Edited version of private advice

Authorisation Number: 5010081609854

Date of advice: 14 January 2022

Ruling

Subject: GST - orthoptist services

Question

Are Orthoptists services to patients (not covered by Medicare) GST-free under subdivision 38-B of the GST Act? And if not, are Optometrist treatment services supervising Orthoptists GST-free?

All further legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) unless stated otherwise

Summary

Question

No, Orthoptist services supplied on its own is not GST-free. Yes, services provided by an Optometrist will be GST-free provided the requirements under subdivision 38-B of the GST Act are satisfied.

This ruling applies for the following periods:

xxxx xxxx to xx xx xxxx

xx xx xxxx to xx xx xxxx

The scheme commences on:

xx xx xxxx

Relevant facts and circumstances

You are currently registered for GST and have been since xx xx xxxx.

You carry on an enterprise in the Health Care and Social assistance industry.

You stated xx xx xxxx you provide Optometry, Orthoptist and Optical dispensing services.

Your Orthoptists are registered with Allied Health Professions Australia (AHPA) and the board of Orthoptics.

You also stated xx xx xxxx you are looking to hire an Optometrist who will be required to be registered with the board of Optometry.

You provide GST-free supplies for Orthoptist eye therapy through the NDIS under section 38-38 of the GST Act.

You also carry out treatment outside of Medicare funded services.

On xx xx you requested a private ruling to determine whether the treatments provided by Orthoptist and Optometrists were GST-Free.

Relevant legislative provisions

New Tax System (Goods and Services Tax) Act 1999 - Section 38

New Tax System (Goods and Services Tax) Act 1999 - Section 9-5

New Tax System (Goods and Services Tax) Act 1999 - Section 40

Reasons for decision

Under subsection 7-1(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), GST is payable on taxable supplies and taxable importations.

Section 9-40 of the GST Act provides that an entity must pay the GST payable on any taxable supply that it makes.

An entity makes a taxable supply where it satisfies the requirements of section 9-5 of the GST Act which 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.

(* denotes a term that is defined in section 195-1 of the GST Act).

A supply made for consideration in the course of the enterprise that an entity carries on will be taxable if it is connected with Australia and the entity is registered for GST.

There are no provisions in the GST Act that would make the supply of treatment services input taxed. Therefore, it remains to be determined whether the supply is GST-free.

Subdivision 38-B of the GST Act provides that certain goods and services relating to health are GST-free.

Of relevance to the issue in this case are sections 38-7 and 38-10 of the GST Act.

Subsection 38-7(1) of the GST Act

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

Section 195-1 of the GST Act defines a 'medical service' 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. Any service that falls within either the first or second limb of the definition is GST-free.

First limb

A service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973, is GST-free under the first limb of the definition. Not all services result in the payment of a Medicare benefit.

You have stated the vision therapy services are not of a kind for which a Medicare benefit is payable, therefore the service for which a Medicare benefit is not payable must be addressed under the second limb of the definition.

For the first limb, it should be noted that unlike the second limb, the supply does not have to be made by a 'medical practitioner' or 'approved pathology practitioner' as defined in section 195-1 of the GST Act.

'Medical practitioner' is defined in section 195-1 of the GST Act to mean a person who is a medical practitioner for the purposes of the Health Insurance Act 1973.

'Approved pathology practitioner' is defined in section 195-1 of the GST Act to mean a person who is an approved pathology practitioner for the purposes of the Health Insurance Act 1973.

An Optometrist is a medical practitioner for the purposes of the Health Insurance Act 1973.

Second limb

The second limb of the definition of 'medical service' contains a number of elements. All of these elements must be satisfied before a service will be a medical service under this limb.

The first element is that the service must be supplied by or on behalf of a medical practitioner or an approved pathology practitioner as defined.

The second element is that the service supplied must be generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

Meaning of 'service supplied by or on behalf of a medical practitioner or an approved pathology practitioner'

The phrase 'on behalf of' for the purposes of the definition of 'medical service' means the performance of a component of the service provided by a practitioner that is not necessarily supervised by that practitioner. An example is where a laboratory technician assists in undertaking pathology testing of specimens.

However, 'on behalf of' does not include a service performed on referral by another person as such a service is not a component of the supply being provided by the first practitioner. The service being provided by the second person will be a separate supply, the GST status of which must be examined by reference to the supply by that person.

Meaning of 'generally accepted in the medical profession as being necessary for the appropriate treatment'

The above requires interpretation as to what is meant by 'generally accepted' and 'appropriate treatment'.

'Appropriate treatment' will be established where the practitioner assesses the recipient's state of health and determines a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of the recipient and will include subsequent supplies for the assessed process. It includes the principles of preventative medicine.

