Edited version of private advice

Authorisation Number: 1052322659194

Date of advice: 29 October 2024

Ruling

Subject: GST and other health services

Question 1

Is your supply of an medical treatment a GST-free supply under subsection 38-10(1) of the A New Tax System (Goods and Services Tax) Act (GST Act)?

Answer 1

Yes, your supply of an medical treatment is a GST-free supply of a medical service under subsection 38-10(1) of the GST Act.

Question 2

Is your supply of the medical product a GST-free supply of a good under subsection 38-10(3) of the GST Act?

Answer 2

Yes, the medical products are GST-free under subsection 38-10(3) of the GST Act when provided to a patient at the medical clinic at the same point in time as the GST-free medical service.

No, the medical products are not GST-free under subsection 38-10(3) of the GST Act when they are sent directly to a patient as they are not provided in the course of supplying a GST-free medical service. Therefore, the medical products that are sent directly to a patient are taxable.

Question 3

Is your supply of the medical products a GST-free supply of a good under subsection 38-10(3) of the GST Act?

Answer 3

No, the medical products are not GST-free under subsection 38-10(3) of the GST Act when they are sent directly to a patient as they are not provided in the course of supplying a GST-free medical service. Therefore, the medical products that are sent directly to a patient are taxable.

Yes, the medial products are GST-free are subsection 38-10(3) of the GST Act when provided to a patient at the medical clinic at the same point in time as the GST-free medical service.

Question 4

Is your supply of the medicines a GST-free supply of a good under subsection 38-10(3) of the GST Act?

Answer 4

No, your supply of the medicines is not GST-free under subsection 38-10(3) of the GST Act as the medicine is not made in the course of supplying a GST-free medical service.

This ruling applies for the following period:

XX XXX 20XX to XX XXX 20XX

Relevant facts and circumstances

You are registered for GST

You provide medical treatment.

A Medicare benefit is not payable for your goods or services.

You engage health professional as contractors to provide medical services to your patients. You provided a sample contract which outlined the relationship between you and the contracted health professionals. You pay the health professionals an agreed fee for providing these services.

The contracted health professionals are registered, permitted, or approved under a State or Territory law to provide medical services.

You manufacture medical products to provide to your patients, which are customised and manipulated for the exclusive treatment of an illness or disability of your patient.

The health providers are sent to a contracted medical professional's practice and are generally provided to a patient at the same time and place as the medical service. However, you may send the medical products directly to the patient.

You manufacture custom removable medical products which are used to prevent the patient's treatment from reverting back after the medical treatment.

The medical product is posted directly to the patient. However, in some cases, the medical product may be provided at the same time and place as the medical service.

You provide a medicine which is used by the patient at home throughout their treatment.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-10(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-10(3)

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

Reasons for decision

Question 1

Is your supply of the medical product treatment a GST-free supply under subsection 38-10(1) of the GST Act?

Detailed reasoning

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

(a) it is a service of a kind specified in the table in the section, 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 be generally 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 of the above requirements must be satisfied for your supply of the medical treatment to be GST-free under subsection 38-10(1) of the GST Act.

Service of a kind specified in the table

You engage health professionals as contractors to provide various services to your patient's as part of your medical treatment.

The supply of these services is considered to be a medical service. A 'XXX' service is listed at Item X in the table in subsection 38-10(1) of the GST Act.

Therefore, paragraph 38-10(1)(a) of the GST Act is satisfied.

Recognised professional

A recognised health professional includes a person who must be registered, permitted, or approved under a State or Territory law to provide the listed health service.[1]

You engage registered health professionals to provide medical services to your patients as contractors. These health professionals are recognised professionals in relation to supplying medical services.

