement, the psychologists make supplies to both you and the clients. You are the recipient of professional services and the clients are the recipients of psychology services.

The supply that the psychologists make to you is not the supply of psychology services. They make a supply of professional services and as such, the requirement in paragraph 38-10(1)(c) of the GST Act that the supply be for the appropriate treatment of the recipient of supply is not satisfied. See discussion in Question 2 above.

The supply by the psychologists satisfies the requirements of section 9-5 of the GST Act and as such, they are making a taxable supply of professional services to you on which GST is payable.

Please note:

The ATO cannot provide advice on how entities should structure their arrangements or on contractual and pricing matters.