GST issues registers

Health industry partnership

Issue 1 - Medical services

Skip to first issue

(a) added, (u) updated, (w) withdrawn

1.a '*Medical services'

Also refer to 'To whom is the supply made (who is the recipient of the supply)?' in Issue 3 for detailed discussion of this issue.

Related questions - The following questions explore what is within the concept of '*medical service' as referred to in section 38-7. None of the following questions and answers should be read in isolation but rather as part of the whole of the information contained within this document.

1.a.1. What is the GST position of the provision of medico-legal reports or opinions (including witness evidence) for use in litigation or otherwise? Does the GST position vary if the provision of the medico-legal report or opinion is provided directly to a patient for use by a patient; or if provided to a third party for their use in legal proceedings?

For source of ATO view, refer to:

•

issue 1.a of this issues register

•

part 3 of GSTR 2006/9 - Goods and services tax: supplies.

A service for which a Medicare benefit is payable, is GST-free under the first limb.

However a service for which a Medicare benefit is not payable, must be addressed under the second limb of the definition of 'medical service'. It is the ATO view that the provision of a medico-legal report or assistance as an expert medical witness in litigation will not be GST-free under the second limb of the definition of 'medical service'. They are not GST-free as neither involves 'appropriate treatment of the *recipient of the supply'. This position does not change if the particular report is provided to the patient or directly or indirectly to a third party.

1.a.2. What is the GST status of reports prepared by medical practitioners for their patients to be used by their patients for gaining vocational qualifications?

For source of ATO view, refer to:

•

issue 1.a of this issues register

•

part 3 of GSTR 2006/9 - Goods and services tax: supplies.

A service for which a Medicare benefit is payable, is GST-free under the first limb.

However if no Medicare benefit is payable, a medical examination for the purposes of preparing a report and the actual preparation of the report for the gaining of vocational qualifications will not be 'appropriate treatment' under the second limb. Such supplies are not GST-free under the second limb because they are not undertaken predominantly for the purpose of preserving, restoring or improving the physical or psychological wellbeing of the patient and are completed for furnishing to a third party.

1.a.3. Is a medical examination of a patient for the purpose of determining the fitness of that patient to undertake an activity such as flying or diving taxable? In this case the patient has not decided whether or not to undertake the activity - the outcome of the medical examination will be used by the patient to determine whether to pursue the activity further or not. The patient pays for the examination (that is no Medicare rebate is paid).

For source of ATO view, refer to:

•

issue 1.a of this issues register

•

paragraph 155 in part 3 of GSTR 2006/9 - Goods and services tax: supplies.

If no Medicare benefit is payable, the first limb of the definition of 'medical service' in section 38-7 will not apply. Therefore it will only be GST-free if the second limb of the definition applies, that is, if it would be generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

Therefore where a patient initiates a medical examination to determine whether their physical fitness is at a level safe enough for them to participate in an activity, the examination will be GST-free if generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

In contrast, if a medical examination is undertaken as a requirement of a regulatory authority or state or federal law, the examination as well as any subsequent report will be a taxable supply. In this situation, the medical examination is not considered to constitute appropriate treatment for the recipient of the supply.

1.a.4. Is GST payable for an examination and report of fitness (where the medical practitioner completes a pro-forma which has been supplied by the regulatory authority for a private pilot's licence (not vocationally related)? The patient pays for the examination.

For source of ATO view, refer to:

•

issue 1.a of this issues register

•

part 3 of GSTR 2006/9 - Goods and services tax: supplies.

A medical examination and provision of a pro-forma report in relation to a private pilot's licence, will be a taxable supply where no Medicare benefit is payable.

In this situation, the examination and writing of the report does not involve the 'appropriate treatment of the recipient of the supply'. Accordingly if a medical examination and report completion is undertaken as a requirement of the regulatory authority, the examination as well as the subsequent report will be a taxable supply.

1.a.5. At what point does a new procedure become 'generally accepted' in the definition of '*medical service' in section 195-1? Is it at the time of publication in a reputed medical journal, when recommended by the relevant Australasian medical college or when adopted by MSAC for incorporation in the Medicare Benefit Schedule?

1.a.6. What is the GST position where the provision of actual treatment to a patient is paid for by a third party?