Goods and Services Tax Industry Issues Health Industry Partnership Issue 2.a.11 Recognised professionals (Issue 2.a.11) explains that the requirement that the supplier of other health services be a recognised professional is taken to be a requirement that the person who actually performs the other health service must be a recognised professional in relation to supplying services of that kind.[2]

That is, paragraph 38-10(1)(b) of the GST Act focuses on the professional status of the person performing the other health service and requires that the person performing the other health service be a recognised professional in relation to supplying services of the kind specified in the table under subsection 38-10(1) of the GST Act.[3]

Therefore, paragraph 38-10(1)(b) of the GST Act is satisfied as the health professionals performing the services are recognised professionals.

Appropriate treatment

To satisfy the requirement under paragraph 38-10(1)(c) of the GST Act, the service must generally be accepted in the profession associated with supplying services of that kind (in this case, the medical profession) as being necessary for the appropriate treatment of the recipient of the supply.

For the third requirement to be satisfied, a health professional is supplying appropriate treatment when they use their professional skills to:[4]

•                     assess a patient's health;

•                     work out a course of action to preserve, restore or improve the patient's physical or psychological wellbeing, as far as the practitioner's training allows; and

•                     supply a treatment that is generally accepted by their profession as being appropriate for the patient.

Your services are generally accepted in the profession as an appropriate treatment.

As the treatment is performed by contracted health professionals, we need to determine who the supply is made by and whether the recipient is the patient.

Recipient of the supply

Under subdivision 38-B of the GST Act, certain supplies are only GST-free if the individual receiving the service is the recipient of that supply. This is due to the specific wording of some of these provisions. For the purposes of the subsection 38-10(1) of the GST Act, this is because paragraph 38-10(1)(c) of the GST Act provides that the supply must be 'necessary for the appropriate treatment of the recipient of the supply'.[5] This means that if the recipient of the supply is not the person receiving the appropriate treatment (such as another business entity) paragraph 38-10(1)(c) of the GST Act cannot be satisfied.

You engage health professionals as contractors to provide the medical services to your patients. In a two-party transaction, it is usually easy to identify the recipient of the supply. However, in more complex arrangements involving more than two parties (known as tripartite arrangements), it is less straightforward to identify the recipient of the supply, the supplier and what is being supplied.

Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies (GSTR 2006/9) examines the meaning of 'supply' under the GST Act, including how to analyse tripartite arrangements.

Proposition 11 from paragraphs 119 to 122 of 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 when dealing with tripartite arrangements. 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).

We consider that you are making a supply to the patients where the services are performed by health professionals as your contractors.

Therefore, paragraph 38-10(1)(c) of the GST Act is satisfied.

Conclusion

As all three of the requirements under subsection 38-10(1) of the GST Act are satisfied, you are making a GST-free supply of a medical service when providing the medical treatment to your patients.

Question 2

Is your supply of the medical product a GST-free supply of a good under subsection 38-10(3) of the GST Act?

Detailed reasoning

Subsection 38-10(3) of the GST Act states:

A supply of goods is GST-free if:

(a) it is made to a person in the course of supplying to the person a service the supply of which GST-free under subsection (1) ...; and

(b) it is made at the premises at which the service is supplied.

The phrase 'in the course of supplying' has been interpreted to require that the goods are supplied at the same point in time at which the GST-free health service is supplied and that the goods have either been:[6]

(a) customised or manipulated for the exclusive treatment of the illness or disability of the particular patient who is the recipient of the GST-free other health service; or

(b) necessarily utilised as an integral part of the patient's treatment, required immediately during that specific attendance.

All of the medical products are customised for the exclusive treatment of the patient's illness or disability. Generally, the medical products are sent to a health professional's practice to be provided during a service.

However, in some circumstances, the medical products are sent directly to the patient and are not provided at the same time and place as the medical service.

Conclusion

As the medical products are customised or manipulated for the exclusive treatment of the patient's illness or disability, your supply of the medical product is GST-free under subsection 38-10(3) of the GST Act when they are provided to the patient at the same time and place as the GST-free medical service.

