Class Ruling CR 2009/16
Date of effect: 30 June 2009

What this ruling is about: 1. This Ruling sets out the Commissioner's opinion on the way in which the relevant provision(s) identified below apply to the defined class of entities, who take part in the scheme to which this Ruling relates. Relevant provision(s) 2. The relevant provisions dealt with in this ruling are: Class of entities 3. The class of entities to which this Ruling applies are 'representative public dentists' (RPDs) who are assigned dental benefits by patients under the Medicare Teen Dental Plan. Qualifications 4. The Commissioner makes this Class Ruling based on the precise arrangement identified in the Class Ruling. 5. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 9 to 16 of this Ruling. 6. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to:

Class of entities or scheme: 3. The class of entities to which this Ruling applies are 'representative public dentists' (RPDs) who are assigned dental benefits by patients under the Medicare Teen Dental Plan. | Qualifications: 4. The Commissioner makes this Class Ruling based on the precise arrangement identified in the Class Ruling. 5. The class of entities defined in this Ruling may rely on its contents provided the scheme actually carried out is carried out in accordance with the scheme described in paragraphs 9 to 16 of this Ruling. 6. If the scheme actually carried out is materially different from the scheme that is described in this Ruling, then: 7. This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to: 8. This Class Ruling applies for the income year ended 30 June 2009 and subsequent years. However, this Ruling will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Ruling (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10). 9. The following description of the scheme is based on information provided by the applicant. The following documents, or relevant parts of them form part of and are to be read with the description: 10. The Medicare Teen Dental Plan (the Plan) provides financial assistance to eligible families to help assess the health of their teenagers' teeth, and to introduce preventative strategies to encourage lifetime good oral health habits. 11. The Plan operates under the statutory framework provided by the Dental Benefits Act 2008: 12. The Plan enables eligible teenagers to use a voucher to obtain an annual preventative dental check costing up to a certain value (indexed annually). 13. The dental checks must be performed by, or on behalf of, a dental provider. A dental provider is a dentist or dental specialist who is registered or licensed to practice as such under a law of a state or territory, and who is registered with Medicare Australia. 14. A dental service is rendered on behalf of a dental provider if the dental service is rendered by another person included in the relevant class of persons under the Dental Benefits Rules 2008 and if the service is provided, in accordance with accepted dental practice, under the supervision of the dental provider. Under the Dental Benefits Rules 2008, a dental service may be rendered on behalf of a dental provider by a dental hygienist, or a dental therapist. In the case of a public sector dental provider, a dental service may also be rendered on his or her behalf by another public sector dental provider. 15. The dental checks are billed under a single preventative dental check item (Item 88000) in Schedule 1 of the Dental Benefits Schedule 2008 administered by Medicare Australia. 16. All dental checks provided under the Plan by public sector dentists are bulk billed. As a result of the administrative arrangements between the Commonwealth Department of Health & Ageing, Medicare Australia and the States and Territories, and in accordance with the operation of the Dental Benefits Act 2008, and the Dental Benefits Rules 2008, this bulk billing arrangement works as follows: | Assigned dental benefits: 17. The dental benefit assigned by the patient to a RPD under the Medicare Teen Dental Plan is income according to ordinary concepts, and is assessable income of the RPD under section 6-5 of the ITAA 1997. 18. The amount included in assessable income excludes any goods and services tax (GST) component, section 17-5 of the ITAA 1997. | Deductibility of amounts paid by Medicare: 19. The amount paid by Medicare Australia to a State or Territory bank account in respect of the bulk billed dental benefit assigned to an RPD is an allowable deduction to the RPD under section 8-1 of the ITAA 1997. Commissioner of Taxation 25 March 2009 | Assigned dental benefits: 20. Section 6-5 of the ITAA 1997 provides that an amount is assessable income if it is income according to ordinary concepts (ordinary income). 