Edited version of your written advice

Authorisation Number: 1012928794814

Date of advice: 21 December 2015

Ruling

Subject: GST and supply of medical consultation services.

Question 1

Are the supplies of medical consultation services made by an entity under contracts directly with individual patients GST-free?

Answer

The supplies of medical consultation services made by the entity under contracts directly with individual patients will be GST-free provided the supplies satisfy all the elements contained in the second limb of the definition of medical service under section 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) . Please refer to the reasons for decision.

Question 2

Are the supplies of medical consultation services provided by the entity to individual patients GST-free where that supply is made under a contract between the entity and an insurer or Australian Government Agency (AGA)?

Answer

The supplies of medical consultation services provided by the entity to individual patients will be GST-free where the supply is made under a contract between the entity and an insurer or AGA under section 38-60 of the GST Act.

Relevant facts and circumstances

• The entity is a business which provides medical videoconference and/or phone consultation services.

• The entity has registered with the Department of Human Services.

• To provide medical consultation services, the entity employs a number of medical general practitioners ("GPs"). The GPs may offer a number of services to customers in Australia (hereafter referred to as "medical consultation services") including:

- examination of medical history and symptoms of the relevant patient;

- receipt and review of relevant clinical information;

- provision of advice and recommendations to the patient as to care and treatment;

- prescription of pharmaceuticals;

- referral to a third party provider; and

- delivery of relevant clinical information from the GP to another health service provider.

• In addition to the medical consultation services outlined above, the entity may provide the following services:

- a telephone service for enquiries about the service;

- a telephone booking service for consultations with GPs;

- delivery of information and services through the website of the entity; and

- access to a translator service (that may be available in some circumstances) for which an additional fee may apply.

• The entity may provide the medical consultation services under various contractual arrangements:

- Directly with individual patients, where the contract is between the entity and the individual patient, and the patient will be invoiced directly for the medical consultation services;

- Under an "umbrella agreement" with a patient's employer, where the medical consultation services are provided to a patient and the employer is liable to pay and will be invoiced for the services; or

- Under an agreement with an insurer or AGA, where the medical consultation services are provided to a patient and the insurer or AGA will be invoiced for the services.

• A Medicare benefit or private health insurance is not payable in respect of the medical consultation services provided by the GPs employed by the entity.

• The entity enters a contract for the provision of the medical consultation services with the customer (and invoices for the same) in a principal capacity and not as an agent for another party (such as the medical practitioner).

• The service cannot be used for emergency or life threatening conditions, illnesses or injuries. If the patients need emergency assistance they are required to call 000 for immediate help.

Prescriptions

• In appropriate circumstances, the GPs may issue emergency prescriptions or prescriptions for regular medications if they consider this is clinically appropriate.

• The prescriptions are issued by the GPs under their own name and their registration number.

Medical certificates

• GPs have a responsibility to obtain sufficient factual information through history and examination of a patient to issue a medical certificate.

• In some cases a GP may be unable to do this on a telephone or video consultation and it may be necessary for the patient to attend a face-to-face visit with a GP.

• The medical certificates are issued by the GPs under their own name and their registration number.

Fees

• To secure a booking for a Medical Consultation, the patient will be charged a fee for a Medical Consultation which will be advised by the entity.

• If the fee for the Medical Consultation is to be paid by the entity's corporate customer, the entity will check the eligibility of the patient as determined by that corporate customer.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 - section 38-7

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

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

Health Insurance Act 1973

Reasons for decision

Question 1

Section 38-7 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides a supply of a medical service is GST-free. Medical service is defined in section 195-1 of the GST Act to mean:

• service for which Medicare benefit is payable under Part II of the Health Insurance Act 1973, or

• any other service supplied by or on behalf of a medical practitioner or approved pathology practitioner that is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

The definition of a medical service has two limbs. Any service that falls within either the first or second limb of the definition is GST-free.

Under the first limb, a service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973, is GST-free. Any service for which a Medicare benefit is not payable must be addressed under the second limb of the definition.

Medicare benefit is not payable to the medical consultation services provided by the entity. Therefore, the supply of medical consultation services must be considered under the second limb of the definition.

The second limb of the definition of medical service contains a number of elements. All of these elements must be satisfied before a service will be a medical service under the second limb.