For source of ATO view, refer to paragraph 177 onwards in part 3 of GSTR 2006/9 - Goods and services tax: supplies.

Ordinarily, it does not matter that the patient (who is the recipient of the supply) does not provide the consideration for the supply (section 9-15(2)). Provided all the necessary elements of section 38-7 (especially the requirements in relation to 'recipient of the supply') are met it will be a GST-free supply.

The case of Federal Commissioner of Taxation v Secretary to the Department of Transport (Vic) [2010] FCAFC 84; 2101 ATC 20-196 illustrated that, in some cases, the payer may also be the recipient of a supply based upon the one set of activities. That is, depending on the arrangement or framework, the medical practitioner may make a supply to both the patient and the payer (Refer to Proposition 15 of GSTR 2006/9).A payer will be the recipient of a supply where, pursuant to an agreement between the payer and a medical practitioner, there is a binding obligation between the medical practitioner and the payer for the medical practitioner to provide the thing to the patient.

In the absence of a binding obligation, there may still be a supply by the medical practitioner to a payer when taking into account the factors listed in paragraph 221B of GSTR 2006/9.

From 1 July 2012, where the payer is an insurer, an operator of a statutory compensation scheme or compulsory third party scheme (scheme operator), or an Australian government agency, the supply to the payer will be GST-free to the extent that the underlying supply of the health service to the patient is a GST-free health supply under Subdivision 38-B (section 38-60). For administrative ease however, the parties may agree for the supply to the payer, or supplies of a kind that include that supply, not to be treated as GST-free (section 38-60(4)).

Where a payer is not an insurer, a scheme operator or an Australian government agency, the supply to the payer will generally not be a GST-free health supply.

Example

ABC Health Fund has a pre-existing arrangement with a medical practitioner for the supply of goods and services to settle claims made under their insurance policies.

The arrangement outlines what both parties need to do when the medical practitioner treats an ABC Health Fund member. Under the arrangement, the payment to the medical practitioner from ABC Health Fund is for the supply made by the medical practitioner to ABC Health Fund of supplying medical treatment to the ABC Health Fund member.

The supply by the medical practitioner to ABC Health Fund is GST-free to the extent that the supply of the medical treatment to the ABC Health Fund member is a GST-free supply under section 38-7.

1.a.7. What is the GST status of medical services provided in Australia to non-Australian patients?

Non-interpretative - straight application of the law.

A *medical service supplied in Australia to a non-Australian patient will be GST-free under the second limb, provided it is 'appropriate treatment' and the other elements of section 38-7 are met.

1.a.8. Is the gap between the schedule fee and the actual fee subject to GST?

Non-interpretative - straight application of the law.

The gap will be GST-free if the service is one for which a Medicare benefit is payable. The fact that the amount charged is in excess of the schedule fee will not alter the GST-free status of the service.

1.a.9. Who is the recipient of a supply of diagnostic imaging (including x-rays) and pathology services?

For source of ATO view, refer to the example in paragraph 118 and general principles in part 3 of GSTR 2006/9 - Goods and services tax: supplies.

The provision of diagnostic imaging (including x-rays) and pathology examinations and consequent results will be GST-free where the elements of section 38-7 are satisfied. Where a Medicare benefit is payable, the supply will be GST-free. If a Medicare benefit is not payable the supply must be addressed under the second limb of the definition of 'medical service' in section 195-1 of the GST Act. The second limb of the definition of '*medical service' requires the recipient to be identified. This question focuses on identifying the recipient of the supply in the question.

In relation to private patients and diagnostic imaging or pathology services, it is understood that referral requests are generally made by a medical practitioner and the results are provided to that practitioner for interpretation, or to the patient for interpretation by that practitioner. The x-ray or pathology is a separate supply provided to the patient (as the recipient of the supply) and is not provided on behalf of the referring practitioner. The patient can choose whether or not to attend for the x-ray or pathology service and, especially in relation to pathology, the patient can request that the results be provided to other medical practitioners for that patient's treatment.

However, where a supply of diagnostic imaging and pathology services is contracted out to another entity (for example contracted out by a hospital to a diagnostic imaging or pathology contractor), there will be two supplies. The first supply is from the contractor to the hospital and the second supply is from the hospital to the patient.

