Edited version of private advice

Authorisation Number: 1052280401452

Date of advice: 9 August 2024

Ruling

Subject: GST and supply of therapy

Question

Are you making a GST-free supply when you supply the new therapy to patients?

Answer

No, you are not making a GST-free supply when you supply the new therapy to patients.

Relevant facts and circumstances

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

You are introducing a new therapy to patients and athletes may use it to improve their breathing and stamina.

This therapy is recognised globally but it is still a new treatment in Australia and it has no Medicare benefit payable for it as yet.

As the first treatment centre in Australia, you had sought Medicare recognition and coverage of the new therapy. You aim to provide this therapy as a GST-free service but, in the meantime, while the application process is ongoing, you will treat your supply of it as a taxable supply.

You advised that it is difficult to answer whether your supply of the new therapy is generally accepted as appropriate treatment for a patient because you are the first and only centre in Australia.

You are making appointments with medical and/or other health professionals to inform them of the availability of the new therapy. You expect that they will refer patients to you even though you do not have any written agreement with any of them and they will not be compensated for any referrals they make to you.

You will be communicating with them on the patient's progress and you expect the patients themselves to update their relevant medical practitioners and/or health professionals on their progress.

All your patients will need to have referrals from their respective medical and/or health practitioner.

You will bill the patients and they will pay you directly for the therapy which may take up to 35 sessions to complete.

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 195

Reasons for decision

All legislative references in this ruling are to the A New Tax System (Goods and Services Tax) Act 1999) (GST Act), unless otherwise stated.

Section 9-5 provides that you make a taxable supply if:

(a)  you make the supply for consideration

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

(c)   the supply is connected with the indirect tax zone, 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.

Based on the information you provided, your supply of the New therapy will satisfy paragraphs 9-5(a) to 9-5(d) when you make the supply of the therapy for consideration, in the course of your enterprise, the supply is connected with Australia and you are registered for GST.

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

Your supply of the new therapy is not input taxed under any provisions of the GST Act or any other Act. Therefore, we need to consider whether the supply of the new therapy is GST-free.

Division 38 provides that certain supplies relating to health are GST-free. In your case, the relevant provisions to examine are section 38-7 and section 38-10.

Medical services

Section 38-7 provides that a supply of a medical service is GST-free. The term medical service is defined in section 195-1 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 supply of a medical service that falls within either the first or the second limb of the definition in section 195-1 is GST-free. The first limb requires that the supply is one for which the specified Medicare benefit is payable. The second limb addresses services for which a Medicare benefit is not payable.

You advised that a Medicare benefit is not payable for your supply of the new therapy. As no Medicare benefit is payable for your supply, the first limb in paragraph (a) of the definition of a medical service in section 195-1 is not met and the services must be considered under the second limb in paragraph (b) of the definition of a medical service in section 195-1.

Only those services supplied by or on behalf of a medical practitioner or approved pathology practitioner will qualify as a medical service under the second limb in paragraph (b) of the definition of a medical service in section 195-1.

The phrase on behalf ofdoes not include a service performed as a result of referral by a medical practitioner or approved pathology practitioner. A service performed as a result of referral by another person, is not a component of the supply being provided by the first practitioner. It is a separate service, the GST status of which must be considered independently.

Our website further provides that a service is performed on behalf of a medical professional if the following conditions are met:

•         it is billed in the name of the medical professional, and they accept full responsibility for the service.

•         it is part of the service the medical professional provides.

•         the medical professional is involved in at least part of the particular service.

Example: GST-free service performed on behalf of a medical professional

Dr Jones, a medical practitioner, employs Angela, a nurse. Angela bandages Dr Jones's patient as part of the treatment. Because Angela performs the bandaging on behalf of Dr Jones, the bandaging is also GST-free.

For a supply of the new therapy to be GST-free, it would have to be provided by a medical practitioner or approved pathology practitioner or be directly supervised by one of these practitioners (referring someone is not a direct supervision). Additionally, the service would have to be generally accepted in the medical professions as being appropriate treatment for the recipient of the supply.

In this case, you advised that you provide the new therapy to your patients referred to you by medical and/or other health professionals and you bill the patients directly. As such, your supply of the new therapy is not provided by or on behalf of a medical practitioner or approved pathology practitioner. In addition, as being the first and only provider in Australia, you stated that it is difficult to confirm that your supply of new therapy is generally accepted in the medical professions as being appropriate treatment of the recipient of the supply. Therefore, second limb in paragraph (b) of the definition of a medical service in section 195-1 is not satisfied.

As your supply of the new therapy does not satisfy the definition of a medical service, it is determined that the supply is not GST-free under section 38-7.

Other health services

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

The first requirement in paragraph 38-10(1)(a) is that you must supply one of the services listed in the table above. Nursing and pharmacy are both listed in the relevant table as Items 10 and 15 respectively.

The second requirement in paragraph 38-10(1)(b) is that the supplier must be a recognised professional in relation to the supply of the listed services, that is, the listed service must be performed by a recognised professional of the listed service.

Section 195-1 provides that a recognised professional, in relation to the supply of services of that kind is a person who:

•         is registered, permitted or approved under state or territory law to supply the listed health service, or

•         if there is no relevant state or territory law, is a member of a professional association that has uniform national registration requirements relating to the supply of the health service.

The third requirement in paragraph 38-10(1)(c) is that the listed service supplied is generally accepted in that health profession associated with supplying services of that kind as being necessary for the appropriate treatment of the recipient of the supply.

As the first and only provider of the new therapy in Australia, it is difficult to confirm that it is generally accepted as appropriate treatment for the recipient of the supply. Therefore, your supply of the New therapy does not satisfy all three requirements in subsection 38-10(1).

As your supply of the new therapy does not satisfy all the requirements of subsection 38-10(1), it is determined that the supply is not GST-free under section 38-10.

Conclusion

As it is determined that your supply of new therapy to your patients is not GST-free under either section 38-7 or section 38-10, your supply of the new therapy is a taxable supply because all the requirements under section 9-5 are satisfied.