Edited version of private advice

Authorisation Number: 1052164359659

Date of advice: 4 September 2023

Ruling

Subject: GST - other health services

Question

Is XXXX (You) making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) where you provide Services to XXXX (Principal) under the contract date XXXX (Contract)?

Answer

Yes. As you satisfy the requirement of 9-5 of the GST Act, you are making a taxable supply of Services to the Principal and your Services will include GST.

This ruling applies for the following periods:

1 July 2022 to 30 June 2023

1 July 2023 to 30 June 2024

1 July 2024 to 30 June 2025

The scheme commenced on:

5 August 2023

Relevant facts and circumstances

You have an ABN and are registered for GST effective 1 January 2022.

You are a qualified psychologist.

An Independent Contract Agreement (Contract) was executed on XXXX between the Principal and You. In the Contract you are identified as an independent contractor (Contractor).

Clause 3 of the Contract titled 'Provision of Services As An Independent Contractor' at clause 3.1 states:

The Contractor shall provide the Services from the relevant Premises to the Principal in accordance with the terms of this Agreement. The contractor shall provide the Services to the Principal as an independent contractor to the standards and satisfaction of the Principal and in the manner, frequency, quantity and times provided by this Agreement or as agreed with by the Principal, and in accordance with all Applicable Legislation.

Services is a defined term in the Contract and is set out in Schedule 1 of the Contract (Schedule 1). Schedule 1 provides the meaning of Services as the performance of work by the Contractor to assist in the delivery of the following services to the Clinic:

a)            Provision of psychological services to Clients of the Clinic, this includes and is not limited to consultations, reports and assessments.

In Schedule 1 of the Contract the 'Clinic' is identified as XXXX (operated by the Principal).

Under Clause 7.1 of the Contract provides that all payments by Clients who are provided the Services by the Contractor will be paid directly to the Principal.

Clause 7.2 of the Contract provides that subject to proper performance of the services by the Contractor, the Principal will pay the Contractor the Service Fee and Referral Fee (if any) each week during the Term on the date nominated by the Principal.

Pursuant to the definition of Service Fee in Schedule 1, you receive 60% of the gross weekly receipts collected by the Clinic and generated by you for performing consultation Services to Clients.

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 38-10.

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

Reasons for decision

Section 9-5 of the GST Act states:

You make a taxable supply if:

(a) you make the supply for consideration; and

(b) the supply is made in the course or furtherance 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.

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

The supply of psychology services would not be considered input taxed under Division 40 of the GST Act. They may however be considered GST-free under section 38-10 of the GST Act as a supply of 'Other Health Services'.

Other Health Services

Subsection 38-10(1) of the GST Act states:

1)            A supply 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 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.[emphasis added]

(defined terms in section 195-1 of the GST Act are bolded).

For services to be GST-free they must meet all the requirements as set out in subsection 38-10(1) of the GST Act.

Listed health services

For a health service that is not defined as a medical service to be GST-free, it must be one of the following:

•                     an Aboriginal or Torres Strait Islander health service

•                     psychology

Psychology is a listed service and therefore would satisfy the first limb of requirements under section 38-10 of the GST Act.

Recognised health professionals

A recognised health professional is a person who is registered, permitted, or approved under state or territory law to provide the listed health service.

If there is no relevant state or territory law, a recognised professional is a member of a professional association that:

•                     relates to the listed health service

•                     has the same registration requirements nationally.

As you are a qualified psychologist and are a recognised health professional you meet the second limb of subsection 38-10(1) of the GST Act.

Meaning of 'the recipient of the supply'

Section 195-1 of the GST Act defines 'recipient' in relation to a supply to mean the entity to which the supply is made. As such, the supply of a health service will only be GST-free where the individual receiving that service or specific health treatment is the recipient of that supply. This means that a GST-free supply of a health service cannot be made to a business entity.

In some circumstances, the 'recipient of the supply' is not the patient of the practitioner but is a third party such as an employer. 'Appropriate treatment' will not include supplies undertaken for a third party that does not encompass the concept of treatment.

For example, an insurance company is a third party who may be the actual recipient of the supply where an assessment of a person is made for insurance purposes. There is no actual treatment involved and such a supply will be taxable.

Identifying the recipient of a supply is a question of fact which must be determined on a case-by-case basis.

In this case you are providing Services to the Principal as an independent contractor in accordance with the Contract between the parties. Therefore, the Principal is the recipient of your supply of Services and you are not providing any Health treatment to the Principal.

You do not meet the third limb of subsection 38-10(1) of the GST Act, thus the supplies you make to the Principal are not GST-free and are taxable if all the requirements of section 9-5 of the GST Act are met.

Arrangements between clinics and health practitioners

Some health practitioners enter into arrangements with clinics for providing health services to patients. The health practitioner will perform the health services and the health clinic provides the rooms and administration. The health practitioner and the clinic may agree to split the patient fees between them.

There will be different GST outcomes depending on who is contracting who. This can only be determined by the contract entered into between the parties and contracts should clearly state who is contracting who so both parties are aware of the GST outcomes.

If the clinic contracts the health practitioner to provide services to the health clinic's patient:

•                     the supply by the health practitioner to the clinic will not usually be GST-free except in specific situations

•                     the supply of the health practitioner's services by the clinic to the patient will be GST-free if the requirements of medical services or other health services are satisfied.

If the health practitioner contracts the clinic to provide rooms and administration services to the health practitioner:

•                     the supply of the rooms and administration services by the clinic to the health practitioner are not GST-free

•                     the supply by the health practitioner to the patient will be GST-free if the requirements of medical services or other health services are satisfied.

Given that you are contracted by the Principal to provide your psychology services (Services), the first example above is relevant to your situation. Your Services are being provided to the Principal rather than the patient and therefore you do not satisfy the requirements of making a GST-free supply.

Consequently, as you meet the requirement for a taxable supply you are required to include GST in your invoices to the Principal for the Services you provide as an independent contractor.