Edited version of your written advice

Authorisation Number: 1051439376723

Date of advice: 1 November 2018

Ruling

Subject: GST on fees for counselling services and counsellor’s reports

Question 1

As a qualified counsellor providing counselling services and counsellor’s reports, are you required to be registered for goods and services tax (GST)?

Answer

Yes, when you meet the registration turnover threshold of $75,000 you will be required to be registered for GST.

Question 2

Are the counselling services and counsellor’s reports that you provide GST-free?

Answer

No, your supplies of counselling services and counsellor’s reports are not GST-free. Your supplies are taxable supplies and are subject to GST.

Question 3

If your supplies are subject to GST, who is liable for that GST?

Answer

As the supplier of taxable counselling services and counsellor’s reports, you are liable for the GST. You must remit to the Australian Taxation Office (ATO) 1/11^th of the price of all taxable supplies you make once you meet the registration turnover threshold of $75,000.

Period to which the ruling will apply

This ruling applies from 1 November 20XX.

Relevant facts and circumstances

You are a qualified counselling therapist and recognised professional counsellor.

You are engaged in private practice, providing counselling services and counsellor’s reports to individual clients.

You are not a registered psychologist or social worker.

A medicare benefit is not payable for the reports or services you provide.

Your GST turnover is less than $75,000 and you are currently not registered for GST.

Your projected GST turnover is expected to exceed $75,000 at some point in the future.

You and a third party have not entered into a separate written agreement that stipulates contractual arrangements to supply counselling services and counsellor’s reports.

You receive client referrals from a number of sources.

A third party pays your fees for the counselling services and counsellor’s reports you provide to your clients.

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 9-15(2)

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

A New Tax System (Goods and Services Tax) Act 1999 section 9-70

A New Tax System (Goods and Services Tax) Act 1999 section 9-75

A New Tax System (Goods and Services Tax) Act 1999 section 23-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 23-15(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 section 188-10

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

A New Tax System (Goods and Services Tax) Regulations 1999 regulation 23-15.01

Reasons for decision

Question 1

Are you required to be registered for GST?

Under section 23-5, you are required to be registered for GST if you are carrying on an enterprise and your GST turnover meets the registration turnover threshold. Subsection 23-15(1) and regulation 23-15.01 of the A New Tax System (Goods and Services Tax) Regulations 1999 (GST Regulations) provide that if you are a non-profit body, your registration turnover threshold is $75,000.

Section 188-10 provides that you have a GST turnover that meets the registration turnover threshold if your projected GST turnover is at or above that threshold, or your current GST turnover is at or above the registration turnover threshold and the Commissioner is not satisfied that your projected GST turnover is below that threshold.

Your current GST turnover is the sum of supplies made, or likely to be made, in the current month and the previous eleven months less excluded supplies. Your projected GST turnover is the sum of supplies made, or likely to be made, in the current month and the next eleven months less excluded supplies.

Supplies that are excluded in calculating your current and projected GST turnovers are supplies that are:

● input taxed

● for no consideration

● not made in the course of your enterprise, or

● not connected with the indirect tax zone.

You are not currently registered for GST. You carry on an enterprise in Australia (indirect tax zone) of providing counselling services and counsellor’s reports for consideration. There are no provisions of the GST Act under which these supplies are input taxed. Therefore, once you reach the registration turnover threshold you will be required to register for GST.

Question 2

Are your supplies GST-free?

Who is the recipient of your supplies?

To determine the GST treatment of an arrangement, the first step is to identify the supplies and the relevant supplier and recipient of those supplies.

In complex arrangements that involve more than two entities, which the Commissioner refers to as tripartite arrangements, analysis may reveal:

● a supply made to one entity but provided to another entity

● two or more supplies made, or

● a supply made and provided to one entity and consideration paid by a third party.

Subsection 9-15(2) provides that consideration does not have to come from the recipient of the supply.

Proposition 14 of Goods and Services Tax Ruling GSTR 2006/9 (GSTR 2006/9) describes a tripartite arrangement where a third party may merely pay for a supply but not be the recipient of that supply.

Paragraph 183 of GSTR 2006/9 states that an entity is a third party payer if it provides or is liable to provide consideration for a supply but that entity is not the recipient of the supply.

