Edited version of your written advice

Authorisation Number: 1051323060783

Date of advice: 22 December 2017

Ruling

Subject: Health services

Question 1

Are certain Health services which would otherwise incur GST be GST-free if they are provided only to clients with a certain disability, including clients funded by certain insurance companies?

Answer

Please see detailed reasoning below.

Question 2

Are services provided by a Health professional GST-free in a disability specific clinic only working with people with a certain disability?

Answer

No, the supply of services provided by a Health professional is not a GST-free supply of medical services or a GST-free supply of other health services. It is a taxable supply and is subject to GST. However, the services will be GST-free if the patient receiving the services is entitled to a Medicare rebate for the services.

Question 3

Are services provided by Services provider A GST free in a disability specific clinic only working with people with a certain disability?

Answer

No, the supply made by Services provider A is not a GST-free supply of medical services or a GST-free supply of other health services. It is a taxable supply and is subject to GST. However, the services will be GST-free if the patient receiving the services is entitled to a Medicare rebate for the services.

Question 4

Are services provided by Services provider B GST-free? Private Practice (P) is only working with people with a certain disability.

Answer

No, the supply made by Services provider B is not a GST-free supply of medical services or a GST-free supply of other health services. It is a taxable supply and is subject to GST. However, the services will be GST-free if the patient receiving the services is entitled to a Medicare rebate for the services.

Question 5

What constitutes supervision if a health professional provides supervision to a non-professional service provider to be GST-free?

Answer

Please see detailed reasoning below.

Question 6

Are certain services provided at P GST-free when made to clients under the National Disability Insurance Scheme (NDIS)?

Relevant facts and circumstances

A private practice (P) provides certain services exclusively to people with a certain disability.

P offers various health services under various insurers and to private paying clients. P does not have a contract with any of those insurers and the insurers pay P directly on behalf of clients for services provided by P.

Reasons for decision

Question 1

Are certain health services which would otherwise incur GST be GST-free if they are provided only to clients with a certain disability, including clients funded by certain insurance companies?

The GST status of a supply of health services is not determined by whether the patient receiving the services is disabled or not. The relevant provisions regarding supplies of health services are sections 38-7 (medical services) and 38-10 (other health services), section 38-38 (NDIS) and section 38-60 (third party procured health supplies) of A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The requirements of these provisions are explained below in relation to your circumstances.

P does not have a contract to provide services with various insurers, and this means P is delivering services to clients directly, even though payments are received by P from the insurers. The insurers are paying P for its services directly on behalf of the insured patient, therefore the supply retains the GST status it would have had if P were dealing directly with the patient.

However, if P was contracted by an insurer to make supplies of health services to insured patients (the underlying supply) to settle an insurance claim and the underlying supply to the patient is GST- free, then the supply to the insurer is also GST-free to that extent (section 38-60). Section 38-60 also applies to operators of statutory compensation schemes.

Question 2

Are services provided by a Health professional GST-free in a disability specific clinic only working with people with a certain disability?

Question 3

Are services provided by Services provider A GST free in a disability specific clinic only working with people with a certain disability?

Question 4

Are services provided by Services provider B GST-free? P is only working with people with a certain disability.

Questions 2, 3 and 4 are addressed together as the reasoning is essentially similar.

Section 9-5 of the GST Act provides that:

You make a taxable supply if:

(a) you make a supply for consideration

(b) the supply is made in the course or furtherance of an enterprise that you carry on

(c) the supply is connected with Australia, and

(d) you are registered, or required to be registered, for GST

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

A supply of Health services is not an input taxed supply under Division 40 of the GST Act. Where you are not making a GST-free supply, you will be making a taxable supply where you satisfy paragraphs (a) to (d) above.

Subdivision 38-B of the GST Act provides for supplies of medical services and other health services to be GST-free where certain requirements are satisfied.

Medical services

Subsection 38-7(1) of the GST Act provides that a supply of a medical service is GST-free. ‘Medical service’ is defined in section 195-1 of the GST Act 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.

