Edited version of private advice

Authorisation Number: 1052039897457

Date of advice: 3 October 2022

Ruling

Subject: GST and health services

Question

Is the supply by Entity A (you) to Entity B of podiatry services under the Agreement subject to GST?

Answer

The supply of your services to Entity B is subject to GST.

This ruling applies for the following period:

1 October 20XX till quarter ending 31 December 20XX

The scheme commences on:

1 September 20XX

Relevant facts and circumstances

You carry on an enterprise of providing podiatry services to clients.

You are registered for GST.

You and Entity B entered into the Agreement under which you provide podiatry services to clients (Client) of Entity B.

The Agreement lists the podiatry services which you provide and identifies the "Gross service charge" payable per hour/unit.

You receive payment (the Service Fee) for your services from Entity B.

The Agreement states that Entity B is not liable for payment for services provided by you to the Client in excess of those indicated in the schedule or service request, unless prior written authorisation has been provided.

You do not have any agreement with the Client (i.e. the Client of Entity C) to provide any services and the Client is not liable to pay you for the services.

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 38-30

Reasons for decision

Section 9-5 of the GST Act provides that you will make a taxable supply where the following requirements are met:

(a) you make a supply for consideration, and

(b) the supply is made in the course or furtherance of an enterprise you carry on, and

(c) the supply is connected with the indirect tax zone (Australia) and

(d) you are registered or required to be registered for GST

However, a supply is not a taxable supply where it is either input taxed or GST-free

In this case the supply of your services satisfies the four requirements listed above. Further the supply is not considered input taxed, therefore what remains to be determined is whether your services are considered GST-free.

Relevant in this case is whether the supply of services falls within either the provisions of:

•         a medical service (section 38-7 of the GST Act)

•         other health services (section 38-10 of the GST Act)

•         Residential care etc (section 38-25 of the GST Act)

•         Home care etc. (section 38-85 of the GST Act)

•         Disability support provided to NDIS participants (38-38 of the GST Act).

Generally, to meet the requirements of each of the above listed provisions the contractual recipient of the supply must be the individual who receives the services. If you are contracting with another entity to deliver the services on behalf of that other entity, a supply to the entity is generally not GST-free. This is discussed in Goods and Services Tax Ruling, GSTR 2006/9: Supplies (GSTR 2006/9) which states:

Certain supplies of health services

155. Under the GST health provisions in Subdivision 38-B, subject to certain exceptions^51A, the supply is only GST-free where an individual receiving that service or specific health treatment is the recipient of that supply. 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. Where this requirement is imposed, a GST-free supply of a health service cannot be made to a business entity or a non-profit body

^51A See sections 38-45, 38-47, 38-55 and 38-60.

This is also demonstrated in Example 7 in GSTR 2006/9 which states:

Example 7: community care

171. A, a community care provider, receives Health and Community Care funding to provide home and maintenance services to people living at home, who are frail and have a moderate or severe disability. A sets the fees for its services according to the care recipient's ability to pay.

172. C, a client of A, is the care recipient. C is assessed by A as being entitled to receive a lawn-mowing service every fortnight at the subsidised rate of $10. There is a contractual relationship between A and C for the supply of the lawn-mowing service at the subsidised rate of $10.

173. A engages B, an independent contractor, to provide the lawn mowing service to C. A agrees to pay B $44 for its service. B is not the recipient of funding under the Home and Community Care Act 1985.

174. C is required to pay A $10 for the service, but A directs C to pay the amount to B on A's behalf. A then pays B the balance of $34.

175. There is no contractual relationship between B and C.

176. B is making a supply of the lawn-mowing service (S1) for $44 to A but providing that service to C.^51G A is also making a supply of a lawn mowing service (S2). A's supply is to C at the subsidised rate of $10.⁴⁴

^51GThe supply B makes to A is not GST-free under section 38-60. If A is an Australian government agency, the supply will not be GST-free under subsection 38-60(3) as the supply B provides to C (that is, the lawn mowing service) is not GST-free under Subdivision 38-B.

⁴⁴ The $10 payment made by C is for a GST-free supply under subsection 38-30(2).

Consistent with the example above, under the terms of the Agreement the supply of your services is made to Entity B. As such, the supply of your services is not considered to be GST-free.

Consequently, your services to Entity B are taxable supplies and are subject to GST.