Edited version of your private ruling

Authorisation Number: 1012486772330

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Ruling

Subject: GST and supply of non-emergency patient transport services

Question

Is the supply of non-emergency patient transport services under an agreement with a government agency GST-free pursuant to subsection 38-10(5) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, the supply of non-emergency patient transport services to the government agency is not GST-free pursuant to subsection 38-10(5) of the GST Act but is GST-free pursuant to subsection 38-60(3) of the GST Act to the extent that that supply is made on or after 1 July 2012.

Relevant facts and circumstances

Entity X (X) provides non-emergency patient transport services to a government agency (Y) in a specified State/Territory (the specified State).

The parties have provided a copy of the original agreement and a deed of variation to the agreement.

The original agreement provides that the purpose of the agreement is for the provision of non-emergency patient transport services to be provided by X as required by Y to eligible individuals (patients) in the specified State.

The deed of variation amended the purpose of the agreement to state that the agreement relates to provision of ambulance and non-emergency patient transport services to the patients, under which Y accepts the financial responsibility for those services.

According to the terms and conditions of the agreement:

· Y monitors the performance of X and its employees and subcontractors.

· Y requires X to adhere to standards by which Y is bound as a government agency.

· X agrees not to use any subcontractors in relation to the agreement without the approval of Y on a case by case basis.

· Y can request X to remove its personnel from any aspect of its service and to promptly nominate a potential replacement.

· Certain confirmations need to be obtained from Y before X can undertake any transport.

· The services that X supplies must adhere to the eligibility criteria set out in the agreement.

· The agreement sets the hours during which X is required to provide the services.

· X is required to maintain service levels at a level consistent with those agreed to by the specified State Government.

· If the agreement is not extended, X is required to do all things necessary to ensure a smooth and well ordered hand-over to any person who takes over the provision of the services described in the agreement.

· X must maintain full levels of insurance cover to properly protect X and Y's interests in relation to the services.

· X is expected to comply with all relevant insurance requirements including conducting and improving relevant risk management practices and incident notification processes.

· X is to indemnify Y against any loss reasonably incurred in relation to the agreement.

· X remains obliged to conduct its activities in accordance with Y's Service Charter and the Australian Public Service values.

X and Y advised that the services provided by X are administered by X's employees. All of X's employees are qualified and each vehicle always carries two qualified staff members.

X and Y further advised that the services were provided to patients who are medically unsuitable for private or public transport and who normally either require stretcher transport, require active management or monitoring during transit, have a condition that would cause the patient to be embarrassed or be unacceptable to other people on public transport, or are medically certified as requiring ambulance transport.

In the ruling request it was submitted that X supplies the service to the patient and that Y is a third party which provides the consideration for that supply:

It was submitted that the agreement was entered into pursuant to a number of sections of a specified Act in support of the submission that X was not providing its services to Y.

The ruling request also referred to paragraph 164 in Goods and Services Tax Ruling GSTR 2006/9 as well as a number of private rulings issued by the Australian Taxation Office (ATO), in support of the submission that X was not providing its services to Y.

X provided a list of the equipment carried in all patient transport vehicles. Each vehicle comes with a collapsible stretcher that can be transformed into a wheelchair if required. All non-emergency vehicles are equipped to manage the worst case scenario which is that the patient goes into cardiac arrest during transport.

X provided details of the licenses or permits held by X under relevant State legislation.

X advised that when the patient falls outside the scope of the agreement between X and Y then X would decline to transfer the patient.

Y advised that separate agreements are entered into for the provision of normal transport services, e.g., taxis that do not have medically qualified attendants. If the services were to be provided by a supplier that did not meet the qualification of an ambulance service, payments would need to be authorised under different provisions, if there were any.

The agreement between X and Y is only for the provision of non-emergency patient transport services in the specified State.

It was also submitted that the arrangement between the parties either is not governed by FCT v Secretary to the Department of Transport (Victoria) [2010] FCAFC 84 or if it was, section 38-60 of the GST Act preserved the GST-free status of the supply made by X.