The nature of the supply by the contractor to the hospital is not 'appropriate treatment' of the '*recipient of the supply' under section 38-7 because the recipient of the supply is the hospital. Accordingly, the supply will not be GST-free pursuant to section 38-7.

However, in relation to the supply by the hospital to the patient, the patient is the recipient and, provided that the other elements of section 38-7 are satisfied, the supply will be GST-free.

1.a.10. Will pathology tests and x-rays, for which a Medicare benefit is not payable, be subject to GST?

Non-interpretative - straight application of the law.

The question raises the application of the second limb of the definition of a '*medical service' in section 38-7. If the pathology test or x-ray is not for an excluded professional service (for example in relation to tattoo removal) or rendered for cosmetic reasons, it will be GST-free.

The service must be performed by a '*medical practitioner or *approved pathology practitioner' and be 'generally accepted in the medical profession as being necessary for the appropriate treatment of the *recipient of the supply'.

1.a.11. Are massage services GST-free where a medical practitioner has referred the client?

For source of ATO view, refer to:

•

issue 1.a of this issues register

•

part 3 of GSTR 2006/9 - Goods and services tax; supplies.

This question raises the application of the second limb of the definition of a '*medical service' in section 38-7. The phrase 'on behalf of' in the second limb of the definition of '*medical service' means the performance of a component of the service provided by a practitioner that is not necessarily supervised by that practitioner. An example is where a laboratory technician assists in undertaking pathology testing of specimens.

However, 'on behalf of' does not include a service performed on referral by another person. A service performed on referral by another person, is not a component of the supply being provided by the first practitioner. The service being provided by the second person will be a separate supply, the GST-free status of which must be examined by reference to the supply by that second person.

A referral, in itself, will not render the subsequent supply GST-free. A massage service will be a GST-free *medical service if either: a Medicare benefit is payable; or it is undertaken by a *medical practitioner (as defined in the GST Act) and the practitioner is skilled in the provision of this supply and such treatment is generally accepted by the profession as being appropriate treatment.

Additionally, under 'Issue 2' of this Log, a supply of a massage service is not a listed service for section 38-10 and will not be GST-free under that section unless it is:

a.

supplied by a '*recognised professional' as defined in section 195-1

b.

is in relation to one of the table listed services such as 'Physiotherapy'

c.

is 'generally accepted in that profession as being necessary for the appropriate treatment of the *recipient of the supply'.

1.a.13. What is the GST status of the provision of services by a medical practitioner (for example visiting medical officer) to a hospital patient?

For source of ATO view, refer to:

•

Part 3 of GSTR 2006/9 - Goods and services tax: supplies

•

GSTD 2012/4 - Goods and services tax: what is 'hospital treatment' for the purposes of section 38-20 of the A New Tax System (Goods and Services Tax) Act 1999?

It is understood there are a number of different arrangements that may be entered into between hospitals, medical practitioners and patients. Given this the following three arrangements are addressed:

1.

a medical practitioner is employed by a hospital or enters into a 'voluntary agreement' with the hospital and the hospital supplies those services to a patient

2.

a medical practitioner to whom (1) does not apply supplies services to a hospital and the hospital supplies those services to a patient

3.

a medical practitioner supplies services to a private patient in hospital.

The above arrangements focus upon the application of section 38-20 (hospital treatment) and section 38-7 (medical services).

First arrangement

The supply of the service by the hospital to the patient will be GST-free under section 38-20 where the necessary elements of that section are satisfied.

Employee

Where a medical practitioner who is an individual is employed by a hospital, it will not be a taxable supply from the medical practitioner to the hospital (section 9-20(2)(a)). To be a taxable supply, it is necessary for an enterprise to be undertaken and for the purposes of the GST Act an employee does not carry on an enterprise.

Voluntary agreement

Where a medical practitioner performing work or services for a hospital is not a hospital employee, but is registered for GST and enters into a 'voluntary agreement' with the hospital, it will not be a taxable supply from the medical practitioner to the hospital (section 113-5). For this option to apply, it is necessary that the supply by the medical practitioner would have otherwise been a taxable supply and would have been a creditable acquisition by the hospital if not for the voluntary agreement.

