Edited version of private advice

Authorisation Number: 1051555456240

Date of advice: 5 August 2019

Ruling

Subject: GST and Tax invoices

Question

How do I invoice the company to which I am contracted to perform services for GST purposes?

Answer

Under the terms of the agreement between yourself and the Company, you are making taxable supplies to the Company, of physiotherapy and acupuncture services. As such, you are required to charge GST when invoicing the Company for your services under the agreement between you and the Company.

A document you issue to the Company in respect of your services that meets the requirements of subsection 29-70(1) or (1A) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) will be a tax invoice in respect of your services.

Relevant facts and circumstances

You and the Company are registered for Goods and Services Tax (GST).

You and the Company signed an Independent Contractor Agreement (the Agreement) under which you agree to supply your services of physiotherapy and acupuncture (your Services) to the Company as detailed in the agreement. Such services you supply to the Company are acquired by the Company which are then supplied by the Company to patients.

Your relationship with the Company is set out as per clause X of the Agreement as follows:

Contractor's relationship with the Company

The relationship between the Contractor and the Company is that of principal and contractor. Nothing in this Agreement is to be construed as constituting the Contractor or any employee of the Contractor and the Company as partners. Nor shall this Agreement be construed as creating the relationship of employer and employee between the Contractor and the Company or between any employee or director of the Contractor and the Company.

As per the Agreement, the Company pays you a fee of X% of gross billings plus X% superannuation (the Fee) as stipulated in the clauses and schedule of the Agreement in consideration for your Services.

You have provided a copy of the Agreement to the ATO.

Your existing patients now attend the company's practice for their treatment.

The Company bills the patients using your provider number.

You are required to invoice the Company for your services in accordance with the billing clauses in the Agreement.

You have sought a private ruling on your question as you are unsure whether your supplies to the Company are subject to GST which would affect how they are reflected on invoices you issue to the Company.

You provided a sample tax invoice in which room rental was also listed as a separate supply to you from the Company. However in a conversation with you, you confirmed that there is no separate consideration that is payable by you in relation to the use of the Company's premises to practise, or any administrative services that may be supplied to you.

Additional information concerning potential supplies by the Company

The Company is not an applicant in this case and the question you have asked does not concern supplies that may be made by the Company. As such, the treatment of supplies that may be made by the Company is not within the scope of this private ruling.

With regard to the sample invoice you advised that the room rental component was mistakenly included as its inclusion was necessary under an arrangement you previously operated under. That previous arrangement was at one point in time subject to ATO audit and is an arrangement materially different to the current arrangement you are in with the Company.

Additionally, clause X of the Agreement concerns equipment and expenses. Relevantly, clause X stipulates that:

The Company may agree to provide the Contractor with tools and equipment required for the Contractor to carry out the Services. Any provision of tools and equipment will be taken into account when determining the Fee under this Agreement.

As understood, there is no separate consideration that is payable by you in relation to tools and equipment that may be supplied to you by the Company.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 - section 11-5

A New Tax System (Goods and Services Tax) Act 1999 - section 11-15

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

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

Reasons for Decision

These reasons for decision accompany the Notice of private ruling for you.

While these reasons are not part of the private ruling, we provide them to help you to understand how we reached our decision.

Section 9-40 of the GST Act establishes that the supplier is liable to remit GST on any taxable supplies made.

Section 9-5 of the GST Act states a taxable supply is a supply made by an entity:

·         for consideration,

·         in the course of the entity's enterprise,

·         connected with the Indirect Tax Zone, and

·         is registered or required to be registered for GST.

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

What needs to be determined in this case is the characterisation of the supplies that are being made, who makes those supplies and who is the recipient of the supplies.

The Company owns a medical practice and makes facilities available to you in which to practise. You operate as an independent contractor.

Medical service

Section 195-1 of the Act defines 'medical service' as:

(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.

In this case based on the facts provided the Company is supplying the service to the patient (as opposed to performing the service) and the Company is entitled to consideration for such service from the patient in their own name. This is evidenced by the fact that the billing of patients is done by the Company albeit using your provider number.

The supply of a 'medical service' for which Medicare benefit is payable by the Company to the patient will be GST-free where the requirements of section 38-7 of the GST Act are satisfied.

Therefore in light of the above the Company is supplying the service to the patient and is entitled to consideration from the patient for the performance of service. You are performing the service and supplying your professional services to the Company.

Under the second limb of the definition of 'medical service' under section 195-1 of the GST Act, a 'medical 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.

With regard to the supply by you to the Company in this case, the Company engages you for the acquisition of your services which the Company supplies to patients. There is an enforceable obligation between you and the Company and the Company is liable to provide consideration to you for your services.

The recipient of your professional services is the Company who is not the patient. The patient is understood to be the recipient of appropriate treatment accepted in the medical profession as opposed to the Company.

Therefore the supply you make to the Company is not of a medical service as defined in the Act. Accordingly it is not GST-free under section 38-7, and as a result is a taxable supply.

Accordingly you are required to issue a tax invoice to the Company for the agreed consideration (the Fee as defined in the Agreement).

This is supported by paragraphs 13 and 21 of Goods and Services Tax Ruling GSTR 2001/6 Goods and services tax: non-monetary consideration (GSTR 2001/6) when discussing 'value' and 'price' of taxable supplies per section 9-75.

13. The amount of GST on a taxable supply is 10% of the value of the taxable supply. Under subsection 9-75(1), the value of a taxable supply is the price x 10/11, where the price is the sum of:

(a)  so far as the consideration for the supply is consideration expressed as an amount of money - the amount (without any discount for the amount of GST (if any) payable on the supply); and

(b)  so far as the consideration is not consideration expressed as an amount of money - the GST inclusive market value of that consideration.

...

This is also reflected at paragraph 21 of GSTR 2001/6:

Value of a taxable supply

21. The amount of GST on a taxable supply is 10% of its value which is 10/11ths of the price of the taxable supply. Subsection 9-75(1) provides that the price is the sum of the monetary consideration and the non-monetary consideration. This is set out in the following table:

Amount of GST on taxable supply = 10% * Value

Value = 10/11 * Price

Price = [amount of monetary consideration + GST inclusive market value of non-monetary consideration]

You are required to remit the GST payable to the ATO in your Business Activity Statement (BAS).

The above GST treatment is consistent with the treatment of common working arrangements between doctors and surgeries discussed on the ATO's Health Industry Partnership - issues register which can be found on the ATO's website www.ato.gov.au (or alternatively can be accessed from the following weblink).

https://www.ato.gov.au/Business/GST/In-detail/GST-issues-registers/Health-Industry-Partnership---issues-register/?page=142

Additional discussion

Creditable acquisitions

As stated above, in the conversation with you confirmed that there is no separate consideration that is payable by you in relation to the use of the Company's premises to practise, or any administrative services that may be supplied to you. It is also understood that there is no separate consideration that is payable by you in relation to tools and equipment that may be supplied to you by the Company. As such you will not be entitled to input tax credits on such supplies that may be made to you by the Company as they will not be creditable acquisitions.