Edited version of your written advice

Authorisation Number: 1051296255105

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Date of advice: 18 October 2017

Ruling

Subject: GST and professional services to a third party

Question

Are your supplies of professional services to a government agency GST-free?

Answer

Yes, your supplies of professional services to a government agency are GST-free. However, where you have reported an amount of GST on those supplies in your activity statements and you have passed on that GST to the government agency, the excess GST is generally taken to be payable and on a taxable supply until you reimburse the amount to them.

Please note you and the government agency can agree that the supplies are not treated as GST-free supplies.

Relevant facts and circumstances

● You are registered for GST,

● You are a social worker accredited and registered,

● The government agency administers a scheme established under an Act to support certain individuals,

● You supply professional services to the government agency under the Act,

● You counsel people,

● Your Agreement states among other things that approved counselling services are to be provided by the Approved Counsellor to a client.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Section 38-60.

Reasons for decision

GST is payable on taxable supplies. GST is not payable where a supply is GST-free or input taxed.

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

● It makes the supply for consideration;

● The supply is made in the course or furtherance of an enterprise that it carries on;

● The supply is connected with the indirect tax zone (Australia);

● The entity is registered or required to be registered for GST; and

● The supply is neither GST-free nor input taxed.

There is no provision in the GST Act under which your supply of professional services is input taxed.

A supply of certain health services is GST-free under Subdivision 38-B of the GST Act.

A supply of professional services is GST-free under other health services in section 38-10 of the GST Act if:

● the supplier is a recognised professional, and

● the supply would generally be accepted in that profession as being necessary for the appropriate treatment of the recipient of the supply.

Where you are contracted by a third party to provide professional services to a patient then the third party is considered to be the recipient of your supply, even though the patient is given the actual treatment.

As the recipient of your supply is the government agency, your supply to them does not involve an ‘appropriate treatment of the recipient of the supply’. Therefore, your supply of services to them is not GST-free under section 38-10 of the GST Act.

However, subsection 38-60(3) of the GST Act provides that if a supply (the underlying supply) by a health service provider to an individual is either wholly or partly GST-free under Subdivision 38-B, then a supply of the service of making the underlying supply by the health service provider to the Australian government agency is GST-free to the same extent as the underlying supply.

This means that if the service is GST-free when provided to an individual, it is also GST-free when provided via an Australian government agency.

An Australian government agency for the purposes of the GST Act has the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997), and the meaning includes among other things, a State or an authority of a State.

In your case, you supply your services to the government agency which therefore meets the requirement of an Australian government agency.

So, when the supply is of professional services to an Australian government agency and the supplies are GST-free under section 38-10 of the GST Act if the recipient of the supply was the individual patient, those services will be GST-free under subsection 38-60(3) of the GST Act.

Therefore, your supply of professional services to the government agency under the Agreement is a GST-free supply because all the requirements of subsection 38-60(3) of the GST Act are met.

Please note: Under subsection 38-60(4) of the GST Act, you and the government agency can agree that the supplies are not treated as GST-free supplies.

Further information

For tax periods starting on or after 31 May 2014, Division 142 of the GST Act applies to, among other things, an overpayment of GST as a result of a mischaracterisation of a supply.

If the excess GST has been passed on to another entity then generally the excess GST is taken to be payable and on a taxable supply until the supplier reimburses the passed-on GST to the other entity.