A 'voluntary agreement' is a written agreement between an individual medical practitioner and a hospital. The hospital is required to withhold an amount from payments to the individual medical practitioner similar to withholdings made from wages to employees. To be able to enter into a 'voluntary agreement', it is necessary that the payments not be subject to any other type of withholding (for example payments made to employees are required to have amounts withheld). The 'voluntary agreement' must be in the approved form, must quote the ABN of the individual and must state that section 12-55 of Schedule 1 to the Taxation Administration Act 1953 (which is the section dealing with 'voluntary agreements') applies to the payments. Both parties to the agreement are required to keep a copy of the agreement while the agreement is in force and for five years after the last payment is made under the agreement. Because of the voluntary nature of this voluntary agreement, either party is able to terminate the agreement by giving notice to the other party in writing.

Second arrangement

Where a medical practitioner (not being an employee or an individual who has entered into a voluntary agreement with the hospital) supplies services to a hospital and, as a result of that supply, services are provided to a patient, there will be two separate supplies:

•

a supply from the hospital to the patient

•

a supply from the medical practitioner to the hospital.

Under this arrangement, the supply by the hospital to the patient will be GST-free under section 38-20 provided that all the necessary elements of section 38-20 are satisfied.

In relation to the supply by the medical practitioner to the hospital, the hospital is the recipient of the supply. It is not considered that the supply by the medical practitioner to the hospital is 'hospital treatment' as defined in section 195-1. It is considered that '*hospital treatment' for the purpose of the GST Act is that as defined in subsection 121-5(1) of the Private Health Insurance Act 2007 andonly relates to supplies made to patients. Further, the nature of the supply by the practitioner is not 'appropriate treatment' of the '*recipient of the supply' under section 38-7 because the recipient of the supply is the hospital. The supply of services made to a hospital by the medical practitioner will represent an entity to entity transaction and, as such, it will be a taxable supply (assuming section 38-60(3) does not apply). However, this will generally have a neutral revenue impact, as the hospital will claim an input tax credit for the GST paid to the medical practitioner. Depending on the arrangement or framework, the medical practitioner may make a supply to both the hospital and the patient.

From 1 July 2012, where the hospital is an Australian government agency, the supply by the medical practitioner to the hospital may be GST-free under section 38-60(3).

Section 38-60(3) provides that if a supply (the underlying supply) by a health care provider to an individual (the patient) is either wholly or partly GST-free under Subdivision 38-B, then a supply of the service of making the underlying supply by the health care provider to the Australian government agency is GST-free to the same extent as the underlying supply.

For administrative ease, the parties may agree for the supply to the payer, or supplies of a kind that include that supply, not to be treated as GST-free (section 38-60(4)).

Third arrangement

Where a medical practitioner supplies medical services to a patient in a hospital (for example as a private patient), the supply will be a GST-free supply from the medical practitioner to the patient under section 38-20 provided that all the necessary elements of section 38-20 are satisfied.

1.a.14. Where a doctor bulk bills for a medical service and charges the patient an administration fee, what is the GST status of the charge for the administration fee?

Non-interpretative - straight application of the law.

The GST status of the administration fee depends on ascertaining the true nature of the fee.

If the administration fee is not a charge for additional services but is a charge that is made separately for overheads embodied within the service that was bulk billed for example, it will have the same character as the service that has been supplied. If the service supplied is GST-free under the second limb of the definition of *medical service, the administration fee for the overheads forming a part of that service will also be GST-free.

If the service supplied would not have been GST-free under the second limb, the administration fee for the overheads forming a part of that service will not be GST-free.

1.a.15. The Aesthetic Society of Plastic and Reconstructive Surgery has a register for breast implants. Clients who have received a breast implant are invited to be placed on to the register for a one-off fee of $20. What is the GST status of the register fee?

Non-interpretative - straight application of the law.

It is understood that the practitioner advises the patient of the existence of the register and facilitates the registration of the necessary details. It is considered that the fee will be GST-free under the second limb of the definition of a *medical service, if it is for the appropriate treatment of the patient.

1.a.16. What is the GST position in relation to checkups, immunisations, pap smears and breast-cancer screening?

Non-interpretative - straight application of the law.

Checkups, immunisations, pap smears and breast-cancer screening will be GST-free under section 38-7.

If a Medicare benefit is payable, the service is GST-free under the first limb of the definition of a *medical service.

If a Medicare benefit is not payable, these services fall within the second limb of the definition and are GST-free where all the elements of section 38-7 are satisfied.