21. In relation to the arrangement the subject of this ruling, the Dental Benefits Act 2008 restricts the class of persons to whom benefits may be assigned to identified dentists, who are registered or licensed to practice as dentists under a law of a state or territory and who are registered with Medicare Australia, who either themselves render the dental services giving rise to the assigned benefits, or on whose behalf such services are rendered. 22. Under the Dental Benefits Act 2008, a dental service is rendered on behalf of a dental provider if the dental service is rendered by another person included in the relevant class of persons under the Dental Benefits Rules 2008, and if the service is provided, in accordance with accepted dental practice, under the supervision of the dental provider. Under the Dental Benefits Rules 2008, a dental service may be rendered on behalf of a dental provider by a dental hygienist, or a dental therapist. In the case of a public sector dental provider, a dental service may also be rendered on his or her behalf by another public sector dental provider. 23. Under the arrangement, a dental service will be provided to a patient, either by the RPD, or, in accordance with accepted dental practice, under the supervision of the RPD, and in return for the provision of that service, the patient agrees to assign to the RPD benefits. 24. That assignment takes place pursuant to a statutory framework, by means of an approved form (DB4-DB or DB2-DB), whereby the patient assigns the benefits to the RPD who provided the services. The benefits are claimed by means of an approved form (DB1N-DB). 25. The RPD does not receive the money, because, pursuant to an agreement between the RPD and the relevant state or territory, the claimed assigned dental benefits are paid into a separately identifiable bank account, advised to Medicare by the RPD, which account is held by the relevant State/Territory Health Department which employs or contracts the RPD. 26. The RPD derives the claimed assigned benefits as income according to ordinary concepts. 27. The state or territory is not a party to the contract the RPD has with the patient, under which the provision of services gives rise to the assignment of the benefits. The statutory assignment framework is such that benefits can only be assigned to the identified registered or licensed natural person, who provided the services (or who supervised their provision). A reward for the performance of personal services in the form of the assigned benefits is income according to ordinary concepts. The fact of non-receipt does not derogate from this conclusion. The decisions in Case T44 86 ATC 366 and Ho v. Federal Commissioner of Taxation [2008] AATA 783 are in accordance with this. | The GST component: 28. The amount included in assessable income under section 6-5 of the ITAA 1997 excludes any goods and services tax (GST) component. Section 17-5 of the ITAA 1997 ensures that an amount is treated as not being assessable income (or exempt income) to the extent that it consists of an amount relating to: | Deductibility of amounts paid by Medicare: 29. Section 8-1 of the ITAA 1997 provides that you can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing assessable income and is not: 30. It is a term of the contract the RPD has with the relevant state or territory that all the claimed assigned benefits are paid directly to the state or territory. That same contract (whether of employment or not) is the framework pursuant to which the dentist provides services and is paid amounts under the contract. 31. The Full Federal Court decision in Service v. Federal Commissioner of Taxation (2000) 97 FCR 265; [2000] FCA 188; 2000 ATC 4176; (2000) 44 ATR 71 (Service) is relevant. In Service, the taxpayer was allowed a deduction for fees obtained from acting as director of other companies and as a member of various governmental bodies which he paid over to his employer company under his employment agreement. The Court held that the directors' fees paid to the company were outgoings incurred by the taxpayer in gaining or producing his assessable income from the employer. 32. It is a term of the employment or labour contract which the RPD has with the relevant state or territory that all the claimed assigned benefits are paid directly to the state or territory. Performing services under that employment or labour contract gives rise to assessable income in the RPD. The payment of the claimed assigned benefits to the relevant state or territory is incurred in gaining or producing the assessable income under the employment or labour contract. 33. The payment of the claimed assigned benefits to the relevant state or territory is an allowable deduction pursuant to Section 8-1 of the ITAA 1997. 34. The following is a detailed contents list for this Ruling: Not previously issued as a draft