X's Constitution states that X may carry on any business authorised by X's Constitution.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-10(5)

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-60(3)

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

Reasons for decision

Summary

X is an 'ambulance service' for the purposes of subsection 38-10(5) of the GST Act, but the supplies made by X to Y prior to 1 July 20XX are taxable supplies under section 9-5 of the GST Act because the requirement in subsection 38-10(5) that those supplies are provided in the course of the treatment of the recipient of those supplies is not satisfied.

To the extent that X makes supplies to Y pursuant to the agreement on or after 1 July 20XX then we agree with the submission in the ruling request that those supplies are GST-free pursuant to subsection 38-60(3) of the GST Act.

Detailed reasoning

Taxable supply

Section 7-1 of the GST Act provides that GST is payable on taxable supplies and taxable importations.

A supply is a taxable supply if it meets all the requirements of section 9-5 of the GST Act:

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)

GST-free supply:

Paragraph 9-30(1)(a) of the GST Act states that a supply is GST-free if it is GST-free under Division 38 or under a provision of another Act.

Section 38-10 of the GST Act deals with the supply of 'other health services' that are GST-free. Subsection 38-10(5) of the GST Act states:

(5) a supply is GST-free if it is provided by an ambulance service in the course of the treatment of the * recipient of the supply.

'Recipient' is defined in section 195-1 of the GST Act, in relation to a supply, to mean the entity to which the supply was made.

For a supply to be GST-free under subsection 38-10(5) of the GST Act, the supply must meet two requirements. That is the supply must be:

· provided by an ambulance service, and

· in the course of the treatment of the recipient of the supply.

First requirement - provided by an ambulance service:

Is X an 'ambulance service'?

The ATO's definition of 'ambulance service' for the purposes of subsection 38-10(5) of the GST Act is set out in the ATO Interpretative Decision ATO ID 2005/185 which states:

'Ambulance service' is not defined in the GST Act. After consideration of the relevant State, Territory and Federal legislation, an ambulance service for the purposes of subsection 38-10(5) of the GST Act is considered to be:

(1) an entity that is primarily established for the purpose of rendering, and which does render, first aid or emergency treatment to, and the transport of, sick and injured persons

(2) an entity that is permitted to operate as an ambulance service under a State or Territory law in the State or Territory in which it operates, or

(3) an entity that is permitted to provide aerial ambulance services pursuant to section 27 of the Civil Aviation Act and regulation 206 of the Civil Aviation Regulations 1988.

We do not consider that part (3) of the 'ambulance service' definition in ATO ID 2005/185 applies to X.

Part (2) of the 'ambulance service' definition requires consideration of the State or Territory in which the relevant entity operates. X is not an entity that is permitted to operate as an ambulance service under the law of the specified State. Consequently X does not satisfy part (2) of the 'ambulance service' definition in ATO ID 2005/185.

That leaves part (1) of the 'ambulance service' definition in ATO ID 2005/185 to be considered.

Our review of State and Territory legislation confirmed that the reference in part (1) of the 'ambulance service' definition in ATO ID 2005/185 to

… rendering, and which does, render, first aid or emergency treatment to, and the transport of, sick and injured persons

adopted definitions of 'ambulance services' or 'ambulance service' which, as at 1 July 2005, appeared in the Health Services Act 1987 (NSW), the Ambulance Service Act 1991 (Qld), the Ambulance Services Act 1992 (SA) (since repealed) and the Ambulance Service Act 1982 (Tas):

In New South Wales subsection 67A(1) of the Health Services Act 1987 (NSW) states that the Ambulance Service of NSW comprises those staff of the NSW Health Service 'who are employed primarily in connection with the provision of ambulance services' and the Dictionary in the Health Services Act 1997 (NSW) states:

ambulance services means services relating to the work of rendering first aid to, and the transport of, sick and injured persons

In Queensland section 3D(a) of the Ambulance Service Act 1991 (Qld) states that functions of the Queensland Ambulance Service include:

(a) to provide, operate and maintain ambulance services; and

(b) for ambulance services provided during rescue and other related activities to protect persons from injury or death, whether or not the persons are sick or injured; and

(c) to provide transport for persons requiring attention at medical or health care facilities; and…

and the Dictionary in the Schedule to the Ambulance Service Act 1991 (Qld) states:

ambulance service means service relating to the work of rendering emergency treatment and patient care to, and the transport of, sick and injured persons.

