Private ruling: Goods and services tax (GST) and medical services
Published: July 2014

Ruling: Q1: Is GST payable on the fees you receive from the private hospital? | A1: Yes. | Q2: Are you required to be registered for GST? | A2: Yes.

Relevant facts and circumstances: You are not registered for GST. You are licensed as a medical practitioner under a State or Territory law that provides for the registration or licensing of medical practitioners. You are contracted by a private hospital to provide assessment and treatment to patients of the hospital. The assessment and treatment would be generally accepted in the medical profession as being necessary for the appropriate treatment of the patient. The hospital pays you fees. You will earn over $75,000 a year. Medicare benefit is not payable in respect of the fees the hospital pays you.

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 subsection 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 23-5 | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-7(1) | A New Tax System (Goods and Services Tax) Act 1999 section 38-20 | A New Tax System (Goods and Services Tax) Act 1999 section 38-60 | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-60(1) | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-60(2) | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-60(3) | A New Tax System (Goods and Services Tax) Act 1999 Division 188 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1 | Private Health Insurance Act 2007 section 121-5 | Health Insurance Act 1973 section 3

Reasons for decision: Summary: You are not making a GST-free supply of medical services or hospital treatment to the hospital. You are not making a GST-free supply under section 38-60 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which deals with third party procured GST-free health supplies. You are required to be registered for GST because you are carrying on an enterprise and your GST turnover is $75,000 or more. | Detailed Reasoning - Detailed reasoning: GST is payable by you on your taxable supplies. You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which 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) You meet the requirements of paragraphs 9-5(a) to 9-5(c) of the GST Act. This is because: • you supply services for consideration • you supply the services in the course of furtherance of an enterprise that you carry on, and • your supply of the services is connected with Australia, You are not registered for GST. There are no provisions of the GST Act under which your supplies of the services in return for the fees are input taxed. Therefore, what remains to be determined is whether you are required to be registered for GST and whether you are making GST-free supplies in return for the fees. Subsection 38-7(1) of the GST Act provides that a supply of a medical service is GST-free. Section 195-1 of the GST Act states: medical service means: (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. Section 195-1 of the GST Act provides that medical practitioner means a person who is a medical practitioner for the purposes of the Health Insurance Act 1973. Section 3 of 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. Section 195-1 of the GST Act provides that recipient, in relation to a supply, means the entity to which the supply was made. Subsection 38-20(1) of the GST Act states that a supply of hospital treatment is GST-free . Section 195-1 of the GST Act states that hospital treatment has the same meaning as in the Private Health Insurance Act 2007 . Section 121-5 of the Private Health Insurance Act 2007 states: Hospital treatment is treatment (including the provision of goods and services) that: (a) is intended to manage a disease, injury or condition; and (b) is provided to a person: (i) by a person who is authorised by a hospital to provide the treatment; or (ii) under the management or control of such a person; and (c) either: (i) is provided at a hospital; or (ii) is provided, or arranged, with the direct involvement of a hospital. 1 Section 38-60 of the GST Act provides that where a health practitioner is contracted by a second entity to supply a service to the second entity of making a GST-free supply of a health service to a patient, the supply made to the second entity may be GST-free. Section 38-60(1) of the GST Act states: If: (a) a supply is a supply of a service to an insurer; and (b) the service is the supplier making one or more other supplies of goods or services to an individual; and (c) at least one of the other supplies is: (i) wholly or partly *GST-free under this Subdivision; and (ii) 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 this Subdivision. Subsection 38-60(2) of the GST Act states: If: (a) a supply is a supply of a service to an *operator of a *compulsory third party scheme; and (b) the service is the supplier making one or more other supplies of goods or services to an individual; and (c) at least one of the other supplies is: (i) wholly or partly *GST-free under this Subdivision; and (ii) made under the compulsory third party scheme; the first-mentioned supply is GST-free to the extent that the other supplies mentioned in paragraph (b) are GST-free under this Subdivision. Subsection 38-60(3) of the GST Act states: If: (a) a supply is a supply of a service to an *Australian government agency; and (b) the service is the supplier making one or more other supplies of goods or services to an individual; and (c) at least one of the other supplies is wholly or partly *GST-free under this Subdivision; the first-mentioned supply is GST-free to the extent that the other supplies mentioned in paragraph (b) are GST-free under this Subdivision. The subdivision referred to in section 38-60 of the GST Act includes section 38-7 and section 38-20 of the GST Act. Paragraph 155 of Goods and Services Tax Ruling GSTR 2006/9 discusses business to business supplies. It states: 155. Under the GST health provisions in Subdivision 38-B, subject to certain exceptions, 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. Paragraphs 156A to 163 of GSTR 2006/9 discuss multi party arrangements. They state: 156A. Under certain multi-party arrangements, an entity may make a GST-free supply of goods or services to an individual which results in the supplier making a further supply to a third party. The supply made to the third party will not be GST-free under provisions within Subdivision 38-B that require the individual receiving the relevant goods or services to be the recipient of the supply. However, in some cases the supply will be GST-free under section 38-60. 