Edited version of your written advice

Authorisation Number: 1051319727139

Date of advice: 13 December 2017

Ruling

Subject: GST and the supply of a medical service

Question 1

Is the treatment you supply to patients a GST-free medical service under section 38-7 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, the supply of the treatments to patients is a GST-free medical service under section 38-7 of the GST Act.

Question 2

Is the supply of treatments for the funded eligible clients GST-free?

Answer

Yes, the supply of treatments for funded eligible clients is GST-free under section 38-7 of the GST Act.

Relevant facts and circumstances

● You have been registered for goods and services tax (GST).

● You supply treatments to individuals.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-7(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-7(2)

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

Reasons for decision

Question 1

Section 38-7 of the GST Act provides that a supply of a ‘medical service’ is GST-free. Section 195-1 of the GST Act defines a 'medical service' to mean:

(a) 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.

Asterisked (*) terms are defined terms as per section 195-1 of the GST Act.

In this case, you have said that your clients do not receive Medicare benefits for the services supplied. Therefore, it needs to be determined if the service is GST-free under paragraph (b) of the definition.

Paragraph (b) contains a number of elements and all must be satisfied before a service will satisfy the definition of a medical service as provided by the GST Act. Firstly the service must be supplied by or on behalf of a medical practitioner or an approved pathology practitioner as defined. Secondly, the service supplied must be generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

'Medical practitioner' is defined in section 195-1 of the GST Act to mean a person who is a medical practitioner for the purposes of the Health Insurance Act 1973. The definition of an 'approved pathology practitioner' is not relevant in this case. The Health Insurance Act 1973 defines a medical practitioner to mean:

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 practise, 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 practise as a medical practitioner in that State or Territory.

Therefore it is required that the specialised professional and treatment trained medical practitioner is registered under the relevant State or Territory laws as a medical practitioner. Note: this has not been provided as a fact and will be dependent on each individual medical practitioner.

Meaning of 'service supplied by or on behalf of a medical practitioner or an approved pathology practitioner'

The phrase 'on behalf of' for the purposes of the definition of 'medical service' means the performance of a component of the service provided by a practitioner that is not necessarily supervised by that practitioner. An example is where a laboratory technician assists in undertaking pathology testing of specimens. However, 'on behalf of' does not include a service performed on referral by another person as such a service is not a component of the supply being provided by the first practitioner. The service being provided by the second person will be a separate supply, the GST status of which must be examined by reference to the supply by that person.

In this case, you refer all potential clients to a specialised professional or treatment trained medical practitioner who must endorse the treatment for a particular patient before any treatments can commence. The specialised professional or treatment trained medical practitioner does not administer the treatments personally. The treatments are administered by a senior medical professional.

However, once treatment is endorsed for a particular patient, the specialised professional or treatment trained medical practitioner is kept informed during the treatment process via progress reports. When the treatment program is finalised, the specialised professional or treatment trained medical practitioner is required to approve a final exit report on the client. As you perform treatment only after endorsement or approval by a specialised professional or treatment medical practitioner, and you provide progress reports and ultimately require the specialised professional or treatment medical practitioner to sign-off the client’s exit report, the treatment you provide is supplied ‘on behalf of’ the specialised professional or treatment medical practitioner.

Meaning of 'generally accepted in the medical profession as being necessary for the appropriate treatment'

'Appropriate treatment' is not defined in the GST Act. Appropriate treatment of the recipient will be established where the health 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 will include subsequent supplies for the assessed process. Appropriate treatment also includes the principles of preventative medicine.

In addition, the definition requires that the treatment must be generally accepted in the medical profession as being necessary. The particular service being provided by the medical practitioner or approved pathology 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, which in this case is the psychiatry profession, that determines what services will be generally accepted.

In this case, approval for an individual patient to undertake treatment must be sought from a specialised professional or a treatment trained medical practitioner prior to the commencement of any treatments. It is the medical practitioner, not you, that independently determines whether treatment is the appropriate treatment in the individual circumstances for a particular client.

It is likely to be generally accepted in the medical profession that the treatments provided by you are necessary for the appropriate treatment of the patient. However, to be GST-free they must also be appropriate for ‘the recipient of the supply’.

Meaning of 'the recipient of the supply'

Section 195-1 defines 'recipient' in relation to a supply to mean the entity to which the supply is made. In this case, when you provide a supply of the treatment to an individual patient, the 'recipient of the supply' is that patient.

Therefore, when you provide treatments to these patients you satisfy all the criteria of paragraph 38-7(b). As such your supply is a GST-free supply of a medical service.

Question 2

As detailed in question 1, the definition of a ‘recipient' in relation to a supply means the entity to which the supply is made. Where there are two parties to the supply of services (you and the patient), generally there is a single supply to which the GST Act applies and the recipient of that supply is the patient.

However, 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.

For example, an insurance company is a third party who may be the actual recipient of the supply where an assessment of a person is made for insurance purposes. There is no actual treatment involved and such a supply will be taxable.

Ordinarily, it does not matter that the patient (who is the recipient of the supply) does not provide the payment for the supply. Provided all the necessary elements of section 38-7 of the GST Act (especially the requirements in relation to ‘recipient of the supply’) are met it will be a GST-free supply.

In this case, you have stated that there is no overarching agreement between you and the funded organisation for the supply of treatments to other funded eligible clients. You have said that the funded organisation simply approve payment for a specific number of treatments supplied to an individual client. As such the supply of a treatment, which is a medical service, is made to the other funded eligible client but payment is provided by the funded organisation.

As such, a supply of treatment to other funded eligible patients is a GST-free supply of a medical service under section 38-7 of the GST Act.