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Edited version of private advice
Authorisation Number: 1051532047465
Date of advice: 19 June 2019
Ruling
Subject: GST and management services
Question 1
Are you making a taxable supply, pursuant to section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when you provide management services to the various specified medical professionals (the Clinicians) who operate from your clinic/practice?
Answer
Yes, you are making a taxable in providing the management services and accordingly, GST is payable by you on your supply.
Question 2
Where you enter into an agreement (Agreement) with the various Clinicians to provide them with management services, will the specified services provided by the Clinicians to their clients be taxable supplies pursuant to section 9-5 of the GST Act?
Answer
We are unable to provide you with specific advice about how the GST Act applies in relation to the GST liability of another entity, due to privacy of information.
Relevant facts and circumstances
You operate a specified clinic/practice. You are registered for GST, effective from a specified date.
You have entered into the Agreement with a number of clinicians (specified clinicians) for them to operate at your clinic.
· All the Clinicians who are delivering the specified services hold current registration with the specified regulatory body in Australia.
· The Clinicians provide specified services and other specified services.
· The Clinicians are operating as independent practitioners treating their own clients (that is, the clients are not your clients).
· The Clinicians are not contracted to provide professional services to you in a principal/contractor relationship. That is, the Clinicians provide their specified services directly to their own clients.
· Some of the Clinicians are registered for GST; some are not.
You provide management services to the Clinicians. The Agreement provides for the management service package which includes:
· State of the art consulting rooms for the Clinicians to deliver their services to their clients.
· Provision of practice management software that allows effective management of patients and the required billing.
· Management of related expenses to maintain the business premises, including paying the cost of all bills such as rental, electricity and registration for running the specified practice.
· Conducting significant business development to increase the overall number of referrals for the Clinicians.
· Managing client communications, for example: arranging appointment for clients, receiving phone calls from clients, advising the clients of the referral pathways, triaging referrals and etcetera.
· Invoicing (on behalf of the Clinicians) third parties.The clients are not charged. It is the third party that is charged.
· Conducting the required tasks of maintaining and keeping premises in a presentable state.
In return for your management services, you charge the Clinicians a management fee of a specified % of the total amount receivable by the Clinicians, which involves the following steps:
(i) When you receive the Clinicians' receivable charges (for example: consultation fees receivable by the Clinicians), the amount received are banked into your bank account.
(ii) You would retain a specified % of the Clinicians' fees collected as payment for the management fee you charge them for your management services. This amount retained by you is in place of your invoicing them for your management services provided. This would ensure you receive the management fee upfront.
(iii) After deducting the management fee, you would then release the remaining balance of a specified % of the amount received to the Clinicians.
(iv) In cases where specified parties pay the full fee to you, you retain the specified % for your management fees and then release the remaining balance of the specified % to the Clinicians.
Relevant legislative provisions
The A New Tax System (Goods and services Tax) Act 1999 section 9-5
The A New Tax System (Goods and services Tax) Act 1999 Division 38
The A New Tax System (Goods and services Tax) Act 1999 Division 40
Reasons for Decision
Question 1
Section 9-5 states that an entity makes a taxable supply if all of the requirements specified below are satisfied:
(a) the entity makes thesupplyfor consideration; and
(b) thesupply is made in the course or furtherance of anenterprise that the entity carries on; and
(c) thesupply isconnected with the indirect tax zone (Australia); and
(d) theentity is registered, orrequired to be, registered for GST.
However, thesupplyis not ataxable supplyto the extent that it isGST-freeorinput taxed.
You are carrying on an enterprise of providing management services in Australia for a management fee and you are registered for GST. Accordingly, your supply of management services satisfies all of the conditions specified in paragraphs 9-5 (a), (b), (c) and (d).
Further, Divisions 38 and 40 do not apply to make your supply of management services GST-free or input taxed.
Therefore, your supply of management services to the Clinicians is a taxable supply pursuant to section 9-5 and GST is payable on the supply.
Question 2
We are unable to provide you with specific advice on how the GST Act applies in relation to the GST liability of another entity, due to privacy of information.