GST issues registers

Issues in this register that are a public ruling can now be found in the Public Rulings section of this Legal Database.

Issues in this register that have not been labelled as public rulings, constitute written guidance. We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and meet your obligations.

If you follow our information on these issues and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we must still apply the law correctly. If that means you owe us money, we must ask you to pay it but we will not charge you a penalty. Also, if you acted reasonably and in good faith we will not charge you interest. If correcting the mistake means we owe you money, we will pay it to you. We will also pay you any interest you are entitled to.

If you feel that the guidance in this issues register does not fully cover your circumstances, or you are unsure how it applies to you, you can seek further assistance from us.

Jane is taken to her local GP who cleans and sutures her wound at the surgery.

The GP advises Jane not to use her hand for three days, and asks her to return to have the stitches removed after three days.

At this point, Jane has not advised her GP that the injury occurred at work. Jane pays the bill herself.

Medical service means:

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

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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.

'Appropriate treatment' is established where a medical practitioner (in this case, the GP) assesses a patient'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 patient, and will include subsequent supplies for the assessed process.

Goods supplied in the course of supplying a GST-free medical service and made at the premises where the medical service is supplied, are GST-free.

In this case the sutures are goods supplied by the GP in the course of supplying the medical service to Jane, and are GST-free.

The medical certificate is part of the supply of the medical service and is GST-free.

Jane's hand has become infected. Her GP decides an x-ray is required to see if there are foreign objects in the wound.

Jane tells her GP that the injury took place at work and advises the GP that her employer's Workers' Compensation Insurer (WCI) is ABC Insurance (ABC).

Her GP sends an invoice to ABC for the consultation.

The service of examining Jane's hand and coming up with appropriate treatment options is a GST-free medical service.

The supply of the medical service by the GP will be GST-free irrespective of whether Jane or ABC is invoiced.

There is a supply to both Jane and ABC:

In some cases, health service providers will have arrangements with third parties, such as insurers. These arrangements may require the GP to get approval from the insurer before they treat a patient. A pre-existing arrangement dictates how all parties must act for the treatment of individuals covered by insurance policies.

Depending on the arrangements, the GP may make supplies to both ABC and Jane.

The GP will be making a supply to ABC where, pursuant to an agreement between ABC and the GP, there is a binding obligation on the GP to provide medical services to the patient (in this case, Jane).

In the absence of a binding obligation, there may still be a supply by the GP to ABC where the factors listed in paragraph 221B of GSTR 2006/9 are present.

Where the payment comes from an insurer to settle a claim under an insurance policy, the supply to the insurer will be GST-free because the underlying supply of medical services to the patient is GST-free.

The service of examining Jane's hand and coming up with appropriate treatment options is a GST-free medical service.

As the supply of the underlying medical service to Jane is GST-free, the supply of the service to ABC of making that supply to Jane will also be GST-free.

The GP and ABC may agree not to treat the supply as GST-free. For example, where there is a combination of GST-free and taxable supplies and determining the amounts for each is complex, it may be administratively easier for the parties to agree to not treat any of the supplies as GST-free.

Where a supply is also made to ABC, the supply will be GST-free as the underlying supply to Jane is GST-free.

As discussed in 2.1, where the supply is to ABC, the GP and ABC may choose not to treat it as GST-free.

The GP spends three minutes completing the claim form and hands the workcover claim form to Jane. The GP does not separately invoice ABC for the preparation of the workcover claim form, and merely increases their normal consultation fee by $3 for preparing the form.

Where the GP provides actual treatment to a patient and also prepares a workcover claim form during a consultation for a single fee, the GP will need to determine whether they have made a mixed supply or a composite supply.

A mixed supply is a supply consisting of at least one taxable and one non-taxable part, each of which is separately identifiable. A part of a supply will be recognised as separately identifiable if it is not integral, ancillary or incidental to another part of the supply.

A composite supply is a supply with one identifiable/recognisable part, but also includes another supply that is not recognised in its own right - it is integral, ancillary or incidental to the dominant part of the supply.

Part of a supply may be considered integral, ancillary or incidental where it:

(a)

is necessary or it contributes to the supply as a whole, but cannot be identified as the dominant part of the supply

(b)

contributes to the proper performance of the contract to supply the dominant part

(c)

does not constitute for customers an aim in itself, but is a means of better enjoying the dominant thing supplied, and/or

(d)

takes up a marginal proportion of the total value of the package compared to the dominant part.

Preparation of a workcover claim form does not satisfy (a) - (c). Accordingly, for a supply of a workcover claim form to be integral, ancillary or incidental, it must satisfy (d) and take up a marginal proportion of the total value of the total supply.

Further, the ATO accepts that the GP may treat a supply of a workcover claim form as integral, ancillary or incidental to a supply of a consultation, if the consideration for it does not exceed the lesser of:

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$3.00, or

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20% of the consideration for the total supply.

For example, when the GP provides treatment and also prepares a workcover claim form for a single fee and that fee is not increased by more than $3.00 for the workcover claim form, the supply of the workcover claim form is integral, ancillary or incidental to the supply of treatment.

However, where the GP charges more than $3.00 more than the GP's normal consultation fee, and neither to consultation nor the workcover claim form is integral, ancillary or incidental to the supply of the other, the GP must apportion the fee charged between the provision of treatment and the preparation of the workcover claim form.

The method of apportionment will need to be on a reasonable basis. A reasonable basis will be one which does not favour either the GST-free part, or the taxable part over the other part of the supply. Each case will need to be determined on its own merits. One reasonable basis may be:

(Time per activity / Total time of all activities) X total fee charged

The GP will be liable to remit 1/11th of the proportion of the fee allocated to the preparation of the report to the ATO.

GST public ruling GSTR 2001/8 provides assistance on apportioning the consideration for a supply that includes taxable and non-taxable parts.

