Edited version of your written advice

Authorisation Number: 1012748934807

Ruling

Subject: Income and deductions/GST

Question 1

Are the medical payments you receive for services performed in respect of the process, assessable income?

Answer

Yes.

Question 2

Are you entitled to claim a gift deduction for the donation of your gross medical receipts (received for services you performed in respect of assessments) to the registered charity?

Answer

Yes.

Question 3

Does the registered charity make a taxable supply in exchange for the receipt of the payment of monies from you?

Answer

No.

Question 4

For the purposes of A New Tax System (Goods and Services Tax) Act 1999 (GST Act), is the payment of monies by you to the registered charity a gift to a non-profit body?

Answer

Yes.

This ruling applies for the following periods:

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

Year ending 30 June 2019

Year ending 30 June 2020

The scheme commences on:

1 July 2014

Relevant facts and circumstances

You are a surgeon. You will be performing assessment procedures as part of the Program provided by the Registered Charity.

The Registered Charity is registered with the Australian Charities and Not-for-Profit Commission, and endorsed as a deductible gift recipient for income tax purposes.

The Program works as follows:

• The patient's doctor provides a referral to a surgeon of the patient's choice, for assessment regarding suitability.

• Surgeons are able to refer clients to the Registered Charity to utilise services offered by the Program.

• The surgeon voluntarily liaises with the Registered Charity's team, to perform the assessment on the patient. The process is carried out in the course of their normal private practice business. The surgeon undertakes certain quality assurance procedures and supervises the services carried out by the Registered Charity employee. The Registered Charity has no control or influence over the performance of the surgeons' assessment process.

• The Registered Charity provides the services to patients under the program at no cost.

• The Registered Charity's employee is renumerated by the Registered Charity for the assessment procedures carried out as an employee of the Registered Charity.

• The Registered Charity is not paid by Medical Insurer for the provision of services.

• The surgeon is paid by Medical Insurer for the relevant item including assessment and supervisory services, and ultimate sign off of the assessment findings.

• Each surgeon uses a new provider number in their name, which specifies that they are performing services from the Registered Charity's premises. This practice has been approved by the Medical Insurer.

• The surgeons' nominated bank account for payments received as a result of Medical Insurer's billings is the Registered Charity's bank account. This nomination is voluntary and the surgeons are able to change their nominated bank account at any time. No inducements or benefits are offered to the surgeons as a motivation to direct their Medical Insurer receipts in this way.

• The Registered Charity issues periodic statements to the surgeons, informing them of the funds received from the Medical Insurer on their behalf.

• Each surgeon then provides an instruction on how to apply the monies received. This could include making a donation to the Registered Charity or otherwise applying the funds in accordance with the surgeon's wishes.

• At the end of each year the Registered Charity in its capacity as a DGR, will provide a receipt to the surgeon acknowledging the donations made for the year.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Division 30

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

A New Tax System (Goods and Services Tax) Act 1999 section 9-15

A New Tax System (Goods and Services Tax) Act 1999 section 9-17

Reasons for decision

Income

Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. This has previously been held by the courts to include amounts received in respect of personal services or in business.

Subsection 6-5(4) of the ITAA 1997 provides any amounts 'dealt with' or 'applied' at the direction of the taxpayer will also constitute assessable income.

In your case, you receive Medical Insurer receipts as a result of services performed as in the assessment process. The process is carried out in the course of your normal private practice business and so is taken to be assessable income under subsection 6-5(2) of the ITAA 1997.

You have nominated that payments received as a result of Medical Insurer billings are to be paid into the Registered Charity's bank account. Accordingly, the Medical Insurer is 'dealing with' or 'applying' your income as you have directed but the income is still assessable to you under subsection 6-5(4) of the ITAA 1997.

Deductions

Gifts or donations may be deductible under Division 30 of the ITAA 1997. To be accepted as a gift for tax purposes, donations must be made voluntarily, not provide a material benefit for the donor and essentially arise from benefaction and a detached and disinterested generosity on behalf of the donor.

