Private ruling: GST and Psychological services funded by the Government
Published: December 2014

Ruling: Q1: 1. Will the psychology services provided by the psychologists to the patients and paid by you under the program funded by Government, be GST-free supply to you? 2. If not GST free, advice on what steps to take going forward based on our actions/circumstances past and present? | A1: 1. No. The psychology services provided by the psychologists under the program funded by Government would be a taxable supply and subject to GST provided the supply satisfies section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). 2. See reasons for decision.

Relevant facts and circumstances: • You are a non-profitable entity and registered for goods and services tax (GST). • You receive Government fund to administer and pay for psychological services to patients under a program. • Under the program: • The local general practitioner (GP) will decide whether a patient requires psychological services. • The GP will refer the patient to you and you will assess the patient to determine whether the patient will be eligible to receive the Government funded psychological services under the program. • If the patient is eligible for free services under the program, you will refer the patient back to the GP with the list of psychologists who are listed/registered with you. • The GP will select the psychologist from the list and will refer the patient to them and will advise you the details of the psychologist. • Then you will send an agreement to the psychologist confirming that you will pay the cost of providing the necessary psychological services to the patient. • The agreement states that the parties acknowledge and agree: • that the health services provided to the general public are GST exempt; • if the health services provided become a taxable supply, the parties agree that the payment will be increased by the GST amount provided the service provider gives a valid tax invoice to you in accordance with the GST Act; • that if any supply made by the service provider under this agreement is deemed a taxable supply, you will pay the service provider the increased amount of GST provided they give you a valid tax invoice in accordance with the GST Act. • You also employed psychologists and pay them wages. When your psychologists provide the services to the patients, you have reported the supplies as GST-free supplies in your business activity statements. • You wanted the ATO to confirm whether the psychological services provided by the external psychologists are GST-free. • You pay the entire cost of providing the health services under the program and Medicare does not pay any part of the cost. • The GP will only refer the patients to the psychologists who are listed under the program. • GP can refer the patients to other psychologists, but the patient will not receive free services if the psychologists are not listed under the program. • You do not make any agreements with the patients referred to you by the GP. You just only manage the administration of the program between the GP and the psychologists where the patients will receive free psychological services.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 and | A New Tax System (Goods and Services Tax) Act 1999 section 38-10.

Reasons for decision: Summary: A Supply of a health services is GST-free under subsection 38-10(1) of the GST Act if: a) it is a service of a kind specified in the table in subsection 38-10(1) of the GST Act or specified in the A New Tax System (Goods and Services Tax) Regulations 1999 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. 'Psychology' is listed at item 16 in the table in subsection 38-10(1) of the GST Act (item 16). The psychological services provided by the psychologists who are registered with you under the program would satisfy the requirements under paragraph 38-10(1)(b) as they are recognised professionals. However, to satisfy paragraph 38-10(1)(c) of the GST Act, the services need to be for the appropriate treatment of the recipient of the supply. Therefore, the recipient of the supply must be the patient receiving the treatment and not a third party such as an employer, insurance company or other entity. The psychologists receive payment from you as a third party for the services provided to the patients. Goods and Services Tax Ruling 2006/9 discuss the meaning and characteristics of a supply. Part 3 of the GSTR 2006/9 discusses multi-party arrangements, commonly known as tripartite arrangements. Proposition 14 outlined in GSTR 2006/9 discusses when a third party may pay for a supply but not be the recipient of the supply. Paragraph 177 states that subsection 9-15(2) of the GST Act provides that the payment does not have to come from the recipient of a supply. To determine whether the third party is a third payer or the recipient of a supply regard needs to be had to the true character of the transaction and by looking at all of the transactions entered into and the circumstances in which the transactions are made. In your case, the psychologists are required to be registered with you to enable them to provide the services to the patients where the patients are not required to pay for the services provided by the psychologists. Once the general practitioner refers the patient to a psychologist, you will enter into an agreement with the relevant psychologist where you will agree to pay them for the services provided to the patient. The general practitioner may refer the patients to psychologists who are not registered with you under the program. But the patient is required to pay for the services provided by these psychologists and it will not be a free service under the program. The arrangements between the general practitioner, psychologists and you are considered tripartite arrangement. In this case the recipient of the supply would be you as you have entered into an agreement with the psychologists to provide the services to the patients who will be assessed by you to receive free services under the program. Section 38-60 of the GST Act provides that if a supply of health service made to an individual is a GST-free supply of health services, that supply will also be GST-free where the recipient of the supply is: • an insurer settling a claim under an insurance policy • an operator of a statutory compensation scheme • an operator of a compulsory third party scheme • an Australian government agency. From 1 July 2012, where a supply is made to the insurer, the scheme operator or the Australian government agency, the supply is GST-free to the extent that the underlying supply of health services to the patient is GST-free. In this case, although the underlying supply is a GST-free supply of health services, it will not be a GST-free supply to you by the psychologists as you are not considered as any of the recipients listed under section 38-60 of the GST Act. Therefore, the psychologists would be making taxable supplies to you under the agreement provided the supply satisfies all of the requirements under section 9-5 of the GST Act. Under section 9-5 of the GST Act, you make a taxable supply if you make the supply for consideration; and the supply is made in the course or furtherance of an enterprise that you carry on; and the supply is connected with Australia; and 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. The psychologists receive consideration from you for the supply that they make to you under the agreement; and they would be making the supply in the course or furtherance of their enterprise of providing psychological services; and the supply is connected with Australia. If the psychologists are registered or required to be registered for GST, they will be making a taxable supply to you as the supply would satisfy all of the requirements under section 9-5 of the GST Act.