1.a.17. What is the GST status where an 85-year-old person is seeking clearance from a doctor to enable them to drive a motor vehicle - there is a Medicare benefit available?

Non-interpretative - straight application of the law.

A service for which a Medicare benefit is payable, is GST-free under section 38-7.

1.a.18. Where a doctor supplies a GST-free medical service and separately charges a facility fee, what is the GST status of the charge for the facility fee?

Non-interpretative - straight application of the law.

Where a separate fee is charged in relation to the facilities used to perform a service, the charge for using those facilities will have the same character as the service that has been supplied.

Therefore where a doctor supplies a service for which a Medicare benefit is payable, and separately charges a facility fee for the use of the facility in which that service was supplied, that facility fee will be GST-free if the service supplied also falls within the second limb of the medical service definition.

If facilities are used to perform a taxable service, for example the removal of tattoos or for services rendered for cosmetic reasons for which a Medicare benefit is not payable, the charge for using those facilities will also be taxable and subject to GST.

If the service supplied is only partly taxable, then the charge for using the facilities in which the service was performed will be proportionately taxable as well.

1.a.19. What is the GST position of an examination for the purpose of preparing a report, prepared by a medical practitioner for a third party (that is not the patient but entities such as insurance companies, workers compensation providers, prospective employers, Government Departments etc) where the report is paid for by, and completed, for the third party?

For source of ATO view, refer to:

•

issue 1.a of this issues register

•

part 3 of GSTR 2006/9 - Goods and services tax: supplies.

A service for which a Medicare benefit is payable, is GST-free under the first limb.

However a service for which a Medicare benefit is not payable, must be addressed under the second limb. It is the ATO view that provision of a report will not be GST-free under the second limb, as it is not for the 'appropriate treatment of the recipient of the supply'.

1.a.20. There is a range of Medicare Benefits Schedule items for the various procedures involved with IVF. What is the GST status of frozen gamete/embryo storage fees?

Non-interpretative - straight application of the law.

Where a Medicare benefit is payable for frozen gamete or embryo storage fees, these fees will be GST-free.

Where no Medicare benefit is payable, frozen gamete or embryo storage fees may in certain circumstances be GST-free. These fees will be GST-free under the second limb of the definition of a *medical service, if the storage is facilitated by a medical practitioner and is part of the appropriate treatment of the recipient of the supply.

However if a separate entity such as a medical scientist provides a supply of storage then that supply will not be a GST-free medical service under the second limb. It will be a taxable supply.

1.a.21. What is the GST status of the reversal of a sterilisation procedure - there is a rebate for sterilisation but not reversal.

Non-interpretative - straight application of the law.

The reversal of a sterilisation procedure supplied by a medical practitioner will be GST-free under section 38-7, where it is 'generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply'. It is anticipated that for some cases, bearing in mind the medically relevant facts, such a reversal for a person would be appropriate treatment.

1.a.22. Is GST payable for an examination and report of fitness where the medical practitioner completes a pro-forma which has been supplied by a social organisation (such as a sporting club) in order for the participant to undertake a particular sporting or recreational activity? There is no regulatory requirement for a medical examination prior to the participant engaging in the proposed activity. The patient pays for the examination.

For source of ATO view, refer to:

•

issue 1.a of this issues register

•

paragraph 155 in Part 3 of GSTR 2006/9 - Goods and services tax: supplies.

This question focuses on whether the examination is a 'medical service' under section 38-7 as defined in section 195-1, and will be GST-free.

If a Medicare benefit is payable, the examination will be GST-free.

If no Medicare benefit is payable, a medical examination to determine a patient's fitness to undertake an activity will be GST-free if it would be generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply. As the patient is engaging the medical practitioner, it is considered that the patient will be the recipient of the supply.

Therefore, where a patient initiates a medical examination to determine whether their physical fitness is at a level safe enough for them to participate in an activity, the examination will be GST-free if generally accepted in the medical profession as being necessary for the appropriate treatment of that patient.

In contrast, if a medical examination is undertaken as a requirement of the social organisation before the person undertakes the activity, the examination as well as any subsequent report or pro-forma will not be a GST-free supply. In this situation, the medical examination is not considered to constitute appropriate treatment for the recipient of the supply.

