Private ruling: GST and agency
Published: March 2014

Ruling: Q1: Are you acting as an agent for each health provider when you collect and bank patients' fees into your bank account, and then pay the health provider their total patient fees less management fees? | A1: Yes, you are acting as an agent for each health provider when you collect and bank patients' fees into your bank account, and then pay the health provider their total patient fees less management fees.

Relevant facts and circumstances: You are registered for goods and services tax (GST). You operate a health facility. There is a consensual agreement between you and the health providers that you will be acting on their behalf to collect the fees they charge to their patients when they provide their medical services to the patients. You provide 'administrative services' to the health providers. The 'administrative services' include: • the provision of professional rooms, health assistants and support staff, equipment, supplies, office administration systems and procedures, • collection of patients' fees on behalf of the health provider, banking of the patients' fees into your own bank account, and • other matters in relation to the operation of the health facility. As consideration for the provision of these 'administrative services', you receive as a management fee a percentage of the total patient fees received by each health provider. Each week, a calculation is made to determine the management fees owing to you. You then pay each health provider their patient fees less their management fee from your bank account. You do not provide any medical services to the patients. The health providers operating from the facility are not your employees. They are separately registered for GST in their own right. They are all appropriately qualified and recognised as professionals in their field. They are paid by the patients for the services that they personally provide to the patients. They do not provide any services to you.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Division 153

Reasons for decision: Summary: Goods and Services Tax Ruling GSTR 2000/37 (available at www.ato.gov.au) discusses the general law in relation to agency relationships. According to paragraph 10 of GSTR 2000/37, an intermediary may be authorised by another party to do something on that party's behalf. Generally, the intermediary is called an agent and the party who authorises the agent to act on their behalf is called the principal. The principal is bound by the acts of an agent as a result of the authority given to the agent. In cases of actual authority, the relationship between a principal and an agent is a consensual one so that no party can claim to be a principal's agent unless both parties consent to the creation of the agency. Notwithstanding the absence of an express agreement, the parties, that is, the principal and agent, may conduct themselves in such a way that it is proper to infer that the relevant authority has been conferred on the agent. Paragraph 28 of GSTR 2000/37 outlines factors that indicate whether an agency relationship exists, as cited below. 28. In most cases, any relevant documentation about the business relationship, the description used by the parties and the conduct of the parties establish the existence of an agency relationship. Therefore, the following factors may show that you are an agent under an agency relationship, although no single factor (by itself) is determinative: • any description of you as an agent, having authority to act for another party, in an agreement (expressed or implied) between you and the other party; • any exercise of the authority that you are given to enter into legal relations with a third party; • whether you bear any significant commercial risk; • whether you act in your own name; • whether you are remunerated for your services by way of commissions and whether you are entitled to keep any part of your remuneration secret from another party; and • whether you decide the price of things that you might sell to third parties. Whether an agency relationship exists does not depend on the terminology adopted by the parties, but on the true nature of the relationship. The relationship between the parties is determined by an examination of the particular facts surrounding relevant transactions. Based on the information provided, we consider you are acting as an agent for the health provider when you collect and bank their patients' fees into your bank account for the following reasons: • There is a consensual agreement between you and the health provider that you will be acting on their behalf to collect the fees they charge to their patients when they provide their medical services to the patients. The health provider therefore retains ownership of the fees even though for administrative purposes you bank them into your account for a period of time. • You do not provide any medical services to the health provider's patients as under the agreement you are responsible for the provision of 'administrative services' which include the provision of professional rooms, health assistants and support staff, equipment, supplies, office administration systems and procedures, collection of fees from patients on their behalf, banking of the patients' fees into your bank account and other matters in relation to the operation of the health facility. • In return for the provision of the 'administrative services', you receive a management fee which is calculated as a percentage of the total patient fees received by each health provider. • Further, the health provider is paid by the patients for the services that they personally provide to the patients. Accordingly, the patients' fees you collect are not consideration for any supply that you have made in your own right to the patients. You are collecting them on behalf of the health provider. In conclusion, the health provider is making a supply of medical services to the patients and the consideration for this supply is the total of the patients' fees which you collect on their behalf in your capacity of an agent and not the net amount that you paid to them fortnightly from your bank account. Further, you are making a supply of services to the health provider and the consideration for your supply of services is the management fee which you deduct from the collected patients' fees before remitting the rest of the patients' fees to the health provider.