Private ruling: GST and health supplies
Published: January 2013

Ruling: Q1: Is the supply of a health service by you that is compliant with the Private Health Insurance (Health Insurance Business) Rules 2010 a GST-free supply of a health service under section 38-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | A1: Yes | Q2: Is the third party procured services, supplied by you, GST-free under section 38-60 of the GST Act? | A2: Yes

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. · You are a company registered for goods and services tax (GST). · You provide health services. · Your service suite covers the full spectrum of health care services from telephonic to complex chronic and acute care, with centralised case management at the core of your service model. · You are looking to implement an insurance company's health service model that will provide members with chronic disease with support, direction and treatment, to help them to better manage their own condition and avoid unnecessary hospital admissions. · The particular compliant health service put in place by you mirrors programs that are currently delivered by hospitals and those coordinated by medical practitioners. · You consider that the programs delivered by hospitals and medical practitioners are in line with requirements under the Health Insurance Act and Medicare Benefits Schedule and are eligible to be GST-free under section 38-7 and 38-20 respectively. · You intend to supply a holistic health service comprised of nursing and other allied health services to eligible participants. You will invoice your customer, for the provision of your services for each participant. · Participants will be identified as being eligible for your services through previous claims history or referral from a General Practitioner. They will have a disease that has been, or is likely to be, present for at least 6 months, including, but not limited to, asthma, cancer, cardiovascular illness, diabetes mellitus, a mental health condition, arthritis and a musculoskeletal condition. · Under your service, a Registered Nurse will undertake the following steps with the eligible participant: 1. Explain to the eligible participant the nature of the program services to be provided; 2. Prepare a written plan in accordance with the requirements as set out in the Private Health Insurance laws including: a. specifying the allied health service or services to be provided; b. specifying the frequency and duration of the services to be provided; c. specifying the health goals to be obtained; and d. specifying the date for review of the plan. 3. Obtain the consent of the eligible participant. The Registered Nurse will then: Coordinate the plan and accept responsibility for: (i) ensuring the services are provided according to the plan; and (ii) monitoring the patients compliance with the agreed goals and activities specified in the plan. · Services identified in the plan will be delivered to the participant by allied health professionals under the coordination and management of a Registered Nurse.

Relevant legislative provisions: All references are to the A New Tax System (Goods and Services Tax) Act 1999 : Section 38-7 | Section 38-10 | Section 38-20 | Section 38-60

Reasons for decision: Summary: The provision of your service is GST-free under section 38-10 of the GST Act. | Detailed Reasoning - Detailed reasoning: Subdivision 38-B of the GST Act sets out the requirements for a supply of health to be GST-free. The definition of a medical service in section 195-1 of the GST Act includes a service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973. Where no Medicare benefit is payable, the health service must be considered under one of the other provisions in Subdivision 38-B of the GST Act. In your circumstances no Medicare benefit is payable for the provision of your service. Subsection 38-10(1) of the GST Act provides that 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. All of these requirements must be satisfied in order for a supply to be GST-free. | Detailed Reasoning - Service: 1 Aboriginal or Torres Strait Islander health 2 Acupuncture 3 Audiology, audiometry 4 Chiropody 5 Chiropractic 6 Dental 7 Dietary 8 Herbal medicine (including traditional Chinese herbal medicine) 9 Naturopathy 10 Nursing 11 Occupational therapy 12 Optometry 13 Osteopathy 14 Paramedical 15 Pharmacy 16 Psychology 17 Physiotherapy 18 Podiatry 19 Speech pathology 20 Speech therapy 21 Social work | Detailed Reasoning - Service of a kind…: In your case Nursing is listed at item 10 of the table and you have advised that the CDMP is planned, developed, coordinated, monitored and reviewed by a Registered Nurse. | Detailed Reasoning - Recognised Professional: Nursing is not defined further in the GST Act. Therefore, it is necessary to ascertain the ordinary meaning of that term. The Macquarie Dictionary defines nursing as: to act as nurse; tend the sick or infirm. Registered Nurses are registered under the Health Practitioner Regulation National Law (WA) 2010 Act and as such would meet the definition of a "recognised professional" under section 195-1 of the GST Act. A recognised professional under section 38-10(1)(b) is defined within section 195-1: 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 a 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. Therefore, you satisfy the first two requirements [38-10(1)(a) and (b)] listed above. What must now be considered is whether the services are for the