1.a.23. Where an interpreter is required for a GST-free medical or other health service, what is the GST status of the interpreting services?

Non-interpretative - straight application of the law.

The supply of interpreter services is not a GST-free supply under the Health provisions.

However, where a medical practitioner or recognised professional requires an interpreter for a consultation and it is a supply of service to that medical practitioner or recognised professional, the supply may be GST-free to the patient if the medical practitioner or recognised professional passes that cost on to the patient as part of a GST-free medical or other health service. Subject to the requirements of a taxable supply, the interpreter services to the practitioner may be subject to GST. If so, the practitioner will be entitled to an input tax credit for the GST paid.

In this situation, the interpreting services will form part of the overheads embodied within the GST-free service.

In contrast, if a patient engages an interpreter for a consultation, the supply of the interpreting service to the patient will not be GST-free.

1.a.24. A Medical Practitioner provides a service involving the testing of employees of a meatworks for Q-Fever and if necessary, vaccination of the employees. The employer company requires all employees to have the tests and if appropriate, the vaccination. A Medical Practitioner bills the company on a per patient/service basis. What is the GST status of the service? Would the GST status of the service be different if the service was provided at the sole option of the employee?

For source of ATO view, refer to Part 3 of GSTR 2006/9 - Goods and services tax: supplies.

A medical practitioner will be making a supply to the employer (and the employer will be the recipient of that supply) where:

•

the employer engages the medical practitioner to provide something to them or to someone else (for example their employee)

•

the employer, by agreement with the medical practitioner, determines what is required to be provided to them or to the employee and

•

either

•

the agreement creates a binding obligation between the employer and the medical practitioner for the thing to be provided to them or to the employee or

•

in the absence of a binding obligation, the factors listed in paragraph 221B of GSTR 2006/9 in combination indicate that the medical practitioner is making a supply to the employer (payer), being the service of testing and vaccinating the employee.

This will be the case regardless of whether the employer requires the employee to be tested and/or vaccinated or whether it is at the option of the employee. The supply of the testing services as well as any subsequent reports will be a taxable supply where no Medicare benefit is payable. Where the medical practitioner is registered or required to be registered for GST, the supply will be a taxable supply. However, the employer will generally be entitled to an input tax credit.

However, where an individual, concerned with the health risks associated with their work environment, requests a medical examination by a medical practitioner, the supply will be GST-free if a Medicare benefit is payable. If no Medicare benefit is payable, it is accepted that the supply may be 'appropriate treatment' and will be GST-free where the requirements of section 38-7 are satisfied and the employee, rather than the employer, is the recipient of the supply (for a discussion of these requirements, refer to Part 1.a. and 1.b. of the Health Issues Log).

1.a.25 A surgeon, acting as agent for the patient, engages the services of a medical practitioner as a surgical assistant. After the operation has been performed, at the request of the surgical assistant, the surgeon bills the patient and includes both the surgeon's fee and the surgical assistant's fee. When payment is received, the surgeon passes on the surgical assistant's fee which was included in the invoice to the patient. The surgeon does not charge an administration fee for handling the billing, and so on. Does the transaction between the surgeon and the surgical assistant attract GST?

For source of ATO view, refer to Part 3 of GSTR 2006/9 - Goods and services tax: supplies

This question focuses on identifying:

•

Whether there is a supply by the surgeon to the patient and a supply by the surgical assistant to the patient (which is merely billed through the surgeon), or

•

Whether there is a supply by the surgical assistant to the surgeon and the surgeon supplies all of the services to the patient.

In determining the GST treatment of the services provided by the surgical assistant and billed by the surgeon to the patient, it is necessary to identify who is the recipient of the services rendered by the surgical assistant.

On the facts provided in the question, the recipient of the services provided by the surgical assistant is the patient. The surgeon is merely a conduit through which the patient pays for the surgical assistant's services. That is, the surgeon merely collects both fees from the patient for administrative convenience. As the payment by the surgeon to the surgical assistant represents consideration for the medical services supplied to the patient, the payment will be GST-free where the requirements of section 38-7 are satisfied.