In addition, the definition requires that the treatment must be generally accepted in the medical profession as being necessary. The particular service being provided by the medical practitioner or approved pathology practitioner and the circumstances in which it is provided must be generally accepted by the medical profession. The words 'generally accepted in the medical profession' indicate that it will ultimately be the medical profession that determines what services will be generally accepted.

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.

Subsection 38-7(2) of the GST Act

Under subsection 38-7(2) of the GST Act, a supply of a medical service is not GST-free under subsection 38-7(1) of the GST Act if:

(a)    it is a supply of a *professional service rendered in prescribed circumstances within the meaning of regulation 14 of the Health Insurance Regulations made under the Health Insurance Act 1973 (other than the prescribed circumstances set out in regulations 14(2)(ea), (f) and (g); or

(b)    it is rendered for cosmetic reasons and is not a *professional service for which medicare benefit is payable under Part II of the Health Insurance Act 1973.

Section 38-10 of the GST Act

Section 38-10 of the GST Act provides that the supply of other health services is GST-free where certain requirements are satisfied.

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.

Each of the above paragraphs is discussed in detail below.

Meaning of 'service of a kind specified in the table'

Paragraph 38-10(1)(a) of the GST Act requires that the service supplied is one of the actual services listed in the table below and not just something similar to one of the services. Support for this argument is found in the table where both audiology and audiometry are listed at item 3. If it were intended that it was sufficient that the supply of a service be similar to one mentioned in the table, one of these terms would be superfluous.

Orthoptics is a service not listed in the table and therefore is not GST-free. Optometry is a service of a kind specified in the table above.

Meaning of 'the supplier is a recognised professional'

Paragraph 38-10(1)(b) of the GST Act requires that the supplier of the service of the kind specified in the table be a 'recognised professional'.

Section 195-1 of the GST Act defines 'recognised professional' as follows:

A person is a recognised professional, in relation to the supply of a service of a kind specified in the table in subsection 38-10(1), if:

(a) the service is supplied in a State or Territory in which the person has permission or approval, or is registered, under a *State law or a *Territory law prohibiting the supply of services of that kind without such permission, approval or registration; or

(b) the service is supplied in a State or Territory in which there is no State law or Territory law requiring such permission, approval or registration, and the person is a member of a professional association that has uniform national registration requirements relating to the supply of services of that kind; or

(c) in the case of services covered by item 3 in the table - the service is supplied by an accredited service provider within the meaning of section 4 of the Hearing Services Administration Act 1997.

In relation to paragraph (a) above, many State and Territory laws regulate the registration of persons for the services listed in the table above. It is considered that the word 'prohibiting' includes a law that regulates the holding out of the provision of certain services. Such restrictions will be sufficient for the purposes of paragraph (a) of the definition of 'recognised professional' and to constitute an act 'prohibiting the supply'.

In relation to paragraph (b) above, the ATO considers that a member of a professional association would normally need to meet specified admission criteria and:

•      have access to a range of published materials such as journals, newsletters or technical updates

•      be allowed to take part in making decisions that affect their profession such as those that are designed to promote, encourage and develop the profession

•      have the right to vote at meetings of the association, and

•      have the right to be recognised as being a member of that professional association.

Where a person other than the recognised professional provides a service which is a component of a specified supply, that component will not be GST-free unless that person is also a recognised professional, or that component is directly supervised by the recognised professional or it is GST-free under another provision. It is considered that a person will be directly supervised where the recognised professional:

•      attends the patient at the commencement of the treatment and at the subsequent commencement of each new treatment

•      is readily available for the whole of the time that the assistant is working with the patient

•      is available to take appropriate action in the case of an emergency

•      determines all of the appropriate treatment to be provided by the assisting person, and

•      can satisfactorily prove that they monitor the services of the unqualified staff.

Meaning of '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'

The third requirement is that the service must be generally accepted in the professions associated with supplying services of that kind as being necessary for the appropriate treatment of the recipient of the supply.

'Appropriate treatment' is not defined in the GST Act. For the purposes of subsection 38-10(1) of the GST Act, it is considered that 'appropriate treatment' will be established where the recognised professional assesses the recipient's state of health and determines a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of that recipient insofar as that recognised professional's particular area of training allows and will include subsequent supplies for the determined process.

'Appropriate treatment' which includes the principles of preventative medicine must be generally accepted in the profession associated with supplying services of that kind as being necessary. It will not include supplies undertaken for a third party that does not encompass treatment (see discussion above under heading subsection 38-7(1) of the GST Act).

Consequently, only services that satisfy the requirements of sections 38-7 or 38-10 of the GST Act, as discussed above, will be GST-free.