Edited version of your private ruling

Authorisation Number: 1012451995632

Ruling

Subject: GST and medical services

Question

Is the supply of medical services as part of a program GST-free under subsection 38-10(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

The supply of medical services as part of a program is GST-free under subsection 38-10(1) of the GST Act.

Relevant facts and circumstances

· Entity A is registered for the goods and services tax (GST).

· Entity B, the owner of Entity A, is registered in this profession as required by law.

· Entity B provides the medical services through Entity A.

· Recently, Entity B adopted a new approach/program to treating patients for certain health conditions. This program, although widely used overseas by the medical profession, is not commonly used in Australia because of its cost.

· Although this new approach is not commonly used in Australia, it is generally accepted within the medical profession in Australia as being necessary for the appropriate treatment of patients for those certain health conditions.

· Under this program, the patient is also provided with accommodation and food.

· Entity B charges the patient a set amount. This amount covers all fees, food and accommodation. Only a nominal amount is allocated towards the food and accommodation. There is no breakdown of the costs shown on the invoice that is issued to the patient.

· The patients engage Entity A directly and pay for the services themselves.

Relevant legislative provisions

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

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

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

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

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

Reasons for decision

Under subsection 38-10(1) of the GST Act, 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.

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

All 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.

Paragraph 38-10(1)(a)

For the purposes of paragraph 38-10(1)(a) of the GST Act, the service must be of a kind specified in the table in subsection 38-10(1) of the GST Act. Entity A provides medical services which are listed at item 16 in the table in subsection 38-10(1) of the GST Act.

As such, the first requirement in paragraph 38-10(1)(a) of the GST Act is satisfied.

Paragraph 38-10(1)(b)

For the purposes of paragraph 38-10(1)(b) of the GST Act, a recognised professional must provide the service.

In this case, Entity B provides medical services through Entity A and as such, Entity A is the supplier of the service. The requirement under paragraph 38-10(1)(b) of the GST Act that the supplier of the service be a recognised professional, is given meaning in the context in which it appears. It is considered that in this context, it is taken to be a requirement that the person who actually performs the service must herself or himself be a recognised professional in relation to the supply of services of that kind. Due to its very nature, a company cannot itself perform the service that it may supply through others, such as recognised professionals.

Therefore, paragraph 38-10(1)(b) of the GST Act focuses on the professional status of the person performing the health service, and requires that that person be a recognised professional in relation to the supply of services of the kind specified in the table in subsection 38-10(1) of the GST Act. In this case, it is Entity B who performs the service and as such, is required to be a recognised professional.

Section 195-1 of the GST Act defines recognised professional to mean:

A person is a recognised professional, in relation to the supply of a service of a kind specified in the table in subsection 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 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) …

As required by law to practise in this profession in Australia, Entity B is registered to do so. Therefore, Entity B satisfies the definition of recognised professional. As such, Entity B is a recognised professional under paragraph 38-10(1)(b) of the GST Act.

Paragraph 38-10(1)(c)

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 in so far as that recognised professional's particular area of training allows and will include subsequent supplies for the determined process.

'Appropriate treatment' includes the principles of preventative medicine. Such treatment must be generally accepted in the profession associated with supplying services of that kind, as being necessary.

The new approach is generally accepted within the medical profession in Australia as being necessary for the appropriate treatment of such patients although it is not commonly used.

Paragraph 38-10(1)(c) of the GST Act also requires that there be appropriate treatment of 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 a health service (as it is in this case, that is, Entity A that supplies medical services and the patient), generally there is a single supply to which the GST Act applies and the recipient is the patient.

However, where there is a third party payer involved in a transaction, there may be one or more supplies to which the GST Act applies and it is necessary to determine what is being supplied and to whom. This would have to be examined on a case by case basis.

In the present case, the patients engage Entity A directly and pay for the services themselves. As such, there is no third party involved, and paragraph 38-10(1)(c) of the GST Act is satisfied.

Therefore, the supply of medical services as part of a program is GST-free under subsection 38-10(1) of the GST Act.

Food and accommodation

A nominal amount of the payment made by the patient is allocated to the food and accommodation provided.

Goods and Services Tax Ruling GSTR 2001/8 (GSTR 2001/8) provides guidance on how to identify whether a supply includes taxable and non-taxable parts under the GST Act.

GSTR 2001/8 describes the characteristics of a supply that contains taxable and non-taxable parts and refers to such a supply as a 'mixed supply'. A mixed supply contains separately identifiable taxable and non-taxable parts that retain their own identity and need to be individually recognised due to their relative significance in the supply.

GSTR 2001/8 also describes the characteristics of a supply that appears to have more than one part but is essentially a supply of one thing and this is referred to as a 'composite supply'. A composite supply contains a dominant part and includes something that is integral, ancillary or incidental to that dominant part. Therefore, the dominant part has subordinate parts that complement the dominant part.

Paragraph 59 of GSTR 2001/8 explains that having regard to all of the circumstances of a supply, indicators that a part may be integral, ancillary or incidental include where:

· you would reasonable conclude that it is a means of better enjoying the dominant thing supplied, rather than constituting for customers an aim in itself; or

· it represents a marginal proportion of the total value of the package compared to the dominant part; or

· it is necessary or contributes to the supply as a whole, but cannot be identified as the dominant part of the supply; or

· it contributes to the proper performance of the contract to supply the dominant part.

Having regard to all the circumstances in the present case, it is considered that the supply of the treatment is the dominant supply. The food and accommodation is a necessary part of the supply of the treatment and represents only a marginal proportion of the total value of the package.

As such, there is only one supply in this case and it is the supply of medical services as part of a program. As stated earlier, this supply is GST-free under subsection 38-10(1) of the GST Act.