Private ruling: GST and other health services
Published: December 2013

Ruling: Is the supply of the program by you a GST-free supply of medical services under section 38-7 or section 38-10 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)? | Due to the limited level of medical benefit provided to the recipient of the program, it is considered that the supply is GST-free in accordance with section 38-10 of the GST Act | · You are registered for goods and services tax (GST) and have been endorsed by the Australian Taxation Office (ATO) as a public benevolent institution. | · You provide support and rehabilitation services to people with physical disabilities, in particular spinal cord injuries. | · The program is promoted as an individually designed intensive activity based rehabilitation program to assist people with spinal cord injuries to improve and maximise their functional ability and lead more independent lives. | · The program involves repetitive, task specific activities and intense, dynamic, weight-bearing exercises all performed out of the wheelchair one-on-one. The exercises are all undertaken with a qualified physiotherapist or accredited exercise physiologist. | · The program is a community based rehabilitation program only available for people who have suffered spinal cord injuries, or in some cases, other neurological conditions which has affected their ability to walk. | · The program involves clients attending sessions in a "physiotherapy style exercise clinic" and undertaking an individually designed activity based program delivered by a qualified physiotherapist or accredited exercise physiologist under the supervision of the National Manager, who is also a qualified physiotherapist. | · The program's activities and assessment protocols are under the direction of the National Manager. | · The program is delivered under formal partnership agreements between you, another disability organisation and various universities. | · Under these formal partnership agreements, all professional aspects relating to the delivery of the program are set by you, under the leadership of the National Manager. In some States, the staff delivering the program are your employees. In other States, the staff delivering the program are employees of the other disability organisation and various universities, respectively. | · The formal partnership agreements with the universities are structured to allow their physiotherapy and exercise physiology students to undertake formal clinical placements under the supervision of one of your therapists. Research activities by the universities are also part of the arrangement with you. | · Your clients are required to obtain medical clearance from a medical practitioner prior to commencement of the program. This clearance includes a bone density scan report, which is interpreted by a medical practitioner. Annual medical clearances are required to remain in the program. Your therapists can request a medical report at any time should they have concerns about a particular health issue. | · You currently charge clients an hourly fee plus GST for the program. Most sessions are 2 hours in duration and clients attend from 1-3 times per week. Clients are scheduled for a monthly program and are charged at the beginning of the month for all the scheduled sessions. | · You issue invoices directly to clients who pay for the program themselves. The partner organisations are not involved in this process. All of your current therapists have Medicare Provider Numbers. Some clients have been able to claim a rebate from Medicare or their private health insurer. | · You have advised that the level of Medicare benefits provided to clients undertaking the program is limited. More specifically, Medicare provides a scheme called the "Allied Health Initiative" (which was previously known as the "Enhanced Primary Care Scheme"). A person with a chronic condition (such as a spinal cord injury) can receive a rebate of 5 sessions per year for services rendered by an allied health professional, such as a physiotherapist or exercise physiologists. A person can only access the rebate 5 times in a year. In that regard, they can choose to use all 5 sessions for exercise physiology services or chiropractic services, or they can split the sessions between various types of allied health professionals. | · You also issues invoices to a range of external agencies (including insurance companies, broker agencies who administer grants/packages of funding from various government or non- government agencies), and registered foundations established to fund raise for a client. This accounts for approximately 20% of clients and this percentage is growing; especially as the philosophy under the National Disability Insurance Scheme (NDIS) for more individual choice becomes more accepted. | 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: Summary The provision of the program is GST-free under Subdivision 38-B of the GST Act. 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 Medicare benefit is payable, the health service can be considered under subsection 38-7(1) of the GST Act. | Detailed Reasoning - Subsection 38-7(1) of the GST Act: Subsection 38-7(1) of the GST Act provides that a supply of a medical service is 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 . The second limb of this definition only applies when the medical service is supplied by (or on behalf of) a 'medical practitioner' or 'approved pathology practitioner' (and other requirements are satisfied). You advised that all of your current therapists have Medicare Provider Numbers and in some instances your clients have been able to claim a rebate from Medicare. In these instances, your supply of the program is GST-free under subsection 38-7(1) of the GST Act where a Medicare benefit is payable for the service. However, due to the limited level of medical benefit provided to the recipient of the Program, it is appropriate to consider your supply of the program under other provisions of Subdivision 38-B of the GST Act. | Detailed Reasoning - Subsection 38-10(1) of the GST Act: 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: … … 17 Physiotherapy … … Service of a kind… In your case Physiotherapy is listed at item 17 of the table and you have advised that the program's activities and assessment protocols are provided under the direction of the National Manager who is also a qualified