Private ruling: GST and tripartite arrangement
Date of advice: 19 March 2018
Published: June 2018

Ruling: Q1: Are you making any supplies (either taxable or GST-free) directly to the customers? | A1: No, you are not making any supplies directly to the customers. Based on your description of the arrangement between yourself, the contractor and the customer, and on the terms of the Agreement between yourself and the contractor, you are only making supplies to the contractor. | Q2: Are you making taxable supplies to the contractor, under the Agreement? | A2: Yes, under the Agreement, you are making taxable supplies to the contractor. You are registered for GST, and you are making supplies of administrative services and use of commercial premises and facilities, to the contractor, under the Agreement. You make these supplies in the course of your business in Australia, in exchange for payment. These are business to business supplies that are not GST-free (under the health exemptions or otherwise), and are not input taxed. Therefore they are taxable. The consideration that you receive for your taxable supply of administrative services and facilities is the ‘facilities fee’ that you retain, as defined in the Agreement.

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 operate a facility and are registered for goods and services tax (GST). You have entered into an Agreement with contractors who wish to operate a practice from your facility. The contractors are all appropriately qualified to be accepted as recognised professionals in their health field, and are all registered for GST. You have provided an unsigned sample Agreement for the purpose of this private ruling, whose terms are reflective of your usual agreements. Under the Agreement, you agree to provide certain facilities to the contractor to enable the contractor to conduct their practice. Specifically, you are responsible for the provision of professional rooms, assistants, equipment supplies, office administration systems and procedures, collection of fees from patients and other matters in relation to the operation of the health facility. As consideration for the provision of these administrative services, you receive a ‘Facilities Fee’ which is a percentage of the customer fees received by the contractor, as per the Agreement. Regarding the relationship between yourself and the contractor, the Agreement states: Relationship (1) The relationship of the Company and the Contractor is that of principal and independent contractor. (2) Nothing in this Agreement is to be read to create or construe an employment relationship between the Company and the Contractor (or its officers, employees, servants and agents). (3) Nothing in this Agreement is to be read to create or construe a franchise relationship between the parties. (4) The Contractor (including its officers, employees, servants, subcontractors and agents) has no authority to incur, and will not incur, any obligation on behalf of the Company except with the prior written approval of the Company. (5) Subject to the terms of this Agreement, the parties acknowledge that the Contractor is solely responsible for controlling the manner in which the Contractor provides the Services. The contractors are paid by the customers for the services that they provide to the patients. You issue the invoices to the patients. The invoices are in the name of the contractor. You do not provide any services to the customers. Following a change of computer systems, you now collect all of the customer fees and bank them into a ‘clearing account’ in the company name. Each fortnight you calculate the Facilities Fee owed to you and remit this amount to your operating account. The remaining funds in the ‘clearing account’ are remitted to the contractor on a fortnightly basis. That is, the contractor is paid fortnightly their customer fees, less their facilities fee. The contractors do not provide any services to the company.

Relevant legislative provisions: The A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 | Subsection 38-10(1)