Private ruling: GST and supply of medical services
Date of advice: 12 October 2017
Published: March 2018

Ruling: Q1: Are you required to include GST for your medical services to patients when the surgeon collects the fees on your behalf? | A1: No. You are not required to include GST for your medical services to patients when the surgeon collects the fees on your behalf. The supply of medical services is GST-free under section 38-7 of the A New Tax System (Goods and Services Tax) Act 1999 . Please refer to the reasons for decision.

Relevant facts and circumstances: ● You provide medical services to patients undergoing surgery. ● Supply of this service is not covered under Medicare benefit. ● You are registered for goods and services tax. ● You provide medical services to the patients of a surgeon. ● The type of surgery is GST-free and not for cosmetic purposes. ● You do not have a written agreement with the surgeon to provide the medical services. ● The surgeon informs the patients of the need for this service and arranges the date of procedure at a Hospital. ● You discuss with the patients on the day of surgery and patients will only contact you if they have a particular concern about the medical service. ● The surgeon collects the fees including the medical fees upfront from the patient and it is their responsibility to pay you. ● The surgeon makes arrangements with you to provide the medical services to the patients at the Hospital. ● You are accredited to work at the Hospital. ● You send an invoice to the surgeon for the medical services and receive payments from them.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 – subsection 9-15(2) | A New Tax System (Goods and Services Tax) Act 1999 – section 38-7 | A New Tax System (Goods and Services Tax) Act 1999 – section 195-1 | Health Insurance Act 1973 – Part 11

Reasons for decision: Summary: Medical services are GST-free provided the requirements under section 38-7 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) are satisfied. Section 38-7 of the GST Act provides a supply of a medical service is GST-free. Medical service is defined to mean: ● service for which Medicare benefit is payable under Part II of the Health Insurance Act 1973 , or ● 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. Under the first limb, a service for which a Medicare benefit is payable under Part II of the Health Insurance Act 1973 , is GST-free. Any service for which a Medicare benefit is not payable must be addressed under the second limb of the definition. Medicare benefit is not payable for the medical services provided by you. Therefore, the supply of medical services must be considered under the second limb of the definition. 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 the second limb. | Detailed Reasoning - Service must be supplied by medical practitioner: The first element is that the service must be supplied by or on behalf of a medical practitioner or an approved pathology practitioner. Section 195-1 of the GST Act defines medical practitioner as a person who is a medical practitioner for the purposes of the Health Insurance Act 1973 . The Health Insurance Act 1973 defines medical practitioner as a person registered or licensed as a medical practitioner under a law of a State or Territory that provides for the registration or licensing of medical practitioners but does not include a person so registered or licensed: (a) whose registration, or licence to practice, as a medical practitioner in any State or Territory has been suspended, or cancelled, following an inquiry relating to his or her conduct; and (b) who has not, after that suspension or cancellation, again been authorised to register or practice as a medical practitioner in that State or Territory. You are a registered medical practitioner and provide medical services to patients who undergo specific surgery. Therefore, your service satisfies the element of supplied by a medical practitioner. | Detailed Reasoning - Appropriate treatment: 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. ‘Appropriate treatment’ will be established where the practitioner assessed 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. In addition, the definition requires the treatment must be generally accepted in the medical profession as being necessary. You provide medical services to the patients of the surgeon who conducts specific surgery to patients who have visionary problems. The patients require this procedure for the surgeon to carry on the surgery. We consider that the medical services provided by you to the patients are necessary for the appropriate treatment by the surgeon. Therefore, your service will satisfy the element of appropriate treatment. | Detailed Reasoning - Recipient of supply: Section 195-1 of the Act defines ‘recipient’ in relation to a supply to mean ‘the entity to which the supply is made’. Where there are only two parties involved, generally there is a single supply to which the GST Act applies. For example, where those two parties are a health professional and a patient, the recipient of the single supply is the patient. The supply will be GST-free provided all the necessary elements of subsections 38-7(1) and (2) of the GST Act are met. Subsection 9-15(2) of the GST Act provides that it does not matter whether the recipient of the supply provides the consideration for the supply. Accordingly, where the recipient of a medical service is the patient, and a third party merely provides consideration on behalf of that patient, the supply will be GST-free provided the service is supplied by, or on behalf of a medical practitioner, or an approved pathology practitioner, and it is generally accepted in the medical profession as being necessary for the appropriate treatment of the patient. However, where there is a third party involved in the transaction, there may be one or more supplies for GST purposes. Therefore, it is necessary to determine what is being supplied and to whom. A third party will be the ‘recipient of a supply’ by the health service provider where: ● the third party engages the health service provider to provide something to them or to someone else; ● the third party, by agreement with the health service provider, determines what is to be provided to them or to someone else; and ● there is a binding obligation between the third party and the health service provider for the thing to be provided and the third party is liable to provide payment. If these requirements are not satisfied, there is generally one supply by the health service provider to the patient and the third party provides consideration for that supply. In this case, you have advised that the surgery in respect of which you provide medical services to the patients of the surgeon is GST-free. Under the arrangement with the surgeon, the surgeon collects your fees from the clients and liable to pay you for your medical services. You do not have a written agreement with the surgeon to provide the medical services and you issue a tax invoice to the surgeon for the services provided to the patients. As explained above, your supply of medical services satisfies the second limb of the definition of medical service. The recipient of the supply is the patient as the patients require anaesthesia for the surgeon to carry on the surgery. Therefore, you are not required to include GST for your medical services when the surgeon collects the fees on your behalf.