156C. Where an entity makes a supply to an individual and that supply is either wholly or partly GST-free under Subdivision 38-B (the underlying supply), a supply of the service of making the underlying supply by the entity to an operator of a compulsory third party scheme is GST-free under subsection 38-60(2) to the same extent as the underlying supply. 156D. Where an entity makes a supply to an individual and that supply is either wholly or partly GST-free under Subdivision 38-B (the underlying supply), a supply of the service of making the underlying supply by the entity to an Australian government agency is GST-free under subsection 38-60(3) to the same extent as the underlying supply. Example 4: ambulance services supplied to hospital 157. A, a supplier of ambulance services, enters into an agreement with B, a hospital, under which A agrees to provide ambulance services as and when B requests them and B agrees to pay for the services. B is not an Australian government agency.The obligations under the agreement between A and B are binding. 158. Pursuant to the agreement, A transfers C, a patient, from hospital B to another hospital. The transfer of C is in the course of C's treatment and B pays A to provide A's services to C. 159. The recipient of A's supply of ambulance services is hospital B. A's supply is made to B and provided to C. 160. One of the requirements under subsection 38-10(5) for a supply of an ambulance service to be GST-free is that the service is supplied in the course of treating the recipient of the supply. As hospital B is the recipient of the supply, not the patient, and there is no treatment of the hospital, the supply of the ambulance service is not GST-free. Example 5: occupational therapist 161. A, an occupational therapist, is engaged by B, a company, to assess the needs of C, its employee. C suffers from multiple sclerosis and needs to use a wheelchair. A and B enter into an agreement which requires A to undertake an assessment of C's condition, to give recommendations in a report to B and for B to pay for the service. 162. A's supply of services is made to B. Although C may benefit from these services, it is B who contracts for the supply of these services and is the recipient of the supply. 163. This supply is not GST-free under subsection 38-10(1). This is because paragraph 38-10(1)(c) requires the supply to be generally accepted in the relevant profession as being necessary for the appropriate treatment of the recipient of the supply. B is the recipient of the supply. The supply is not for the treatment of B. Paragraph 38-10(1)(c) is not satisfied. Paragraphs 30 to 33 of Goods and Services Tax Determination GSTD 2012/4 discuss the hospital treatment exemption. They state: 30. The definition of hospital treatment requires that the treatment be provided to a person. 31. The Commissioner's view is that the term 'provided to a person' in the context of the PHI Act is a reference to the treatment being supplied to a patient. In the context of the GST Act, the Commissioner considers that a supply of something can be made to one entity and be provided to a separate entity. This view recognises the use of the words 'made' and 'provided' in the GST Act. In contrast, the PHI Act does not use terms that suggest the treatment provided to a person can arise from a supply of the treatment being made to a separate entity. 32. Accordingly, only supplies of treatment made to an individual patient can fall within the definition of hospital treatment. 33. A supply made under a multi-party arrangement where one entity supplies to a second entity the service of providing treatment to the individual patient is not a supply of hospital treatment as the recipient of the supply is not the individual patient. The private hospital in your case contracts you to supply services and therefore the fees you receive from the hospital are consideration for supplies you make to the hospital. Medicare benefit is not payable in respect of your supplies of services to the hospital. You are licensed as a medical practitioner under a State or Territory law that provides for the registration or licensing of medical practitioners. Therefore, you are a medical practitioner. As the fees are consideration for supplies you make to the hospital, the hospital is the recipient of the relevant supplies. The services you supply to the hospital are not for the treatment of the hospital. Therefore, the supplies you make in return for the fees are not for the treatment of the recipient of the supply. Hence, the supplies you make in return for the fees are not supplies of medical services for the purposes of subsection 38-7(1) of the GST Act. Therefore, you do not make GST-free supplies under subsection 38-7(1) of the GST Act in return for the fees. The supplies you make in return for the fees are not supplies of hospital treatment as the recipient of the supplies you make in return for the fees (the hospital) is not the individual patients. Therefore, you do not make GST-free supplies under subsection 38-20(1) of the GST Act in return for the fees. The private hospital is not an insurance company, compulsory third party scheme operator or Australian government agency. Hence, you do not meet the requirements of subsection 38-60(1), subsection 38-60(2) or subsection 38-60(3) of the GST Act. Therefore, you are not making GST-free supplies to the hospital under section 38-60 of the GST Act. There are no other provisions of the GST Act under which your supplies to the hospital are GST-free. GST registration Section 23-5 of the GST Act provides that an entity is required to be registered for GST if: (a) it is carrying on an enterprise, and (b) its GST turnover is $75,000 or more. You are required to be registered for GST because you are carrying on an enterprise and your GST turnover is $75,000 or more. Therefore, you meet the requirement of paragraph 9-5(d) of the GST Act. (Note that if you made GST-free supplies for consideration, these supplies would be included in the GST turnover calculation.) As you meet all of the requirements of section 9-5 of the GST Act, you are making taxable supplies to the hospital. Therefore, GST is payable on the fees that the hospital pays you.