Edited version of your written advice

Authorisation Number: 1051433843894

Date of advice: 20 March 2019

Ruling

Subject: GST status of your diabetes education services

Question 1

Are you making GST-free supplies when you supply diabetes education directly to patients entitled to Medicare benefits for your services?

Answer

Yes. When you supply diabetes education directly to patients entitled to Medicare benefits for your services, you are making GST-free supplies under subsection 38-7(1) of the A New Tax System (GST) Act 1999 (GST Act).

Question 2

Are you making GST-free supplies when you supply diabetes education directly to patients not entitled to Medicare benefits for your services?

Answer

Yes. When you supply diabetes education directly to patients not entitled to Medicare benefits for your services, you are making GST-free supplies of nursing services under subsection 38-10(1) of the GST Act.

Question 3

Are you making GST-free supplies when you provide diabetes education services to patients under your arrangement with Entity A?

Answer

No. Under your arrangement with Entity A, you are making taxable supplies of professional services to Entity A when you provide diabetes education services to the patients.

Relevant facts and circumstances

You are a sole trader registered for goods and services tax (GST).

You are a registered nurse and a diabetes educator. You are not a medical practitioner.

You are registered with Medicare Australia to provide diabetes education health services.

You operate as a sole trader at medical practices. At these practices medical practitioners refer patients directly to you as an allied health service provider for diabetes education.

Most of your patients have a chronic disease management plan in place. The plan is implemented under Medicare for patients with chronic medical conditions and complex care needs, and entitles them to Medicare benefits for your services. If the patient uses their chronic disease management plan for your services, then they are billed with a Medicare claim under the plan. In these circumstances, a Medicare benefit is payable to the patient specifically for your services as a diabetes educator.

Some patients do not have a chronic disease management plan in place. In these instances the patient is not entitled to Medicare benefits for your services and pays the full fee for your service.

Another source of income is from Entity A.

Entity A is not an Australian government agency, insurer or a compulsory third party scheme operator.

Entity A pays you for patient appointments. The patient does not pay you or Entity A anything and does not need to claim any Medicare benefits.

You provided a copy of the agreement between you and Entity A.

Relevant legislative provisions

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

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

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 38-10(1)

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

Reasons for decision

All legislative references are to the GST Act unless otherwise specified.

Summary

Question 1

When you supply diabetes education services directly to your patients and a Medicare benefit is payable to the patients for those services, the supplies will be GST-free as ‘medical services’ under subsection 38-7(1). This is because a ‘medical service’ is defined, in part, to include a service for which a Medicare benefit is payable and it does not have to be made by a medical practitioner.

Question 2

When you supply diabetes education services directly to your patients and a Medicare benefit is not payable to the patients for those services, the supplies will still be GST-free as a component of nursing under subsection 38-10(1). This is because the diabetes education is a component treatment of your nursing services, you are a recognised nursing professional trained in diabetes education services, and the diabetes services are generally accepted in the nursing profession as appropriate treatment for the recipients of the supplies, that is the patients.

Question 3

The Agreement between you and Entity A creates a binding obligation on you to provide the services as prescribed in the Agreement and for Entity A to provide payment. This means you are making supplies of professional services to Entity A when you provide diabetes education services to the patients. Entity A is the recipient of your supply of professional services, not the patient. The professional services that you supply to Entity A are not GST-free under:

● subsection 38-7(1) (medical services) because the definition of medical service is not met – Entity A cannot claim a Medicare benefit for your services, you are not a medical practitioner and as your services are on referral, they cannot be provided on behalf of a medical practitioner, and

● paragraph 38-10(1)(c) (nursing services) because your supplies of professional services to Entity A are business to business transactions and therefore are not for the ‘appropriate treatment of the recipient’ i.e. Entity A.

As no other GST-free provisions are relevant, your supplies of professional services to Entity A are subject to GST.

Detailed reasoning

Question 1

Are you making GST-free supplies when you supply diabetes education to patients entitled to Medicare benefits for your services?

Under section 7-1 of the GST Act GST is payable on taxable supplies.

Under section 9-5 of the GST Act, an entity makes a taxable supply if:

● it makes a supply for consideration

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

● the supply is connected with the indirect taxation zone, and

● the entity is 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.

Your supplies of diabetes education services meet the positive requirements of section 9-5 and are not input taxed. The relevant GST-free health provisions in the GST Act are considered below.

Medical services

Under subsection 38-7(1) the supply of a medical service is GST-free.

A 'medical service' is defined under section 195-1 to mean:

● a service for which Medicare benefit is payable under Part II of the Health Insurance Act 1973 (HIA), 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.

Any service that falls within the first limb or second limb of the above definition is GST-free. For the first limb (unlike the second limb) the supply does not have to be made by a medical practitioner or an approved pathology practitioner.

When you provide a diabetes education service to a patient and there is a Medicare benefit payable specifically for that supply, that service will fall within the first limb of the definition of a ‘medical service’ and that service will be a GST-free supply under subsection 38-7(1).