appropriate treatment of the recipient of the supply [38-10(1)(c)] . | Detailed Reasoning - Appropriate treatment: Appropriate treatment is provided where a recognised professional assesses the recipient's state of health and determines a course of treatment, in an attempt to preserve, restore or improve the physical or psychological wellbeing of the recipient. Appropriate treatment includes the principles of preventative medicine. In addition, the legislation requires that the treatment be generally accepted in the profession as being necessary for the treatment of the patient. The words 'generally be accepted, in the profession' indicate that it will ultimately be the medical profession that determines what services will be generally accepted. You have stated that the supply of your service can only be provided to patients who have an established chronic disease which is agreed between the parties and is defined under the HIB rules to be: "A disease that has been, or is likely to be, present for at least 6 months, including' asthma, cancer, cardiovascular illness, diabetes mellitus, a mental health condition, arthritis and a musculoskeletal condition". In the case of a recipient of your service, it is generally accepted due to the nature of the illness that such a program is necessary to treat the recipient in order to reduce complications or prevent the onset of potentially fatal illness. You have stated that the supply of your service is generally accepted by the medical profession as being necessary for the appropriate treatment of your patients. Further, the information that you have provided regarding the role and duties of your registered nurse indicates that their services would fall within the above description of appropriate treatment. Further, you have advised that the services provided by your Registered Nurses are generally accepted in the nurse practitioner profession as being appropriate for the patient. However, the requirement in paragraph 38-10(1)(c) of the GST Act is that there be appropriate treatment of the 'recipient of the supply'. Therefore, it is necessary to determine who is the recipient of your supply. | Detailed Reasoning - Recipient of the supply: A supply of health service is generally GST-free when supplied to the individual requiring that treatment or specific health services. Therefore, it is necessary to determine the recipient of the supply made by the health practitioner. Section 195-1 of the GST Act defines recipient to mean the entity to which the supply was made. For GST purposes, the identity of the recipient of a supply does not generally determine the GST treatment of the underlying supply. However, where the underlying supply is a health service, such as other health services, the identity of the recipient is relevant for determining the GST status of the supply (subject to the exception of section 38-60 of the GST Act that is explained further below). Goods and services tax ruling GSTR 2006/9 examines the meaning of 'supply' in the GST Act. The view of the Tax Office on the matter is provided in paragraph 155 of GSTR 2006/9. This paragraph states: Under the GST health provisions in Subdivision 38-B (except for sections 38-45 and 38-47 dealing with particular supplies of goods and section 38-55 dealing with private health insurance and ambulance insurance), the supply is only GST-free where an individual receiving that service or specific health treatment is the recipient of that supply . This outcome results from the specific wording in some health provisions, whilst in other provisions it is due to the nature of the services themselves. This means that a GST-free supply of a health service cannot be made to a business entity or a non-profit body. [emphasis added]. However, the recipient of the supply may not be the patient if there is a third party involved in the transaction. When there are only two parties to a supply of health services (the health practitioner and the patient), the patient is generally the recipient of the supply. However, the view of the Tax Office in paragraph 155 of GSTR 2006/9 has been altered following the insertion of the new section 38-60 of the GST Act (effective from1 July 2012). This section provides that where a supply of a health service made to an individual is a GST-free supply of health service, that supply will also be GST-free where the recipient of the supply is either: · 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. Section 38-60 is discussed further at Question 2. Where you supply your services to a patient as a result of a referral from a GP the patient is the recipient of your supply of treatment. As the third element in subsection 38-10(1) of the GST Act is satisfied, you are making a GST-free supply when you supply your services directly to patients at your Clinic. | Summary: The services provided by you are GST-free under section 38-60 of the GST Act and as such any consideration received by you for the services provided will not include GST. | Detailed Reasoning - Detailed reasoning: You have advised that you will be providing your services to an insurance company's members as part of their service model. Therefore whilst you will provide the services to the patient it is under an agreement that the supply will be provided to their members for which you will invoice the company direct. Within subsection 38-60(1) of the GST Act, if: a) a supply is a supply of a service to an insurer; and b) the service is the supply of making one or