Edited version of private advice

Authorisation Number: 1051599590738

Date of advice: 25 October 2019

Ruling

Subject: GST and treatment

Question

Are you making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when you supply treatment to the Treatment centres?

Answer

Yes, you are making a taxable supply under section 9-5 of the GST Act, when you supply treatment to the Treatment centres.

Relevant facts and circumstances

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

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 subsection 38-60(3)

A New Tax System (Goods and Services Tax) Act 1999 section 38-50

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-20(3)

Reasons for decision

Under section 9-5 of the GST Act, you make a taxable supply if:

·        you make the supply for consideration

·        the supply is made in the course or furtherance of an enterprise that you carry on

·        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.

In this case, there is a supply of the treatment being made to the Treatment centres, for consideration as per the agreement. This supply is made in the course of your enterprise in Australia and you are registered for GST. Therefore, you are making a taxable supply under section 9-5 of the treatment unless it is determined your supply is GST-free in accordance with Subdivision 38-B of the GST Act.

Subsection 38-60(3)

Most of the provisions in Subdivision 38-B of the GST Act only determine that supplies are GST-free when supplied to the end user (in this case the patient). However, subsection 38-60(3) of the GST Act is one exception to this.

Subsection 38-60(3) of the GST Act provides that if:

a)     a supply is a supply of a service to an Treatment centres, and

b)     the service is the supplier making one or more other supplies of goods or services to an individual, and

c)     at least one of the other supplies is wholly or partly GST-free under this Subdivision;

Then the first mentioned supply is GST-free to the extent that the other supplies mentioned in paragraph (b) are GST-free under this subdivision.

Therefore, it would be necessary to determine if there is a supply from you to the patient that would be GST-free under this subdivision. If that were the case, the supply from you to the Treatment centres would also be GST-free.

Paragraph 156D of Goods and Services Tax Ruling GSTR 2006/9 provides:

156D Where an entity makes a supply to an individual and that supply is either wholly or partly GST-free under Subdivision 38-B (the underlying supply), a supply of the service of making the underlying supply by the entity to an Australia government agency is GST-free under subsection 38-60(3) to the same extent as the underlying supply.

Therefore, this requires you to make a supply to the patient. For example paragraphs 176E to 176H of GSTR 2006/9 illustrate how this can operate:

176E A, an Treatment centres, implements a program to fund supplies of hearing aids to individuals who satisfy specified criteria. As part of the program, A forms an agreement with B, an audiologist, for B to supply hearing aids to eligible individuals, for which A is liable to pay. A and B have not entered into an agreement to treat supplies B makes to A as not being GST-free.

176F C, an eligible individual, attends an appointment with B on 1 March 2013 and receives a hearing aid. B then notifies A that they have made a supply of the hearing aid to C. A pays B in accordance with the pre-existing agreement.

176G Under the agreement, B supplies the hearing aid to C while also supplying a service to A (being the service of making the supply to C).

176H The supply of the hearing aid by B to C is GST-free under subsection 38-45(1). The supply of the service B makes to A is GST-free under subsection 38-60(3).

Agreement between you and the Treatment centres and is not an agreement to make supplies of GST-free services to the patient as is the case in the example above. As such, subsection 38-60(3) of the GST Act does not apply.

Section 38-50

Section 38-50 of the GST Act does not apply in these circumstances. This is because section 38-50 of the GST Act only applies to the end supply to the patient (subsection 38-50(7) of the GST Act). Additionally, subsection 38-50(6) of the GST Act (which would be the most relevant) refers to drugs and medicinal preparations that have been subject to an approval under paragraph 19(1)(a) of the TGA or are supplied under an authority under subsection 19(5) of the TGA or is authorised by rules under subsection 19(7A) of the TGA or is exempted from the operation of Part 3 of the TGA.

Subsection 38-20(3)

A supply of goods is GST-free under subsection 38-20(3) of the GST Act, if it is a supply that is directly related to a supply of hospital treatment that is:

·        GST-free because of subsection 38-20(1) of the GST Act (supply of hospital treatment), and

·        supplied by, or on behalf of, the supplier of the hospital treatment.

Paragraph 29 of Goods and Services Tax Determination GSTD 2012/4 provides 'a supply of goods is GST-free under subsection 38-20(3) of the GST Act if it is a supply that is directly related to a supply of hospital treatment that is GST-free under subsection 38-20(1) of the GST Act and is supplied by, or on behalf of, the supplier of the hospital treatment.' Therefore, paragraph 38-20(3)(b) of the GST Act is read as referring to the 'goods' being supplied by, or on behalf of, the supplier of the hospital treatment.

The change in definition of hospital treatment to now be the definition provided by the Private Health Insurance Act (PHI Act) rather than subsection 67(4) of the National Health Act 1953 means that the definition of hospital treatment now includes goods used to manage a disease, injury or condition. As such, many of the goods supplied will be GST-free under subsection 38-20(1) of the GST Act.

You do not make the supply of the treatment as part of hospital treatment and you are not supplying it to the patient on behalf of the Treatment centres. As such, subsection 38-20(3) does not apply.

We do not consider that the treatment provided by you to the Treatment centres is GST-free under any other provisions in Subdivision 38-B of the GST Act. We have given consideration to subsections 38-7(1) and (3) and subsection 38-45(1) of the GST Act and don't consider these apply in this case.

As such, it is considered you are making a taxable supply under section 9-5 of the GST Act, to the Treatment centres. You are required to remit 1/11 of the value of the supply to the Tax Office.

Note: if the Treatment centres is registered or required to be registered for GST, they are entitled to input tax credits to 1/11 of the value of the acquisition provided they hold a valid tax invoice.