Edited version of your written advice

Authorisation Number: 1051202369394

Date of Advice: 23 March 2017

Ruling

Subject: GST and supply of health services

Question

Is the supply of medical services as a contractor for an entity, GST-free?

Answer

No. The supply of medical services as a contractor for the entity is taxable.

This ruling applies for the following periods:

Not applicable

The scheme commences on:

Not applicable

Relevant facts and circumstances

You are a trust and carrying on an enterprise of providing medical services and registered for goods and services tax (GST).

The medical services are performed by a general practitioner, for the trust.

The trust is currently providing medical services for the entity.

The entity manages an institution which is wholly owned by the state under a contract with the relevant governing body.

The trust has entered into an agreement with the entity to provide medical services on a fee for service basis.

The medical services provided by the trust do not satisfy the first limb of the definition of medical services.

The trust has not entered into any contract or agreement with the institution.

The trust will provide the following services under the agreement with the entity:

Diagnoses and treatment for colds, flu, skin rashes,

Routine medical check-ups such as blood pressure heart rate etc,

Administering treatment - injections, flu shots, prescription of medicines,

Emergency treatment such as stitching wounds, asthma attacks, allergic reactions,

Responsible for the CPOP program which provides Methadone to opioid addicts,

Managing chronic diseases and other GP services.

The trust issues invoice to the entity for the medical services provided and receives the payments direct from the entity.

Relevant legislative provisions

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

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

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

A New Tax System (Goods and Services Tax) Act 1999 - Division 40

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

Health Insurance Act 1973

Reasons for decision

A supply is a taxable supply where the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are satisfied.

You make a taxable supply if you make the supply for consideration; and the supply is made in the course or furtherance of an enterprise that you carry on; and the supply is connected with the indirect tax zone; and 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.

The supply of medical services is not input taxed under Division 40 of the GST Act. Therefore, it should be determined whether the supply of medical services by the trust is GST-free under Division 38 of the GST Act.

A supply of medical services is GST-free under section 38-7 of the GST Act.

For GST purposes, a medical service is defined under section 195-1 of the GST Act to mean:

(a) As a service for which Medicare benefit is payable under Part II of the Health Insurance Act 1973: or

(b) 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.

Where the first requirement is not met, the requirements of the second limb of the definition of medical service must be met. That is, the supply is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

Appropriate treatment is established where a practitioner assesses 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 includes subsequent supplies for the assessed process.

The medical services provided by the trust are not covered by Medicare benefit and therefore the first limb of section 38-7 of the GST Act is not applicable.

It is necessary to consider whether the supply of medical services by the trust would satisfy the second limb of section 38-7 of the GST Act. 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.

Services 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.

In determining whether the medical services are provided by the trust as a medical practitioner, it is relevant to consider whether the trust itself as an entity can provide the medical services. The definition of medical services requires that the medical services 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 the very nature, a trust 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 trust itself.

In this case, the medical services are provided by a general practitioner and therefore the first element of the definition where the services should be provided by the medical practitioner would be met.

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, it is our view that the services provided by the general practitioner would satisfy the second element of the definition of 'appropriate treatment'.

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. Appropriate treatment will not include supplies undertaken for a third party that does not encompass the concept of treatment.

In some instances, medical services are made under multi-party arrangements where a medical practitioner supplies medical service to a person (patient) and the medical practitioner receives payment from a third party. The Commissioner generally treats these arrangements as involving a single supply with the payment from the third party being the consideration for the supply and the third party is the recipient of the supply. As the supply is not provided to the patient, the supply is not a GST-free supply.

A third party will be the recipient of a supply where:

(a) The third party engages you to provide something to them or someone else;

(b) The third party, by agreement with you, determines what is required to be provided to them or to someone else; and

(c) There is an enforceable obligation between the third party and you for the thing to be provided and the third party is liable to provide payment.

In this case the trust provides the medical services under an agreement with the entity. The trust issues invoices for the services provided to the entity and receives consideration for the supply of medical services.

As explained above, there is an enforceable obligation between the trust and the entity under the agreement and the entity is liable to provide consideration for the medical services provided by the trust. Therefore, the entity is the recipient of the supply made by the trust and the supply of medical services provided by the trust would be taxable supply.