Edited version of private advice

Authorisation Number: 1051933871394

Date of advice: 17 December 2021

Ruling

Subject: GST free supply - exercise physiology services

Question

Are the Exercise Physiology services supplied by X Pty Ltd a GST free supply under Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer

No, the supply of Exercise Physiology services supplied by you are not a GST-free supply under subsection 38-10(1) of the GST Act.

However, if a medicare benefit is payable, that supply is GST-free under subsection 38-7(1) of the GST Act.

The scheme commences on:

23 November 20XX

Relevant facts and circumstances

X are registered for GST.

X are carrying on an enterprise of Exercise Physiology, providing services to clients mostly on site.

X do not offer services to the public at large and are not a gym or personal training facility.

A proportion of your clients are under the National Disability Insurance Scheme (NDIS) funding along with a significant amount paying you directly.

You employ Exercise Physiologists who are registered Medicare Providers and belong to the professional association Exercise & Sports Science Australia (ESSA).

Your clients receive Medicare benefits on some occasions.

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 38-7

A New Tax System (Goods and Services Tax) Act 1999 Section 38-10

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

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

Reasons for decision

Division 38 of the GST Act provides that certain supplies relating to health are GST-free.

Subsection 38-7(1) of the GST Act provides that a supply of a medical service is GST-free. The term medical service is defined in section 195-1 of the GST Act to mean:

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.

The definition of a medical service has two limbs. The second limb requires the suppliers to be medical practitioners or approved pathology practitioners which your providers are not, therefore, we won't be discussing the second limb.

The first limb merely requires that the supply is one for which the specified medicare benefit is payable.

In your case, when clients are referred by medical doctors to seek your services and medicare benefits are payable, your supply of the exercise physiology services are GST-free under subsection 38-7(1) of the GST Act. This is regardless of whether the clients have to pay a gap payment for the services. However, if you provide five exercise physiology services to a client that have a Medicare benefit payable and the sixth service does not, then the sixth service is not GST-free under subsection 38-7(1) of the GST Act.

Subsection 38-10(1) of the GST Act provides that a supply of health services is GST-free if:

a)    it is a service of a kind specified in the table in this subsection or of a kind specified in the A New Tax System (Goods and Services Tax Regulations 2019 (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 profession associated with supplying services of that kind, as being necessary for the appropriate treatment of the recipient of the supply.

All of the three requirements in subsection 38-10(1) of the GST Act must be satisfied for a supply of health services to be GST-free under that subsection.

Exercise physiology is not listed in the table in subsection 38-10(1) of the GST Act. However, as you stated in your submission, physiotherapy is listed at Item 17.

Whilst you make reference to exercise physiology services being similar to physiotherapy services, they are considered to be different allied health services. It is acknowledged that exercise physiology is an allied health service, albeit one that is not listed in the table in subsection 38-10(1) of the GST Act.

Additionally, to be considered a recognised professional in relation to physiotherapy, the allied health provider would have to have permission or approval or be registered under a State or Territory law prohibiting the supply of physiotherapy services without such permission, approval or registration. If there is no such law then the providers would have to be members of a professional association that has uniform national registration requirements in relation to the supply of physiotherapy services. The appropriate association is the Physiotherapy Board of Australia.

As such, you are not making GST-free supplies under subsection 38-10(1) of the GST Act.

For completeness we have also considered section 38-38 of the GST Act which is about disability support provided to NDIS participants. Not all supports funded by NDIS are GST-free and this includes where exercise physiology is funded unless it is provided within a residential care facility and all the other requirements of section 38-38 of the GST Act are satisfied.

In conclusion, exercise physiology services where a Medicare benefit is payable for the service is GST-free under Division 38 of the GST Act. However, all other exercise physiology services you provide is a taxable supply under section 9-5 of the GST Act.