Edited version of private advice

Authorisation Number: 1051867500742

Date of advice: 14 July 2021

Ruling

Subject: GST and occupational therapy services

Question

Is the supply of the Entity A's services, pursuant to the agreement with a health services provider, GST-free under subsection 38-10(1) or section 38-38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No. The supplies of Entity A's services pursuant to the agreement are not GST-free under subsection 38-10(1) or section 38-38 of the GST Act.

Relevant facts and circumstances

Entity A (you) is a sole trader who provides occupational therapy services. You are registered with the Australian Health Practitioner Regulation Agency (Ahpra) as an occupational therapist. You are not currently registered for GST.

You recently entered into an Agreement with Entity B, a health services provider. A copy of the Agreement was provided.

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 38-10(1)

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

Reasons for decision

Summary

Supplies of Entity A's services under the Agreement with Entity B are not GST-free. This is because the recipient of the supply of Entity A's services under the Agreement is Entity B, rather than the individual clients. Where you are registered, or required to be registered, for GST the supplies of your services under the Agreement are taxable.

Detailed reasoning

GST is payable on a taxable supply. You make a taxable supply under section 9-5 of theGST Act if:

(a) you make the supply for consideration; and

(b) the supply is made in the course of an enterprise that you carry on; and

(c) the supply is connected with Australia; and

(d) 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.

There are no provisions in the GST Act that make the supply of occupational therapy services input taxed. However, supplies of various health services are GST-free under Subdivision 38-B of the GST Act where certain conditions are met.

GST-free other health services

A supply of a health service is GST-free when it satisfies all the requirements in subsection 38-10(1) of the GST Act.

The requirements of subsection 38-10(1) of the GST Act are that:

(a) the service is listed in the table in this subsection, or in the GST regulations; and

(b) the supplier is a recognised professional in relation to the supply of services of that kind; and

(c) the supply would generally be accepted in the health profession associated with supplying services of that kind as being necessary for the appropriate treatment of the recipient of the supply.

Occupational therapy is listed at item 11 in the table in subsection 38-10(1) of the GST Act, meaning that paragraph 38-10(1)(a) of the GST Act is satisfied.

An occupational therapist who is registered with the Ahpra as an occupational therapist will meet the requirements for being a recognised professional in occupational therapy for the purposes of paragraph 38-10(1)(b).

Paragraph 38-10(1)(c) requires that the supply of the health service be generally accepted in the relevant health profession as being necessary for the appropriate treatment of the recipient of the supply.

Under the GST health provisions in Subdivision 38-B of the GST Act, including subsection 38-10(1), generally a supply is only GST-free where an individual receiving the health service is the recipient of the supply. Paragraph 155 of Goods and Services Tax RulingGSTR 2006/9 Goods and services tax: supplies explains that this outcome results from the specific wording in some health provisions, whilst in other provisions it is due to the nature of the services themselves.

The recipient of the supply is whoever engages the health practitioner to provide the service. In many cases, this will be patient. However, in some cases, it will be a business. Supplies of services by a health practitioner to another business are not GST-free unless you are contracting with an insurer, an operator of a statutory compensation scheme, a compulsory third party scheme operator or an Australian Government agency and the other requirements of section 38-60 of the GST Act are met. From the information provided, section 38-60 of the GST Act does not apply in this situation.

In a simple two-party transaction, it is usually easy to identify the recipient of the supply. However, in more complex arrangements involving more than two entities (known as tripartite arrangements), it is less straightforward to identify the recipient of the supply, the supplier and what is being supplied. There will be different GST outcomes depending on who is contracting who.

Proposition 11 in GSTR 2006/9 explains that the agreement is the logical starting point when working out the entity making the supply and the recipient of that supply (see paragraphs 119 to 122).

Proposition 13 in GSTR 2006/9 explains that one type of tripartite arrangement is where one entity, entity A, has an agreement with another entity, entity B, for B to provide a supply to entity C. Under this arrangement there is a supply made by B to A (contractual flow) that B provides to C (actual flow). This concept of supply and provide is illustrated in paragraph 118 of GSTR 2006/9 and, in a health context, at examples 4 and 5 at paragraphs 157 to 164.

The terms of the Agreement show that Entity A is engaged by Entity B to provide occupational services to clients of Entity B for a fee.

That is, the recipient of Entity A's supply of services under the Agreement is Entity B (contractual flow) which are provided to individual clients of Entity B (actual flow). Therefore, supplies of Entity A's services under the Agreement with Entity B are taxable where you are registered, or required to be registered, for GST.

GST-free NDIS supports

Many supplies of supports to NDIS participants are GST-free provided all of the following requirements of section 38-38 of the GST Act are satisfied:

•         the NDIS participant has a NDIS plan in effect;

•         the supply is of reasonable and necessary supports that are specified in the statement of supports in the participant's NDIS plan;

•         there is a written agreement between you and the NDIS participant (or another person); and

•         it is a supply of a kind outlined in the A New Tax system (Goods and Services Tax) (GST-free Supply - National Disability Insurance Scheme Supports) Determination 2021.

Under the Agreement, Entity A is providing services to clients of Entity B, some of whom may be NDIS participants. Since you are engaged by Entity B under the Agreement, the recipient of your supplies is Entity B. This means that even though you may be providing occupational therapy services to NDIS participants, you are not the supplier of those services to the NDIS participants. Rather, Entity B is the supplier to the NDIS participants and accordingly section 38-38 of the GST Act does not apply to your supplies under the Agreement. This is so even if you had a written agreement between you and the NDIS participant because under the Agreement, you are merely providing the services to clients of Entity B on their behalf.