Question 2

Are you making GST-free supplies when you supply diabetes education directly to patients not entitled to Medicare benefits for your services?

Medical services

Some of the patients referred to you do not have a chronic disease management plan in place nor are they part of your arrangement with Entity A. The patient is not entitled to a Medicare benefit for your service and pays the full fee for that service. As such, the first limb of the definition of ‘medical service’ is not met.

In terms of the second limb of the definition of ‘medical service’, you are not a medical practitioner and an approved pathology practitioner is not relevant to your circumstances. When a medical practitioner refers a patient to another person for treatment, as in your case, that person’s service is not performed on behalf of the referring medical practitioner nor is it part of the referring medical practitioner’s supply. It must be considered separately. Therefore the second limb of the definition does not apply to you.

Consequently when you supply diabetes education to patients not entitled to Medicare benefits for your services, you are not making GST-free supplies of medical services under subsection 38-7(1).

Other health services

Under subsection 38-10(1), an entity makes a GST-free supply if:

(a) the entity supplies a service of a kind specified in the table in subsection 38-10(1) (Table), or of a kind specified in the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations), and

(b) the entity 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.

Service of a kind specified in the Table

Diabetes education is not a service specified in the Table. However, a service that is not specifically listed in the table may still be supplied as a component treatment of one of the specified services.

You are a registered nurse and nursing is listed at Item 10 of the Table. Where your supplies of diabetes education are administered as part of nursing services and the nursing profession considers the diabetes education to be a component treatment of that nursing service, you are supplying a service specified in the Table.

Recognised professional

In your particular circumstances, for the purposes of paragraph 38-10(1)(b) you must be a recognised professional for the listed service you provide (i.e. nursing), who is trained in diabetes education.

Under section 195-1 a recognised professional is a person who is registered, permitted or approved under a State or Territory law to provide the listed health service. If there is no relevant State or Territory law, a recognised professional is a member of a professional association that relates to the health service and has the same registration requirements nationally.

You are a registered nurse so you meet the definition of a recognised professional because a nurse must be registered under the relevant law in each state and territory. You are also trained in diabetes education.

Supplies generally accepted as appropriate treatment for the recipient

For the purposes of paragraph 38-10(1)(c), the recognised professional must provide the service listed in the Table, and the relevant profession would need to consider the service as being necessary for the appropriate treatment of the recipient of the supply.

Whether or not diabetes education is generally accepted as appropriate treatment for recipients by the nursing profession is a question of fact. A treatment is appropriate where the professional 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. Appropriate treatment includes the principles of preventative medicine.

We accept that this applies in your case.

Therefore, your diabetes education services provided to those patients not entitled to a Medicare benefit and who are not part of your arrangement with Entity A, will be GST free supplies of nursing services under subsection 38-10(1).

Question 3

Are you making GST-free supplies when you provide diabetes education services to patients under your arrangement with Entity A?

Medical services

In terms of subsection 38-7(1) and whether a Medicare benefit is payable for the first limb of the definition of ‘medical service’, you are contracted by Entity A to provide diabetes education services to the patients. Entity A is the recipient of your supply. Entity A cannot claim a Medicare benefit in its own right for the supply to it, because a Medicare benefit is only payable under the HIA to an individual (who may assign it to another party). In any event, the patient is not charged for your service so it is unlikely a Medicare benefit is payable.

Consequently your services to Entity A do not fall within the first limb of the definition of 'medical service' under section 195-1.

You do not meet the second limb of the definition of ‘medical service’ for the reasons explained under question two.

Therefore when you supply diabetes education to patients on behalf of Entity A, you are not making GST-free supplies of medical services under subsection 38-7(1).

Other health services

Paragraph 38-10(1)(c) requires that the supply must 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.

A supply can only constitute ‘treatment’ if it is made to the person requiring that treatment. Therefore, ‘treatment’ cannot, by its nature, be something that is supplied to a business entity.

Section 195-1 defines 'recipient' in relation to a supply to mean the entity to which the supply was made. Where there are only two parties involved, generally there is a single supply to which the GST Act applies. For example, where those two parties are a health professional and a patient, the recipient of the single supply is the patient.

Where there is a third party involved in a transaction, there may be more than one supply to which the GST Act applies. For example, the terms of an agreement between the health professional and a third party may result in the health professional making a supply to that third party which is not a GST-free health service.

In your case you have an Agreement with Entity A.

The Agreement creates a binding obligation on you to provide those services and Entity A is liable to provide payment. In these circumstances you are making supplies of professional services to Entity A when you provide the diabetes education services to the patients. The supplies of professional services to Entity A are business to business transactions. As a business entity cannot receive ‘treatment’, the supplies to Entity A are not for the ‘appropriate treatment of the recipient’ and paragraph 38-10(1)(c) is not met.

Consequently you are not making GST-free supplies under subsection 38-10(1).

No other GST-free provisions are relevant to your circumstances. Therefore under your arrangement, your supplies of professional services to Entity A are subject to GST.