In South Australia section 4 of the Ambulance Services Act 1992 (SA) defined 'ambulance service' as:

… the transporting of a patient by ambulance to a hospital, surgery or other place to receive medical treatment or the transporting of a patient by ambulance from a hospital, surgery or other place at which the patient has received medical treatment

and defined 'ambulance' as:

…a vehicle that has been modified to provide medical treatment to patients being transported in the vehicle.

In Tasmania section 4 of the Ambulance Service Act 1982 (Tas) establishes the Tasmanian Ambulance Service under the control of the Director of Ambulance Services, section 6 states that one of the Director's functions is to co-ordinate and direct the development of ambulance services, and section 3 defines 'ambulance services' as:

ambulance services means services relating to the work of rendering first aid to, and the conveyance of, persons suffering from illness or injury;

and defines 'ambulance' as:

ambulance means a motor vehicle which has been specifically equipped for the provision of first aid to, and the conveyance of, persons suffering from illness, disability, or injury and which has been approved by the Director for that purpose;

The definitions of 'ambulance service' or 'ambulance services' used in New South Wales, Queensland and Tasmania refer to 'services' (or 'service') relating to the work of rendering' certain services, i.e. 'first aid' (New South Wales and Tasmania) or 'emergency treatment and patient care' (Queensland) to 'sick and injured persons' (New South Wales and Queensland) or 'persons suffering from illness or injury' (Tasmania). Each definition then refers to either 'and the transport of' (New South Wales and Queensland) or 'and the conveyance of' such persons.

The Macquarie Dictionary defines 'render' to include:

2. to do; perform: to render a service

Similarly, part (1) of the 'ambulance service' definition in ATO ID 2005/185 in part turns upon the type of service which an entity renders:

an entity that is primarily established for the purpose of rendering, and which does render, first aid or emergency treatment to, and the transport of, sick and injured persons

We consider that X does render first aid or emergency treatment to and the transport of sick or injured persons.

Unlike the definitions of 'ambulance service' or 'ambulance services' in the New South Wales, Queensland, and Tasmanian legislation, part (1) of the 'ambulance service' definition in ATO ID 2005/185 refers to 'an entity that is primarily established for the purpose of rendering' the services described. X is an 'entity' as defined in section 184-1 of the GST Act, being a body corporate (which includes a Corporations Act 2000 (Cth) company - Miscellaneous Taxation Ruling MT2006/1, Para 31). In relation to the purpose for which X is 'primarily established', X's Constitution states that X may carry on any business authorised by X's Constitution. In our view, therefore, the purpose for which X is primarily established is determined by what X in fact does. As discussed above, the agreement indicates that X does render first aid or emergency treatment to and the transport of sick or injured persons. All of X's vehicles are equipped to manage the worst case scenario which is a patient going into cardiac arrest. The ruling request referred to X's services being administered by a Patient Transport Officer (who is trained in basic patient care and drives the vehicle and loads and unloads the patient) and either an Ambulance Transport Officer/Ambulance Officer (qualified as a paramedic who is responsible for patient care during transportation) or a nurse (qualified as a Critical Care Division 1 nurse). X has advised that it supplies two qualified staff per vehicle.

We therefore consider that the supply made by X pursuant to the agreement is a supply which is made by an 'ambulance service' as required by subsection 38-10(5) of the GST Act.