more other supplies of goods and services to an individual; and c) at least one of the other supplies is: a) wholly or partly GST-free under the subdivision; and b) for settling one or more claims under an insurance policy of which the insurer is an insurer the first-mentioned supply is GST-free to the extent that the other supplies mentioned in paragraph b) are GST-free under the subdivision In these circumstances under section 38-60 the service supplied by you to the insurance company will be GST-free where 1. The services are supplied to an insurer 2. The service is to supply a GST-free health service to an individual, and 3. The service is for settling a claim under an insurance policy. | Detailed Reasoning - Supply to an Insurer: The supply of services to the insurance company will be a supply of services to an insurer. | Detailed Reasoning - Supply to an individual: You have agreed with the private insurance company to provide services to an eligible member. Those services are provided to an individual as the patient. You, as discussed above, will only provide the health services to a patient that meets certain criteria and the services will only be provided to that qualified individual. The services are provided to an individual. | Detailed Reasoning - GST-free Health Service Settling an Insurance Claim: In order for your supply of your services to the insurance company to be GST-free under section 38-60, it is important to ensure that the service is GST-free under section 38-10. Where all the requirements of section 38-10 of the GST Act have been met then the service would qualify as GST-free. In this case you advise that the services provided by you will only be provided to the insurance company's members that are covered under an appropriate health insurance policy. The insurance company will be paying a benefit to you for the services delivered to its members. Benefit statements will be provided to the member and the benefits paid will appear on the annual Claims Tax Statements that the insurance company provide to its members. As discussed above we have determined that the provision of the service provided to the patient is GST-free. Accordingly, you will be providing the services as the settlement of the insurance company's members health insurance policy and consequently the services provided by you to the insurance company will be GST-free under section 38-60. The Explanatory Memorandum that accompanied the introduction of the section 38-60 of the GST Act explains the circumstances where the GST-free provision was expected to apply and provided examples as shown below. | Detailed Reasoning - Explanatory Memorandum: 1.15 If a supply by a health care provider to an insured person is either wholly or partly GST-free under Subdivision 38-B of the GST Act (the underlying supply), then a supply of the service of making the underlying supply by the health care provider to an insurer, in the course of settling insurance claims under a private, general or other health insurance policy, is GST-free, to the extent that the underlying supply is GST-free. [Schedule 1, item 1, subsection 38-60(1)] Example 1.1: A wholly GST-free supply between a health service provider and an insurer Peter purchases private health insurance from a health insurer and pays an annual contribution. The health insurer has a pre-existing agreement with a physiotherapist where services are supplied to individuals for the purposes of settling claims made under insurance policies that the insurer issues. The agreement outlines how the parties will act when the physiotherapist treats the identified individuals. The agreement also establishes the obligation on the health insurer to pay the physiotherapist if the physiotherapist provides services to the identified individuals and a mechanism by which such payments are to be authorised. Peter injures his knee playing sport and requires physiotherapy. Peter contacts the health insurer advising of his injury. The health insurer refers Peter to the physiotherapist who supplies physiotherapy services to Peter. The supplies of the physiotherapy services are GST-free under subsection 38-10 (1). The health insurer pays the physiotherapist for the services under the terms of the pre-existing agreement. Under this arrangement, the payment to the physiotherapist is for the supply made to the health insurer, being the service of making the supply of the physiotherapy services to Peter. Peter's physiotherapist makes a GST-free supply to the health insurer under subsection 38-60(1). This is because: • the supply made by the physiotherapist is a supply of a service to an insurer; • the service is the physiotherapist making one or more supplies of goods or services to an individual (Peter); • the supplies made by the physiotherapist to Peter are GST-free under Subdivision 38-B; and • the supplies are made for settling one or more claims under an insurance policy of which the health insurer is an insurer. Note that the outcome in this example would be the same even if the health insurer and physiotherapist had no pre-existing agreement but instead the insurer contracted with the physiotherapist to provide the services. As your supply of your service is made to an insurer, your supply in this instance is GST-free under section 38-60 of the GST Act to the extent that the underlying supply of your service to the patient is GST-free under subsection 38-10(1) of the GST Act.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.