Private ruling: GST and supplies of medical services
Date of advice: 25 October 2018
Published: February 2019

Ruling: Q1: Are you making a taxable supply of medical services to the medical centre? | A1: Yes | Q2: Is the supply of administrative services and premises from the medical centre to you a creditable acquisition? | A2: Yes

Relevant facts and circumstances: You and the medical centre (the practice) are registered for GST. Your work as a medical practitioner at the practice is governed by a consultancy agreement (the agreement). Under the agreement the practice engages you as a consultant to provide services as a medical practitioner at the practice at days and on times specified in the contract. Under the agreement the practice receives all gross receipts on account of your provision of medical services. Under the agreement, Gross receipts mean revenue received in clear funds by the practice on account of the Consultant’s provision of services. Under the agreement gross receipts earned from the Services are earned by the practice, and in the first instance to be credited direct to the practice’s bank account. The service fee the practice pays you is calculated at a percentage of the gross receipts. Under the agreement if the Consultant wishes to recoup GST for which he is or becomes liable in respect of the provision of the Services, then no less frequently than once each calendar month he or she must issue to the practice a tax invoice for payments of the Service Fee made in the immediately preceding month, unless by agreement the practice issues a recipient created tax invoice for the same. The practice includes GST with the service payments it pays you and issues tax invoices to you. The practice receives payments under your medical practitioner provider number.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 – section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 – section 11-5 | A New Tax System (Goods and Services Tax) Act 1999 – section 11-15 | 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

Reasons for decision: Summary: A supply of a medical service is GST-free under section 38-7 of the A New Tax System (Goods and Services Tax) Act 1999 (the Act). | Detailed Reasoning - Supplies and tripartite arrangements: Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies (GSTR 2006/9) examines the meaning of ‘supply’ in the GST Act. Part 3 of the ruling (from paragraph 114) looks at the meaning of ‘supply’ in the context of tripartite arrangements. Tripartite arrangements are often governed by a contract or agreement. ‘The agreement is the logical starting point when working out the entity making the supply and the recipient of that supply’ (GSTR 2006/9, proposition 11 at para 118). | Detailed Reasoning - The agreement: Under the agreement: ● The practice is the ‘Principal’ and has most control over the (/terms of the?) arrangement. ● The practice engages you as a consultant to provide services as a medical practitioner at the practice at days and on times specified in the contract. ● Gross receipts earned in the Services ‘are earned by the practice’, not the consultant, and in the first instance to be credited direct to the practice’s bank account. ● The service fee the practice pays you is calculated at XX% of the gross receipts. Moreover, the agreement specifically addresses GST and only contemplates it applying to the service fee it pays to you, the consultant. In this case the practice engages you to supply medical services to its patients on its behalf under the terms of the agreement. There is an enforceable obligation between you and the practice and the practice is liable to provide consideration for the services provided by you. GSTR 2006/9 also arrives at the following general proposition: ‘When A has an agreement with B or B to provide a supply to C, there is a supply made by B to A (contractual flow) that B provides to C (actual flow).’ (proposition 13, para 130) ‘Made’ in the context of ‘supply made’ takes its meaning from the definition of ‘recipient’ in section 195-1 of the GST Act: ‘recipient, in relation to a supply, means the entity to which the supply was made’ (GSTR 2006/9 para 131) ‘Provide’ is used in contrast with ‘made’ – it distinguishes between the contractual flow of the supply to the recipient (the entity to which the supply is made) and the actual flow of the supply to another entity (the entity to which the supply is provided). (GSTR 2006/9 para 132) In this case the contractual flow of the supply is to the practice, so the supply of services is made to the practice (A) by you (B) and provided to the patients (C). As the supply of services is made to the practice it is the recipient of the supply. | Detailed Reasoning - Medical service: Section 195-1 of the 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. In this case the Medicare benefit is not payable in relation to the supply of the service made by you to the practice, but is rather payable for the service the patient receives from the practice (/from you on behalf of the practice). Under the second limb of the definition, in order to be a ‘medical service’ the recipient of the supply must be the one to receive the appropriate treatment. In this case the practice is the recipient of the supply but does not itself receive the appropriate treatment. Therefore the supply you make to the practice is not of a medical service as defined in the Act. Accordingly it is not GST-free under section 38-7, but a taxable supply. | Detailed Reasoning - Question 2: Is the supply of administrative services and premises from the medical centre to you a creditable acquisition? The relevant law is section 11-5 of the GST Act: Under section 11-5 you make a creditable acquisition if: (a) you acquire anything solely or partly for a creditable purpose; and (b) the supply of the thing to you is a taxable supply; and (c) you provide, or a liable to provide, consideration for the supply; and (d) you are registered, or required to be registered. Under subsection 11-15(2) you do not acquire a thing for a creditable purpose to the extent that: (a) the acquisition relates to making supplies that would be input taxed; or (b) the acquisition is of a private or domestic nature. The practice provides ‘inputs’ under the contract, such as the insured premises with furnished consulting rooms, a lunch room, toilets, telephones, internet, medical supplies and receptionist staff. The practice retains YY% of the gross receipts. Both parties are registered for GST and the supply of the premises and administrative services is made for consideration in the course of the enterprise being carried on. The supply of services from the practice to you is taxable and not input taxed or GST-free. The acquisition is for a creditable purpose, does not relate to input taxed supplies and is not of a private or domestic nature. Therefore the supply of administrative services from the practice to you is a creditable acquisition.