Second requirement - provided in the course of the treatment of the recipient of the supply:

Subsection 38-10(5) of the GST Act states that a supply provided by an ambulance service is GST-free if it is provided in the course of the treatment of the recipient of the supply. 'Recipient' is defined in section 195-1 of the GST Act in relation to a supply to mean the entity to which the supply is made.

ATO ID 2005/185 explains the second requirement in subsection 38-10(5) of the GST Act as follows:

For the supply of the ambulance service to be GST-free under subsection 38-10(5) of the GST Act, the service must be provided in the course of treating the recipient of that supply. A supply can only be one of 'treatment' if it is made to the person requiring that treatment. By its nature 'treatment' cannot be something that is supplied to a business entity.

Accordingly, where the ambulance services are supplied under an agreement with a third party that is a business entity, and the terms of the agreement are such that the third party is the recipient of the supply, that supply to the third party is not covered by subsection 38-10(5) of the GST Act. This is because as a business entity, the third party cannot be in receipt of 'treatment'.

In the ruling request the parties relied on paragraph 164 of Goods and Services Ruling GSTR 2006/9:

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.

and a number GST private rulings issued by the ATO.

In the ruling request Y referred to certain provisions in a specified Act which governs Y's activities to support the submission that Y was not the recipient of the supply made by X and that that supply was made by X to the patient and therefore provided in the course of the treatment of the recipient.

In our view Y is obliged pursuant to the specified Act to arrange for the provision of the non-emergency patient transport services either by providing the services itself or entering into arrangements with third parties for those third parties to provide the services to the patients.

Where Y arranges for third parties to provide the services to the patient we consider that Proposition 13 in GSTR 2006/9 applies (where 'A' is Y, 'B' is X and 'C' is the patient):

Proposition 13: when A has an agreement with B for B to provide a supply to C, there is a supply made by B to A (contractual flow) that B provides to C (actual flow)

130. In Grandma's flowers pursuant to the contract between A and B, B makes the supply to A but provides the flowers to C.

131. 'Made' in the context of 'a supply made' takes its meaning from the definition of 'recipient' in section 195-1:

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

132. 'Provide' is used to contrast with 'made' - it distinguishes between the contractual flow of the supply to the recipient (the entity to which the supply is made) and the actual flow of the supply to another entity (the entity to which the supply is provided).

We note that paragraph 164 in GSTR 2006/9, which X and Y relied on in the ruling request, involves an arrangement that is different to that between X and Y and different to that described in Proposition 13. Consequently we do not agree with the submission made in the ruling request that the specified Act indicates that Y does not enter into contracts under which it acquires services for entitled persons but merely accepts financial responsibility for those services. In our view the specified Act allows Y to enter into agreements with a third party (e.g. X) for the third party to provide a supply to the patient, in which case for GST purposes X makes a supply to Y.

The agreement:

Taking into account the changes made to the agreement by the deed of variation, we do not agree with the submission in the ruling request that Y merely accepts financial responsibility for payment.

We understand that the intention of the deed of variation was to bring the agreement within the arrangement described paragraph 164 of GSTR 2006/9, i.e. where the patient is the recipient of the supply made by X (so that that supply is in the course of the treatment of the recipient of the supply and is therefore GST-free) and Y merely pays X on behalf of the patient.

Our view is that if Y was merely a third party payer (per Para 164 in GSTR 2006/9) and not recipient (per Proposition 13 in GSTR 2006/9) X would not have remained subject to various obligations in favour of Y pursuant to the agreement as amended by the deed of variation. For example, X agrees it will not use any subcontractors without Y's approval on a case by case basis. Y retains the power to approve the use of a subcontractor by X. X also remains obliged to conduct X's activities in accordance with Y's service Charter and the Australian Public Service values. Y requires X to adhere to standards by which Y is bound as a government agency. X also agrees to maintain insurance so as to properly protect X's and Y's interests. The process set out in the agreement gives Y an absolute discretion to accept financial responsibility for services similar to those offered by X which are supplied by third parties. If Y was merely a third party payer in respect of supplies made by X to a patient, such a clause would be unnecessary.