The supply is only to Jane and no supply to ABC:

The x-ray service required as part of Jane's ongoing treatment satisfies the definition of a medical service and is GST-free. This applies irrespective of whether Jane or ABC is invoiced.

There is a supply to both Jane and ABC:

As the underlying supply of x-rays to Jane, required as part of her ongoing treatment, is a GST-free medical service, the supply to ABC is also GST-free to the same extent.

As discussed at 2.1, where a supply is made to ABC, the radiologist and ABC can agree not to treat it as GST-free.

If the x-rays were not part of Jane's ongoing treatment, for example, for cosmetic treatment, or as part of litigation proceedings, they would be taxable.

To determine the GST status of the x-rays, the radiologists will need to ascertain whether the x-rays are required for cosmetic treatment or as part of litigation proceedings. In some cases, it may be reasonable for the radiologists to contact the referring GP. Whatever method the radiologist uses to determine the GST status of his/her supply, it must be reasonable.

Note: The AMA suggests that medical practitioners who commonly refer patients to a radiologist could, by agreement, indicate the purpose of the x-ray on the referral form.

As discussed in 2.1, where the supply is to ABC, the radiologist and ABC may choose not to treat it as GST-free.

If the radiologist had charged ABC for supplying the report, the supply would have been taxable, because it is a direct and separate supply from the radiologist to ABC and it is not part of Jane's treatment.

The GP advises Jane that a foreign object remains in the wound and that day surgery is required.

The GP sends an invoice to ABC for the consultation.

Where a supply is also made to ABC, the supply will be GST-free as the underlying supply to Jane is GST-free.

As discussed in 2.1, where the supply is to ABC, the GP and ABC may choose not to treat it as GST-free.

Where a supply is also made to ABC, the supply will be GST-free as the underlying supply to Jane is GST-free.

As discussed in 2.1, where the supply is to ABC, the GP and ABC may choose not to treat it as GST-free.

The supply of the treating doctor's workcover report is taxable.

Please note: Supplies made by the hospital; supplies made to the hospital; and supplies made under section 38-20 are beyond the scope of this case study.

Where a supply is also made to ABC, the supply will be GST-free as the underlying supply to Jane is GST-free.

However, where a supply is made to ABC, the surgeon and ABC can agree not to treat that supply as GST-free.

The surgeon is satisfied with the results of the surgery and advises Jane to see her GP in a week.

The surgeon sends an invoice to ABC for the consultation.

Where a supply is also made to ABC, the supply will be GST-free as the underlying supply to Jane is GST-free.

As discussed in 2.1, where the supply is to ABC, the surgeon and ABC may choose not to treat it as GST-free.

Where a supply is also made to ABC, the supply will be GST-free as the underlying supply to Jane is GST-free.

As discussed in 2.1, where the supply is to ABC, the surgeon and ABC may choose not to treat it as GST-free.

No fee is charged for the copy of the op/analysis treatment report/letter.

If the surgeon had charged ABC for supplying the report, the supply would have been taxable, because it is a direct and separate supply between the surgeon and ABC. The provision of the report to ABC is not part of Jane's treatment.

During the consultation her GP telephones her surgeon to discuss treatments for Jane's hand.

The GP and surgeon agree that Jane requires physiotherapy, and that her GP should oversee all future treatments.

The GP invoices ABC for the consultation. The consultation fee is more than the usual consultation fee because the GP has also invoiced for the time spent speaking to the surgeon.

Where a supply is also made to ABC, the supply will be GST-free as the underlying supply to Jane is GST-free.

As discussed in 2.1, where the supply is to ABC, the GP and ABC may choose not to treat it as GST-free.

Telephone consultations between practitioners to discuss a mutual patient's condition and their medical history with a view to determining the most appropriate treatment will be GST-free if the telephone consultation is for 'appropriate treatment'.

Where a supply is also made to ABC, the supply will be GST-free as the underlying supply to Jane is GST-free.

As discussed in 2.1, where the supply is to ABC, the GP and ABC may choose not to treat it as GST-free.

ABC decides to engage an independent specialist of their choice to examine Jane's hand. Jane agrees to attend a medical examination with the independent specialist. After examining Jane's hand, the independent specialist decides that they require an x-ray of Jane's hand to enable them to make their report to ABC.

The independent specialist sends an invoice to ABC for the medical examination.

This is because, ABC has:

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requested the medical examination

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liability to pay for the medical examination

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provided instructions about what is required, and

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entered into a contractual relationship with the independent specialist to examine Jane, for ABC.

The supply of the medical examination is taxable.

The x-rays are being supplied to help the independent specialist report to ABC. (Refer to Issue 3.1)

The supply of the x-rays is taxable.

Supply of the treating doctor's report/letter is taxable.

They agree that Jane should be fit for light duties after a final physiotherapy visit and examination by her GP.

The GP and physio both invoice ABC for attending the case review consultation.

It is not for the appropriate treatment of Jane.

The case review conference is to enable ABC to assess whether Jane's treatment to date has been adequate; and to determine what further treatment is required, if any, before Jane can return to work.

As the primary reason for the conference is to assess whether ABC has met its past obligations and to ascertain any future obligations, the supply of the case review conference is taxable.

Where a supply is also made to ABC, the supply will be GST-free as the underlying supply to Jane is GST-free.

As discussed in 2.1, where the supply is to ABC, the GP and ABC may choose not to treat it as GST-free.

The GP issues an account to ABC for the consultation and completion of the report.

The report is taxable because it is not integral to the appropriate treatment of Jane.

Where there is one combined fee for both the treatment and report preparation and neither dominates the supply of the other, the GP must apportion the fee between the GST-free and taxable parts of the supply. (Refer to Issue 2.3)