Ruling: Assigned dental benefits: 17. The dental benefit assigned by the patient to a RPD under the Medicare Teen Dental Plan is income according to ordinary concepts, and is assessable income of the RPD under section 6-5 of the ITAA 1997. 18. The amount included in assessable income excludes any goods and services tax (GST) component, section 17-5 of the ITAA 1997. | Deductibility of amounts paid by Medicare: 19. The amount paid by Medicare Australia to a State or Territory bank account in respect of the bulk billed dental benefit assigned to an RPD is an allowable deduction to the RPD under section 8-1 of the ITAA 1997. Commissioner of Taxation 25 March 2009


Appendix: Assigned dental benefits: 20. Section 6-5 of the ITAA 1997 provides that an amount is assessable income if it is income according to ordinary concepts (ordinary income). 21. In relation to the arrangement the subject of this ruling, the Dental Benefits Act 2008 restricts the class of persons to whom benefits may be assigned to identified dentists, who are registered or licensed to practice as dentists under a law of a state or territory and who are registered with Medicare Australia, who either themselves render the dental services giving rise to the assigned benefits, or on whose behalf such services are rendered. 22. Under the Dental Benefits Act 2008, a dental service is rendered on behalf of a dental provider if the dental service is rendered by another person included in the relevant class of persons under the Dental Benefits Rules 2008, and if the service is provided, in accordance with accepted dental practice, under the supervision of the dental provider. Under the Dental Benefits Rules 2008, a dental service may be rendered on behalf of a dental provider by a dental hygienist, or a dental therapist. In the case of a public sector dental provider, a dental service may also be rendered on his or her behalf by another public sector dental provider. 23. Under the arrangement, a dental service will be provided to a patient, either by the RPD, or, in accordance with accepted dental practice, under the supervision of the RPD, and in return for the provision of that service, the patient agrees to assign to the RPD benefits. 24. That assignment takes place pursuant to a statutory framework, by means of an approved form (DB4-DB or DB2-DB), whereby the patient assigns the benefits to the RPD who provided the services. The benefits are claimed by means of an approved form (DB1N-DB). 25. The RPD does not receive the money, because, pursuant to an agreement between the RPD and the relevant state or territory, the claimed assigned dental benefits are paid into a separately identifiable bank account, advised to Medicare by the RPD, which account is held by the relevant State/Territory Health Department which employs or contracts the RPD. 26. The RPD derives the claimed assigned benefits as income according to ordinary concepts. 27. The state or territory is not a party to the contract the RPD has with the patient, under which the provision of services gives rise to the assignment of the benefits. The statutory assignment framework is such that benefits can only be assigned to the identified registered or licensed natural person, who provided the services (or who supervised their provision). A reward for the performance of personal services in the form of the assigned benefits is income according to ordinary concepts. The fact of non-receipt does not derogate from this conclusion. The decisions in Case T44 86 ATC 366 and Ho v. Federal Commissioner of Taxation [2008] AATA 783 are in accordance with this. | The GST component: 28. The amount included in assessable income under section 6-5 of the ITAA 1997 excludes any goods and services tax (GST) component. Section 17-5 of the ITAA 1997 ensures that an amount is treated as not being assessable income (or exempt income) to the extent that it consists of an amount relating to: | Deductibility of amounts paid by Medicare: 29. Section 8-1 of the ITAA 1997 provides that you can deduct from your assessable income any loss or outgoing to the extent that it is incurred in gaining or producing assessable income and is not: 30. It is a term of the contract the RPD has with the relevant state or territory that all the claimed assigned benefits are paid directly to the state or territory. That same contract (whether of employment or not) is the framework pursuant to which the dentist provides services and is paid amounts under the contract. 31. The Full Federal Court decision in Service v. Federal Commissioner of Taxation (2000) 97 FCR 265; [2000] FCA 188; 2000 ATC 4176; (2000) 44 ATR 71 (Service) is relevant. In Service, the taxpayer was allowed a deduction for fees obtained from acting as director of other companies and as a member of various governmental bodies which he paid over to his employer company under his employment agreement. The Court held that the directors' fees paid to the company were outgoings incurred by the taxpayer in gaining or producing his assessable income from the employer. 32. It is a term of the employment or labour contract which the RPD has with the relevant state or territory that all the claimed assigned benefits are paid directly to the state or territory. Performing services under that employment or labour contract gives rise to assessable income in the RPD. The payment of the claimed assigned benefits to the relevant state or territory is incurred in gaining or producing the assessable income under the employment or labour contract. 33. The payment of the claimed assigned benefits to the relevant state or territory is an allowable deduction pursuant to Section 8-1 of the ITAA 1997.


What this Ruling is about | NOT LEGALLY BINDING SECTION: | A public ruling is an expression of the Commissioner's opinion about the way in which a relevant provision applies, or would apply, to entities generally or to a class of entities in relation to a particular scheme or a class of schemes. | If you rely on this ruling, the Commissioner must apply the law to you in the way set out in the ruling (unless the Commissioner is satisfied that the ruling is incorrect and disadvantages you, in which case the law may be applied to you in a way that is more favourable for you - provided the Commissioner is not prevented from doing so by a time limit imposed by the law). You will be protected from having to pay any underpaid tax, penalty or interest in respect of the matters covered by this ruling if it turns out that it does not correctly state how the relevant provision applies to you. | Appendix 2 - Detailed contents list


Related rulings: TR 2006/10
Legislative references: ITAA 1997 ITAA 1997 6-5 ITAA 1997 8-1 ITAA 1997 17-5 Copyright Act 1968 Dental Benefits Act 2008 Dental Benefits Rules 2008
Case references: Ho v. Federal Commissioner of Taxation [2008] AATA 783 2008 ATC 10-044
Subject references: business expenses business income deductions & expenses dental practitioners health professionals medical practitioners
Other references: Dental Benefits Schedule 2008