Gifts are only deductible if they are made to deductible gift recipients and if (in case of monetary gifts) the value of the gift is $2 or more. For most types of gifts, the tax deduction for the gift should be claimed in the tax return for the income year in which the gift was made. In the case of a monetary gift, the deduction will be equal to the amount of the gift, provided that this deduction does not add to or create a tax loss.

In your case, you have voluntarily donated or will be voluntarily donating some or all of your Medical Insurer receipts received for services you performed in the assessment process. You do not receive an inducement or benefit from this gift, and have a detached and disinterested generosity in relation to the donation. Accordingly, your donation to the Registered Charity is considered to be a gift for tax purposes.

The Registered Charity has been approved by the Commissioner as a deductible gift recipient. Accordingly, the Medical Insurer receipts of $2 or more donated to the Registered Charity will be deductible to you in the income year of the donation.

Taxable Supply

Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), an entity makes a taxable supply if:

(a)  it makes the supply for consideration; and

(b)  the supply is made in the course or furtherance of an enterprise that the entity carries on; and

(c)  the supply is connected with Australia, and

(d)  the entity is registered or required to be registered for GST.

However, a supply is not a taxable supply to the extent that it is GST-free or input taxed.

To satisfy the first requirement in section 9-5 of the GST Act, an entity must first make a 'supply' for 'consideration'.

For a payment to be consideration for a supply there must be a sufficient nexus between the payment made by the payer and a supply made by the payee. A payment is consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement of' a supply. The test is an objective one.

Subsection 9-10(1) of the GST Act states that a supply is any form of supply whatsoever.

Section 9-15 of the GST Act provides that consideration includes any payment, or any act or forbearance, in connection with, in response to or for the inducement of a supply of anything.

However, subsection 9-17(2) of the GST Act provides that making a gift to a non-profit body is not the provision of consideration for a supply. The terms 'gift' and 'non-profit body' are not defined in the GST Act. Therefore, the terms take their ordinary meaning from the context in which they are used.

In relation to gifts to a non-profit body, GSTR 2012/2 at paragraphs 70 to 75 states:

The term 'gift' is not defined in the law and therefore takes its ordinary meaning having regard to the context in which it appears. It is considered that a 'gift' has the following characteristics and features:

• there is a transfer of a beneficial interest in property;

• the transfer is made voluntarily;

• the transfer arises by way of benefaction; and

• no material benefit or advantage is received by the giver (payer) by way of return.

71. In applying these criteria, the courts have recognised that the criteria may not be absolute and may involve a matter of degree.

72. The fact that a payment is made voluntarily does not of itself mean that it is a gift. Such a payment can be consideration for a supply.

73. A payment that is made as a function of government, and does not have the characteristics of benefaction including detached, disinterested generosity, is not a gift.

74. In order for the specific exclusion from the definition of 'consideration' to apply, the payment must be a gift to a non-profit body. The term 'non-profit body' is not defined for the purposes of the GST Act so takes its ordinary meaning in the context in which it appears. A body is a non-profit body if, by operation of law (for example, a statute governing a body's activities) or by its constituent documents, the body is prevented from distributing its profits or assets amongst its members while the body is functional and on its winding-up.

75. Where it is clear from the objects, policy statements, history, activities and proposed future directions of the body that there will be no distributions to members, we accept that the non-profit test has been satisfied.

As discussed previously, in your case, you have voluntarily donated or will be voluntarily donating some or all of your Medical Insurer receipts received for services that you performed in the Registered Charity's assessment process. This voluntary payment made by you to the Registered Charity is a gift because you do not receive an inducement or a material benefit from this donation, and you have a detached and disinterested generosity in relation to the donation.

The Registered Charity is registered with the Australian Charities and Not-for-Profit Commission and is endorsed as a deductible gift recipient (DGR) for income tax purposes.

Under subsection 9-17(2) of the GST Act, the making of a gift to a non-profit body is not the provision of consideration for a supply. We consider that your voluntary payment of monies to the Registered Charity would be considered as the making of a gift to a non-profit body for GST purposes. As such, the payment meets the requirement of subsection 9-17(2) of the GST Act and does not constitute the provision of consideration for a supply made by the Registered Charity.