Service must be supplied by medical practitioner

The first element is that the service must be supplied by or on behalf of a medical practitioner or an approved pathology practitioner. Section 195-1 of the GST Act defines medical practitioner as a person who is a medical practitioner for the purposes of the Health Insurance Act 1973.

The Health Insurance Act 1973 defines medical practitioner as a person registered or licensed as a medical practitioner under a law of a State or Territory that provides for the registration or licensing of medical practitioners but does not include a person so registered or licensed:

(a) whose registration, or licence to practice, as a medical practitioner in any State or Territory has been suspended, or cancelled, following an inquiry relating to his or her conduct; and

(b) who has not, after that suspension or cancellation, again been authorised to register or practice as a medical practitioner in that State or Territory

In determining whether the medical consultation service is provided by the entity as a medical practitioner, it is relevant to consider whether the entity itself as a company can provide the medical consultation service. The definition of medical service requires that the medical service should be supplied by a medical practitioner.

It is considered that in this context, it is taken to be a requirement that the person who actually performs services must herself or himself, be a medical practitioner in relation to supplying services of that kind. Due to its very nature, a company cannot itself perform the services it may supply through others such as medical practitioner. Therefore, the consideration should be on the professional status of the person performing the services and not the company itself.

The entity employs a number of medical general practitioners ("GP") and the GPs may offer a number of services to the customers of the entity. Therefore, we consider that the first element of the definition where the services should be provided by the medical practitioner would be met in this circumstance.

Appropriate treatment

The second element is that the service supplied must be generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

'Appropriate treatment' will be established where the practitioner assessed the recipient's state of health and determines a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of the recipient and will include subsequent supplies for the assessed process. Appropriate treatment includes the principles of preventative medicine.

In addition, the definition requires the treatment must be generally accepted in the medical profession as being necessary. The particular service being provided by the practitioner and the circumstances in which it is provided must be generally accepted by the medical profession. The words 'generally accepted in the medical profession' indicate that it will ultimately be the medical profession that determines what services will be generally accepted.

Based on the facts provided, the entity provides a variety of services and some of the services may not be considered as appropriate treatment and may not be generally accepted in the medical profession. For example, services such as providing a telephone service for enquiries about the service or delivery of information and services through their website may not be considered as appropriate treatment, although the entity may not charge a fee for these services.

As explained above, it is the medical profession which determines the extent to which those services are generally accepted as appropriate treatment. We consider that not all the services provided by the entity will satisfy the second element of medical services. Therefore, the entity is required to identify the type of services provided to their clients and ensure that the services are generally accepted in the medical profession as being necessary for the purposes of GST.

Recipient of 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. In some circumstances, the recipient of the supply is not the patient of the practitioner but is a third party such as an employer. Appropriate treatment will not include supplies undertaken for a third party that does not encompass the concept of treatment.

Under an umbrella agreement with a patient's employer, the entity will provide medical consultation services to a patient and the employer is liable to pay and the invoice will be issued to the employer for the services provided to the patient. As explained above, the supply to the employer will not satisfy the element of recipient of the supply. Therefore, the services provided to a patient's employer under the umbrella agreement will not be GST-free supplies under section 38-7 of the GST Act.

Composite supplies

Goods and Services Tax Ruling GSTR 2001/8 (GSTR 2001/8) discusses the issue of apportioning the consideration for a supply that includes taxable and non-taxable parts. The ruling explains how to identify whether a supply includes taxable and non-taxable parts. Such supplies are termed mixed supplies. It also describes the characteristics of supplies that appear to have more than one part but that are essentially supplies of one thing. These supplies are referred to as composite supplies.

If you make a supply that contains a dominant part and the supply includes something that is integral, ancillary or incidental to that part, then that supply is composite. You need to consider all of the circumstance of a supply to determine whether the supply is mixed or composite. If a composite supply is taxable, then GST is payable on the whole supply. If a composite supply is non-taxable, then no GST is payable on the supply as a whole.

Therefore, we need to consider whether the additional supplies made by the entity will satisfy the requirements of composite supplies to the dominant supply of medical consultation services.