However, when the medical products are not provided at the same time and place as the medical service and are sent directly to the patient, the supply is not GST-free under subsection 38-10(3) of the GST Act. Therefore, the medical products that are sent directly to your patients are taxable.

Question 3

Is your supply of the medical products a GST-free supply of a good under subsection 38-10(3) of the GST Act?

Detailed reasoning

Per the reasons discussed under question 2 above, your supply of the medical products will be GST-free under subsection 38-10(3) of the GST Act if the medical products are:

•                     made to an individual in the course of supplying to the person a GST-free medical service and

•                     made at the premises at which the medical service is supplied.

Relevantly, we need to consider whether the medical products are supplied at the same point in time at which the GST-free medical service is supplied and whether the goods have either been:[7]

•                     customised or manipulated for the for the exclusive treatment of the illness or disability of the particular patient who is the recipient of the GST-free medical service; or

•                     necessarily utilised as an integral part of the patient's treatment required immediately during that specific attendance.

While the medical products are customised for the exclusive treatment of your patient's illness or disability, they are generally sent directly to the patient and not provided at the same time and place as a GST-free medical service.

However, in some circumstances, the medical products are provided to the patient at the same time and place as the GST-free medical.

Conclusion

Although the medical products are customised or manipulated for the exclusive treatment of your patient's illness or disability, as the medical products are sent directly to the patient, they are not provided at the same time and place as the GST-free medical service. Accordingly, the medical products are not GST-free under subsection 38-10(3) of the GST Act because they are not made in the course of supplying to the person a GST-free medical service and are not made at the premises at which the GST-free medical service is supplied. Therefore, the medical products that are sent directly to your patient are taxable.

However, when the medical products are issued at the same time and place as the GST-free medical service, your supply of the medical products is GST-free under subsection 38-10(3) of the GST Act.

Question 4

Is your supply of the medicine a GST-free supply of a good under subsection 38-10(3) of the GST Act?

Detailed Reasons

Per the reasons discussed under question 2 above, your supply of the medicine will be GST-free under subsection 38-10(3) of the GST Act if it is:

•                     made to an individual in the course of supplying to the person a GST-free medical service and

•                     made at the premises at which the medical service is supplied.

Relevantly, we need to consider whether the medicine is supplied at the same point in time at which the GST-free medical service is supplied and whether the medicine has either been:[8]

•                     customised or manipulated for the for the exclusive treatment of the illness or disability of the particular patient who is the recipient of the GST-free medical service; or

•                     necessarily utilised as an integral part of the patient's treatment required immediately during that specific attendance.

The medicine is issued to the patient at the same point in time as the GST-free medical service, it is not customised or manipulated for the exclusive treatment of the illness or disability of the particular patient.

Goods are necessarily utilised as an integral part of the patient's treatment required immediately during that specific consultation when the goods are necessarily supplied by that supplier as an integral part of the performance of that service for immediate treatment and not for ongoing or later treatment.

The medicine is given to the patient to use at home over a certain period of time and is not used as an integral part of the patient's treatment and is not required immediately during that specific consultation.

Conclusion

The medicine has not been customised or manipulated for the exclusive treatment of the patient and is not utilised as an integral part of the treatment that is required immediately in the specific attendance.

Therefore, the supply of the medicine does not satisfy subsection 38-10(3) of the GST Act and is taxable.

[1] See the defintion of 'recognised health professional' under section 195-1 of the GST Act.

[2] See paragraph 2 of Issue 2.a.11.

[3] See paragraph 3 of Issue 2.a.11.

[4] See paragraphs 10 and 11 of Goods and Services Tax Industry Issues Health Industry Partnership Issue 2.a Section 38-10 Other health services.

[5] (emphasis added).

[6] See Goods and Services Tax Industry Issues Health Industry Partnership Issue 2.b Goods supplied 'in the course of supplying' a GST-free 'other health service' (Issue 2.b).

[7] See Issue 2.b.

[8] See Issue 2.b.