To determine the nature of an arrangement, regard needs to be had to the true character of the arrangement entered into and all of the surrounding circumstances, including any written documentation.

An examination of the documents and surrounding circumstances indicate there is no binding obligation for you to provide the counselling services and counsellor’s reports. Your clients are referred by lawyers and from other sources. While a client may be referred to you, you are not contractually obliged to treat them. That is, you cannot be compelled to treat a particular client.

Therefore, based on the facts provided your clients are considered to be the recipients of your supplies of counselling services and counsellor’s reports and the third party is merely a third party payer for those services supplied to your clients.

Additional information

While the entity which provides the consideration makes no difference to the GST liability of the supplier, there are clear ramifications for the recipient of the supply in determining whether they have made a creditable acquisition and therefore can claim a GST credit.

As a third party payer, an entity does not make a creditable acquisition in relation to its payment because the supply is not made to that entity (as required by section 11-5). Making a payment for a supply made to another entity is not sufficient to make the payer the recipient of that supply.

Taxable supplies

Subsection 7-1(1) provides that GST is payable on taxable supplies. Under section 9-5 you make a taxable supply if:

● you make the supply for consideration

● the supply is made in the course of carrying on an enterprise

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

● 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.

As your supplies of counselling services and counsellor’s reports are made for consideration in the course of carrying on your enterprise in Australia and are not input taxed, once you are registered, or required to be registered for GST, the supplies will meet the requirements of section 9-5, unless they are GST-free.

The relevant GST-free provisions are discussed below. There are no other provisions of the GST Act under which your supplies of counselling services and counsellor’s reports may be GST-free.

Other health services

Under subsection 38-10(1), a supply is GST-free if all of the following are satisfied:

(a) it is a service of a kind specified in the table in this section, or of a kind specified in the GST Regulations

(b) the supplier is a recognised professional in relation to the supply of the service 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.

To qualify as a service of a kind specified in the table in subsection 38-10(1) (the Table), the service must be the provision of one of the actual services listed and not just similar to one of those services. The list must be strictly interpreted as the actual service listed in the Table and not something similar to one of the services. If the list is not required to be strictly interpreted, there is no necessity, for example, to include audiometry alongside audiology under item 3 in the Table. Thus, we interpret the Table in this section strictly, based only on the items listed.

In this case you are providing counselling services and counsellor’s reports (refer below for the GST status of the reports you provide). Counselling services are not listed in the Table in subsection 38-10(1) and there is currently no GST Regulation made in respect of subsection 38-10(1). Therefore, the supply of counselling services, in itself, does not satisfy the requirement in paragraph 38-10(1)(a).

Consequently, as a counsellor, the counselling services you provide will be taxable supplies under section 9-5 and not GST-free. The ATO has no discretionary power in this regard.

Additional information

In other circumstances you may have an agreement, or there may be a pre-existing arrangement, with an organisation or a government agency to provide a supply of counselling services to a client. Even if the terms of the arrangement are such that it is found that you are making a supply of counselling services to that entity, with the underlying supply being provided to the client, this will not change the GST status of the supply. The supply of counselling services will still be a taxable supply because counselling services is not a listed service in the Table in subsection 38-10(1).

Counsellor’s Reports

A medical report that a medical practitioner supplies is only GST-free where a Medicare benefit is payable for it. For example, if a doctor supplies a report to a third party (such as an insurance company or solicitor acting in a personal injury case), the service is not for the treatment of a patient (pursuant to paragraph 38-10(1)(c)) and the report is taxable.

This applies whether the medical practitioner provides the report to the patient, or directly or indirectly to the third party.

Medicare benefits are not payable for the counsellor’s reports that you provide. As the provision of reports is not considered ‘treatment’, the supplies of the reports are not GST-free.

Question 3

Who is liable for the GST?

Section 9-40 states that you must pay GST on any taxable supplies that you make. The GST amount is 10% of the value of the taxable supply, or 1/11th of the price of the supply, as provided at sections 9-70 and 9-75.

As detailed above, once you meet the registration turnover threshold for GST you are required by law to be registered for GST. At that time, you are required to remit 1/11^th of the price of all taxable supplies you make as GST to the ATO.