physiotherapist. Recognised Professional Physiotherapy is not defined further in the GST Act. Therefore, it is necessary to ascertain the ordinary meaning of that term. The Macquarie Dictionary, [Multimedia], version 5.0.0, 1/10/01 defines physiotherapy as: the treatment of disease or bodily weaknesses or defects by physical remedies, such as massage, exercise, etc Physiotherapists must be registered with the Physiotherapy Board of Australia, and meet the Board's Registration Standards, in order to practise in Australia. Their registration is recognised in the States and Territories of Australia that have enacted the National Law. The National Law is the Health Practitioner Regulation National Law (2009), as in force in each state and territory. A recognised professional under section 38-10(1)(b) is defined within section 195-1 as: "…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)..." Where there is no law in the State which regulates that particular health service, an entity practising in that State, will only satisfy the requirements for being a recognised professional where they are a member of a professional association with uniform national registration requirements that relate to the practice of that profession. You have advised that all of the therapists that provide the program are qualified physiotherapists, and are registered with the Australian Health Professional Regulation Agency. As such your Physiotherapists would meet the definition of a "recognised professional" under section 195-1 of the GST Act. Additionally, you advise that the exercise physiologists that you employ in the provision of the program all have a tertiary qualification in Exercise and Sports Science and are required to meet the accreditation standards to be recognised as an "Accredited Exercise Physiologist" by their professional association, Exercise and Sports Science Australia. The Exercise and Sports Science Australia has uniform national registration requirements. You further advise that the Exercise Physiologists are directly supervised by the National Manager, who is a recognised professional in the area of physiotherapy. 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)] . 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 the program is only available for people who have suffered spinal cord injuries, or in some cases, other neurological conditions which has affected their ability to walk. In the case of a recipient of the program, it is generally accepted due to the nature of the injury/illness that such a rehabilitation program is necessary to assist people with spinal cord injuries to improve and maximise their functional ability and lead more independent lives. You have stated that the supply of a physiotherapy services is generally accepted by the medical profession as being necessary for the appropriate treatment of spinal cord injury patients. Further, the information that you have provided regarding the role and duties of your exercise physiologists indicates that their services would fall within the above description of appropriate treatment. Further, you have advised that the services provided by your exercise physiologists are generally accepted in their 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. 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: 155. Under the GST health provisions in Subdivision 38-B, subject to certain exceptions 1 , 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. Where this requirement is imposed, a GST-free supply of a health service cannot be made to a business entity or a non-profit body. However, the recipient of the supply may not be the patient if there is a third party involved in the transaction. When a third party (rather than the patient) is the recipient of the health service, the service is not GST-free as 'appropriate treatment' will not include supplies undertaken for a third party, which does not encompass treatment. Please note, the above does not apply to an arrangement whether or not contractual, between the third party and the registered member, merely to pay for any services supplied to patient. 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. | Detailed Reasoning - The exceptions under section 38-60of the GST Act: You have advised that you also issues invoices to a range of external agencies (including insurance companies, broker agencies who administer grants/packages of funding from various government or non- government agencies). 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. In the case of the insurance companies, whilst you provide the services to the patient it is under an agreement that the supply will be provided to insurance company 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. Supply to an Insurer The supply of services to the insurance company will be a supply of services to an insurer. Supply to an individual You have agreed with the insurance company to provide services to an eligible insurance company 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 has suffered spinal cord injuries, or in some cases, other neurological conditions which has affected their ability to walk and the services will only be provided to that qualified individual. The services are provided to an individual. GST-free Health Service Settling an Insurance Claim In order for your supply of the program to the insurance company to be GST-free under section 38-60, it is important to ensure that the Program is GST-free under section 38-10. Where all the requirements of section 38-10 of the GST Act have been met then the Program would qualify as GST-free. As discussed above we have determined that the provision of the Program provided to the patient is GST-free. Accordingly, you will be providing the services as the settlement of the insurance company's member's 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. 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 the Program is made to an insurer, your supply is GST-free under section 38-60 of the GST Act to the extent that the underlying supply of the program to the patient is GST-free under subsection 38-10(1) of the GST Act. The same general principals also apply to the supply your program to an individual through an operator of a statutory compensation scheme, an operator of a compulsory third party scheme or an Australian government agency. 1 See sections 38-45, 38-47, 38-55 and 38-60 of the GST Act