Edited version of private advice

Authorisation Number: 1052340050840

Date of advice: 9 December 2024

Ruling

Subject: GST and medical services

Question

Is the supply of specified services made by Entity A under an agreement (the Agreement) with Entity B GST-free under subsection 38-7(1) of the GST Act?

Answer

No. Supplies of specified services made by Entity A under the Agreement with Entity B are not GST-free under subsection 38-7(1) of the GST Act.

This ruling applies for the following period:

Four years from the date of issue

Relevant facts and circumstances

Entity A (you) is registered for goods and services tax.

You have entered into an agreement (the Agreement) with Entity B for the provision of specified services.

No Medicare benefit is payable for these specified services.

Entity A invoices Entity B who pays Entity B a fee for the specified services.

A copy of the Agreement entered into between Entity A and Entity B was provided.

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 subsection 38-7(1)

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

Reasons for decision

Under subsection 38-7(1) of the GST Act, the supply of a medical service is GST-free.

A medical service is defined in section 195-1 of the GST Act to mean:

•         a service for which Medicare benefit is payable under Part II of the Health Insurance Act 1973; or

•         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.

Since no Medicare benefit is payable in this scenario, the answer to this question turns on whether the second limb of the definition of medical service in section 195-1 of the GST Act is satisfied in relation to the reporting services supplied by Entity A to Entity B. The second limb of the definition provides that a medical service is:

• 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 second limb of the definition of medical service contains a number of elements. All of these elements must be satisfied before a service is a medical service or part of a medical service under the second limb.

One of the elements is that the service must be 'for the appropriate treatment of the recipient of the supply'.

Section 195-1 defines 'recipient' in relation to a supply to mean the entity to which the supply was made.

'Appropriate treatment' does not include supplies made to business entities since they do not encompass the concept of treatment.

Paragraph 155 of Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies confirms that under the GST health provisions in Subdivision 38-B of the GST Act, the supply is only GST-free where an individual receiving that service or specific health treatment is the recipient of that supply, subject to certain exceptions. Subsection 38-7(1) of the GST Act is not one of those exceptions. This means that a GST-free supply of a medical service cannot be made to a business entity.

Under the Agreement, Entity A agrees to provide specified services to Entity B. In return, Entity B will pay Entity A the fee.

The supply by Entity A to Entity B of the specified services is not 'appropriate treatment of the recipient of the supply' because the recipient of the supply is Entity B. The supply of specified services from Entity A to Entity B under the Agreement does not satisfy the second limb of the definition of a 'medical service' and, therefore, is not GST-free under subsection 38-7(1) of the GST Act.