In our view X makes a single supply pursuant to the agreement and Y is the recipient of that supply. For this reason the supply does not meet the second requirement of subsection 38-10(5) of the GST Act and therefore is not GST-free under subsection 38-10(5). The supply of ambulance services made by X to Y prior to 1 July 2012 is a taxable supply as the supply meets all the requirements of section 9-5 of the GST Act.

X and Y, in their submission have made reference to a number of private rulings. We consider that the arrangement between X and Y differs from the arrangements described in those rulings. It should also be noted that each private ruling is based on a specific set of circumstances advised to the ATO and is considered binding only in respect of the person/s or entity/ies on whose behalf the advice was sought.

Supplies after 1 July 2012 - Subsection 38-60(3) of the GST Act:

Subsection 38-60(3) of the GST Act states:

Government agencies

(3) If:

(a) a supply is a supply of a service to an *Australian government agency; 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 wholly or partly *GST-free under this Subdivision; the first-mentioned supply is GST-free to the extent that the other supplies mentioned in paragraph (b) are GST-free under this Subdivision.

Subsection 38-60(3) of the GST Act applies to supplies made on or after 1 July 2012.

Where X makes supplies to Y pursuant to the agreement on or after 1 July 2012 then we agree with the submission in the ruling request that those supplies are GST-free pursuant to subsection 38-60(3) of the GST Act.

We consider that paragraph 38-60(3)(a) of the GST Act is satisfied because X makes the supply to an 'Australian government agency' which is defined in Division 995 of the Income Tax Assessment Act 1997 to mean, inter alia, an authority of the Commonwealth and would include Y.

Paragraph 38-60(3)(b) of the GST Act requires that the service supplied to an Australian government agency:

… is the supplier [i.e. X] making one or more other supplies of goods and services to an individual;

We consider that the purpose of subsection 38-60(3) of the GST Act is to ensure that the same GST-free treatment is afforded to the payer (i.e. Y) as is afforded to the supply of goods or services made to the patient and that subsection 38-60(3) of the GST Act is not intended to be limited to cases similar to FCT v Secretary to the Department of Transport (Vic) [2010] FCAFC 84, but also applies to cases where the relevant supply is made to an Australian government agency and provided to an individual. The intended breadth of subsection 38-60(3) is also supported by subsection 38-60(4) which gives taxpayers the option of agreeing to continue to treat a supply as taxable notwithstanding that that supply would be GST-free under subsections 38-60(1), (2) or (3) of the GST Act. We therefore consider that paragraph 38-60(3)(b) of the GST Act is satisfied in the present case.

Paragraph 38-60(3)(c) requires that at least one of the 'other supplies' (i.e. the supplies of goods or services made to the patient) is GST-free. We consider that this requirement is satisfied because the present case is analogous to Example 1 in Class Ruling CR 2013/14 (paragraphs 56-58) which states:

Example 1 - supply of health services by a dentist to an insurer

56. ABC Health Fund has a pre-existing agreement with a dentist for the supply of goods and services to settle claims made under their insurance policies.

57. The agreement outlines what both parties need to do when the dentist treats an ABC Health Fund member. Under the agreement, the payment to the dentist from ABC health Fund is for the supply made by the dentist to ABC Health Fund for supplying dental treatment to the ABC Health Fund member.

58. As the supply of the dental treatment to the ABC Health Fund member is a GST-free supply under section 38-10, the supply by the dentist to ABC Health Fund is GST-free under section 38-60.

As the requirements of subsection 38-60(3) are satisfied we consider that supplies made by X to Y on or after 1 July 20XX pursuant to the agreement are GST-free.

However, the supplies would not be GST-free if the parties agree for the supplies not to be treated as GST-free (subsection 38-60(4) of the GST Act).