The definition of a ‘medical service’ has two limbs. Any service that falls within either the first or the second limb of the definition in section 195-1 of the GST Act is GST-free. For the first limb, it should be noted that unlike the second limb, the supply does not have to be made by a medical practitioner or an approved pathology practitioner as those terms are defined in section 195-1 of the GST Act.

P advised that some patients using Health services can in some circumstances claim a Medicare benefit for the service. In applying subsection 38-7(1) of the GST Act to P’s circumstances, P will be making a GST-free supply of Health services to those patients receiving a Medicare benefit for its services.

Where no Medicare benefit is payable to the patient for the service, the supply of the Health service provided will not be a GST-free medical service.

Other health services

Subsection 38-10(1) of the GST Act specifies the other health services which are GST-free and states that:

(1) A supply is GST-free if:

(a) it is a service of a kind specified in the table in this subsection, or of a kind specified in the regulations; and

(b) the supplier is a *recognised professional in relation to the supply of services of that kind; and

(c) the supply would generally be accepted, in the profession associated with supplying services of that kind, as being necessary for the appropriate treatment of the *recipient of the supply.

Each of the above requirements must be satisfied for the supply of Health services to be GST-free under subsection 38-10(1) of the GST Act, which provides that a supply is GST-free if it is a health service of a kind specified in the table (the Table) in that subsection, or of a kind specified in the regulations. Currently, there are no services of a kind specified in the regulations that may be a GST-free health service.

P provides Health services to patients. However, none of the three types of Health services in questions 2 to 4 is one of the services listed in the Table. Therefore, a supply of any of the three types of Health services provided by P is not GST-free under subsection 38-10(1) of the GST Act.

Question 5

What constitutes supervision if a Health professional provides supervision to a non-professional service provider to be GST-free?

The Health professional supervising the sessions must be in a profession listed in the Table in subsection 38-10(1), and in this case the Health professional is listed in the Table. In addition they must be a recognised professional in the field, and the treatment must be generally accepted in that profession as appropriate.

The ATO view with respect to the meaning of ‘direct supervision’ is outlined in: The Health industry partnership – issues register at Issue 2.a which states:

Where a person other than the recognised professional provides a component of the supply, for section 38-10 to apply, that component will not be GST-free unless that person is also a recognised professional, or the component of the supply is directly supervised by the recognised professional. It is considered that a person will be directly supervised where the recognised professional:

● attends the patient at the commencement of the treatment and at the subsequent commencement of each new treatment, and

● is readily available for the whole of the time that the assistant is working with the patient, and

● that the recognised professional be available to take appropriate action in the case of an emergency, and

● determines all of the appropriate treatment to be provided by the assisting person, and

● can satisfactorily prove that they monitor the services of the assistant.

Where a recognised professional (listed in the Table) directly supervises the provision of services by a non-professional person (that is not listed in the Table), according to all the above criteria, then the supply will be GST-free as part of the overall supply of the listed professional service.

Question 6

Are certain services provided at P GST-free when made to clients under the National Disability Insurance Scheme (NDIS)?

In relation to the supply of supports under the NDIS (such as certain services in your case), section 38-38 of the GST Act provides that the supply will be GST-free if all of the following criteria are met:

● the client is a participant in the NDIS and has a plan in effect under a section of the FIS Act, and

● it is a supply of one or more reasonable and necessary supports, in the statement in the participant’s plan, as per a subsection of the NDIS Act, and

● there is a written agreement between the supplier and the participant (or another person such as the participant’s representative), that identifies the participant, and

● the agreement states that the supply is a supply of one or more of the reasonable and necessary supports specified in the statement included in the participant’s plan as per a subsection of the NDIS Act, and

● it is of a kind listed in the GST-free Supply (National Disability Insurance Scheme Supports) Determination 2017 (the Determination).

P provides certain supports which are funded under NDIS. The Determination above lists some of the services provided by P as GST-free. However, items in that part of the Determination are restricted to those services that are also listed in other specified Determinations (see paragraph 4 of Schedule 1 of the Determination). None of the three determinations listed in paragraph 4 cover the certain services provided by P. Those which are listed are however limited to services which are provided to a resident of a residential care facility. P does not provide services at residential care facilities. Consequently, the supply of certain services provided by P will not be GST-free.