Private ruling: Goods and services tax (GST) and stem cell medicine
Published: January 2015

Ruling: Q1: Is GST payable on your supply of stem cell therapy, associated assessments/consultations, associated liposuction, associated stem cell related services and associated stem cells? | A1: No.

Relevant facts and circumstances: You are registered for GST. You operate under the name (name). You supply stem cell therapy, medical services, consulting and procedures for patients suffering from arthritis in the joints. Your medical practitioners are registered to practice as medical practitioners by the Medical Board of Australia. You are also running a number of ethically approved medical trials of these stem cell procedures in conjunction with both a university and university ethics committee. Patients seen at your medical centre first undergo a thorough medical assessment. Patients are assessed for suitability of stem cell therapy based on current level of evidence and are provided with formal written information regarding both stem cell therapy and other relevant alternative treatment options. Patients assessed as suitable for stem cell therapy then undergo a liposuction/harvest procedure. This is undertaken in a procedural day centre environment at your premises and performed by medical clinicians with formal liposuction accreditation and with assistance of qualified nursing staff. Stem cells are extracted from the patient's lipoharvest material. Once the stem cells are ready, they are injected into the patient's symptomatic joint using treatment protocols with proven efficacy in previously published scientific papers. This treatment ranges over a number of separate injections administered over a period of time. This protocol and treatment plan is in accordance with the National Health and Medical Research Council's recommendations that treatments should be 'based on the highest level of evidence, preferably ... randomised controlled clinical trials that measure relevant outcomes and demonstrate a strong, clinically important, beneficial effect of the intervention'. Your medical centre and its clinicians strictly adhere to both the above NHMRC principles and also the national TGA Biological Exemption framework that allows use of autologous biological therapies. As such, all your medical centre's stem cell procedures are an approved medicinal preparation under the law of a particular State or Territory. Stem cell therapies are not classified as a `product' as per the TGA Biological Exemption item 4q and are thus viewed as a "medical procedure" which is performed by and under the direct supervision of the treating clinician. Stem cell therapies in the treatment of osteoarthritis have scientific evidence of both safety and efficacy as per the aforementioned NHMRC guidelines. It is always the patients that engage you and contract you to provide the services in question. Some of the services you supply are eligible for Medicare benefit, but some are not.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 7-1(1) | A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 section 9-40 | 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

Reasons for decision: Summary: GST is payable on taxable supplies. Section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an*enterprise that you *carry on; and (c) the supply is connected with Australia; and (d) 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. (* Denotes a term defined in section 195-1 of the GST Act) Subsection 38-7(1) of the GST Act provides that a supply of a medical service is GST-free. However, subsection 38-7(2) of the GST Act contains some exclusions. It states: However, a supply of a *medical service is not GST-free under subsection (1) if: (a) it is a supply of *professional services rendered in prescribed circumstances within the meaning of regulation 14 of the Health Insurance Regulations made under the Health Insurance Act 1973 (other than the prescribed circumstances set out in regulations 14(2)(ea),(f) and (g)); or (b) it is rendered for cosmetic reasons and is not a *professional service for which medicare benefit is payable under Part II of the Health Insurance Act 1973 . Section 195-1 of the GST Act defines medical service as: (a) a service for which medicare benefit is payable under Part II of the Health Insurance Act 1973 ; or (b) 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. Where Medicare benefit is payable for your services, you make a supply of a medical service under paragraph (a) of the definition of medical services. Additionally, the exclusions in subsection 38-7(2) of the GST Act do not apply. Therefore, where Medicare benefit is payable for your services, you make a GST-free supply of medical services. We shall now consider whether your supplies of services are GST-free where Medicare benefit is not payable. Medical practitioner means a person who is a medical practitioner for the purposes of the Health Insurance Act 1973 , which 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. In your case, the stem cell therapy, associated assessments/consultations, associated liposuction and associated stem cell related services are services performed by or on behalf of persons who are registered as medical practitioners. In accordance with the Australian Taxation Office fact sheet, GST and medical services, for GST purposes, a health practitioner is supplying appropriate treatment when they use their professional skills to: • assess a patient's health • work out a course of action to preserve, restore or improve the patient's physical or psychological wellbeing, as far as your training allows • supply a treatment that is generally accepted in the profession as being appropriate for the patient. The words 'generally accepted in the medical profession' indicate that it will ultimately be the medical profession that determines what services will be generally accepted. Stem cell therapy treatment is a relatively new procedure and mostly at an experimental stage. Even though it is a new procedure, the use of stem cell therapy treatment is advancing both in Australia and internationally. In considering at what point a new procedure becomes "generally accepted", the Commissioner notes that relevant evidence would include the time of publication in a reputable medical journal, the time of recommendation by the relevant Australasian medical college or the time when adopted for incorporation in the Medicare Benefit Schedule (issue 1.a.5 of the ATO Health Industry Issues Register). The Commissioner suggests that if practitioners are uncertain as to the acceptability of a procedure, they should seek clarification from their relevant professional association or college. However, in most cases, it should ultimately be the individual doctor who will determine the most appropriate treatment of their patient, unless their treatment methods come to the attention of medical tribunals following complaints or publicity. The Commissioner accepts that special procedures that have inherent risks or that are of an experimental nature may still be "generally accepted" as appropriate treatment of the recipient bearing in mind the prognosis for, and circumstances of, the particular individual. Directives of a relevant professional association, college or an ethics committee will also be relevant. We accept based on the information you provided that the services in your case are generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply - the patient. Therefore, you are making supplies of medical services under paragraph (b) of the definition of medical service where Medicare benefit is not payable for the service. Additionally, none of the exclusions in subsection 38-7(2) of the GST Act apply in this case. Therefore, you make GST-free supplies of medical services under subsection 38-7(1) of the GST Act when you supply the stem cell therapy, associated assessments/consultations, associated liposuction, associated stem cell related services and Medicare benefit is not payable. Paragraph 17 of Goods and Services Tax Ruling GSTR 2001/8 discusses composite supplies. It states: 17. In this Ruling, the term 'composite supply' is used to describe a supply that contains a dominant part and includes something that is integral, ancillary or incidental to that part. You treat a composite supply as a supply of a single thing. Paragraphs 55 to 63 explain what are integral, ancillary or incidental parts. The supply of the stem cells is an integral part of a composite supply of stem cell therapy services, which is GST-free. Therefore, the supply of the stem cells is GST-free under subsection 38-7(1) of the GST Act. As all of the supplies in question are of medical services for the purposes of the GST Act and the exclusions at subsection 38-7(2) of the GST Act don't apply, GST is not payable on these supplies.