The distinction between parts that are separately identifiable and things that are integral, ancillary or incidental is a question of fact and degree. Paragraph 55 of GSTR 2001/8 states:

55. Some supplies include parts that do not need to be separately recognised for GST purposes. We refer to these parts of a supply as being integral, ancillary or incidental. In a composite supply, the dominant part of the supply has subordinate parts that complement the dominant part. If such a supply is analysed in a common sense way, it can be seen that the supply is essentially the provision of one thing. It needs not be broken down, unbundled or dissected any further. For this reason, a composite supply may appear, at first, to have more than one part, but is treated as if it is a supply of one thing.

All facts must be considered in determining whether a supply has any parts that are integral, ancillary or incidental. No single factor will by itself provide the sole test of whether a part of a supply is integral, ancillary or incidental to the dominant part of the supply. Having regard to all of the relevant circumstances, indicators that a part may be integral, ancillary or incidental to a supply include:

• it can reasonably be concluded 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.

On that basis, a part of a supply will be integral, ancillary or incidental where it is insignificant in value or function, or merely contributes to or complements the use or enjoyment of the dominant part of the supply.

The entity considers that the supply of telephone enquiry, booking and delivery services should be considered as integral, ancillary or incidental to the dominant supply of the medical consultation services. However, the entity provides these services except the translator services for no additional fees.

We are of the opinion that the telephone service for enquiries about the service and/or delivery of information and services through the website can be identified as separate supplies to the dominant supply of medical consultation services. As explained above, the telephone service for enquiries about the service and/or delivery of information and services through the website may not be considered as the appropriate treatment of the patient under the definition of medical services. A telephone booking service for consultation with the GP may be considered as integral, ancillary or incidental to the dominant supply of the medical consultation services.

Translator services

The supply of interpreter services is not GST-free supply under the health provisions. However, where a medical practitioner or recognised professional requires an interpreter for a consultation and it is a supply to that medical practitioner or recognised professional, the supply may be GST-free to the patient if the medical practitioner or recognised professional passes that cost on to the patient as part of a GST-free medical or other health service.

Subject to the requirements of a taxable supply, the interpreter services to the practitioner may be subject to GST. If so, the practitioner will be entitled to an input tax credit for the GST paid. In this situation, the interpreting services will form part of the overheads embodied within the GST-free service.

In contrast, if a patient engages an interpreter for a consultation, the supply of the interpreting service to the patient will not be GST-free.

As explained above, the supply of translator services will not be GST-free unless the entity passes the cost to the patient as part of the medical consultation services provided by them to the patient. However, if the entity itself provides the translator services to the patient and issues an invoice which includes the cost of translator fees as part of the supply of medical consultation services, then the whole supply may be GST-free supply of medical consultation services.

In contrast, if the entity issues a separate invoice or includes their cost of translator services as a separate item in their invoice, then the entity may be making a mixed supply of taxable and GST-free supplies.

Furthermore, if the translator service is an integral, ancillary or incidental to the dominant part of the supply of medical consultation services as explained above, the whole supply may be GST-free.

Conclusion:

Based on the facts provided and the above analysis, we accept that the medical consultation services provided by the entity to the patient will be GST-free supplies provided that all the elements contained in the second limb of the definition of medical service under section 195-1 of the GST Act, are satisfied.

The additional services provided by the entity may not constitute as an integral, ancillary or incidental to the dominant part of the supply of medical consultation services as explained above.

The translator services will be GST-free supplies to the patient only if the entity passes the translator fees to the patient as part of their GST-free medical consultation services.

Question 2

Section 38-60 of the GST Act provides that where a supply of a health service made to an individual is a GST-free supply of health service, that supply will also be GST-free where the recipient of the supply is either:

• an insurer settling a claim under an insurance policy;

• an operator of a statutory compensation scheme;

• an operator of a compulsory third party scheme;

• an Australian government agency.

The entity may provide medical consultation service under an agreement with an insurer or Australian Government Agency (AGA), where the medical consultation services are provided to a patient and the insurer or AGA will be invoiced for the services. We agree that the services to the insurer or AGA will be GST-free supply provided the supply satisfies section 38-60 of the GST Act.

Where the client is the recipient of the supply and is a business entity not covered by the entity types set out in section 38-60 of the GST Act, the supply would be a taxable supply.

The entity may also provide the medical consultation services under an "Umbrella agreement" with a patient's employer where the medical consultation services are provided to a patient and the employer is liable to pay and will be invoiced for the services. We consider that the supply of medical consultation services under these circumstances will not be a GST-free supply as the supply may not satisfy the requirements of section 38-60 of the GST Act.