It is important to emphasise that each case needs to be considered on its merits. If the facts of a particular supply differ from those stated in this question, the supply may not be GST-free. For example, the surgical assistant will be making a supply to the surgeon rather than the patient where:

a.

the surgeon engages the surgical assistant to provide something to them or to someone else (for example, their patient)

b.

the surgeon, by agreement with the surgical assistant, determines what is required to be provided to them or to the patient

c.

the agreement creates a binding obligation between that surgeon and the surgical assistant for the thing to be provided to them or to the patient.

1.a.26 What is the GST status of supplies made by non-employee medical practitioners under the following arrangements with the Australian Defence Force (ADF):

For source of ATO view, refer to Part 3 of GSTR 2006/9 - Goods and services tax: supplies.

1.

Contract Health Practitioner (CHP): a medical practitioner is engaged to provide services and treatment to military personnel in a Defence establishment, normally where a uniformed medical practitioner is not available and a vacancy of up to 12 months exists within a Defence establishment.

2.

Sessional Contract Practitioner (SCP): a medical practitioner is engaged for a series of agreed sessions to provide services not available in ADF Health Facilities.

3.

Fee for Service (FFS): the ATO understands that no standard arrangement exists, medical practitioners being engaged at a local level for individual consultations at their usual fees.

It is considered that where no Medicare benefit is payable because the ADF pays for the services provided, under the CHP, SCP and FFS arrangements, a medical practitioner makes a supply to the ADF where:

a.

the ADF engages the medical practitioner to provide something to them or to someone else

b.

the ADF, by agreement with the medical practitioner, determines what is required to be provided to them or to someone else

c.

the agreement creates a binding obligation between the ADF and the medical practitioner for the thing to be provided to them or to someone else or, in the absence of a binding obligation, taking the factors listed in paragraph 221B of GSTR 2006/9 into account, the medical practitioner is considered to make a supply to the ADF that involves a supply by the medical practitioner to the military personnel.

Depending on the arrangement or framework, the medical practitioner may make a supply to both the military personnel and the ADF.

From 1 July 2012, as the ADF is an Australian government agency, the supply by the medical practitioner to the ADF may be GST-free under section 38-60(3).

Section 38-60(3), provides that if a supply (the underlying supply) by a health care provider to an individual (the patient) is either wholly or partly GST-free under Subdivision 38-B, then a supply of the service of making the underlying supply by the health care provider to an Australian government agency is GST-free to the same extent as the underlying supply.In relation to the FFS arrangement, where the requirements in paragraphs (a) to (c) above are not met, there is generally one supply by the medical practitioner to the patient for which the ADF provides consideration. This supply is GST-free where the medical profession would consider the service necessary for the appropriate treatment of the patient as recipient of the supply, and the other requirements of section 38-7 are met.

1.a.27 Dr O G owns and operates a private obstetrics practice, undertaking procedures in both public and private hospitals. Dr O G will be away for the delivery of one of his pregnant patients who he has been attending to during the course of her pregnancy. Dr O G enters into an arrangement with Dr Standin whereby Dr Standin performs the delivery at the hospital for Dr O G's patient. Dr Standin bills the patient in Dr O G's name and receives 80% of the fee charged to the patient -the remaining 20% goes to Dr O G.

For source of ATO view, refer to Part 3 of GSTR 2006/9 - Goods and services tax: supplies.

1.

Who is responsible for charging and collecting GST?

2.

What is/are the criterion(a) used in determining the liability for collecting and charging GST as between Doctors O G and Standin?

3.

What further information (if any) is required in order to determine GST liability?

4.

Does the name of the biller have a material impact on the GST status?

5.

What should Doctors O G and Standin do to ensure that the GST liability is appropriately clarified to the satisfaction of the ATO?

1. Who is responsible for charging and collecting GST?

Under the GST Act, the supplier of goods and services is liable to remit GST on supplies made.

The facts of each individual case, including any written or oral agreements and the surrounding circumstances, will determine the parties to the transaction, the supply made between the parties, the status of each supply and the liability for GST. The description given by the parties may not of itself be determinative.

The end supply may consist of a series of transactions which in themselves are individual supplies. The application of the GST Act must be considered in relation to each supply, in other words, on a supply by supply basis.

In the current situation, it is considered important to determine who is the supplier of the services to the patient, or whether a separate arrangement exists between Doctors O G and Standin in relation to providing the service to the patient.

In the present case, from the patient's perspective, she has received a medical service, ostensibly from Dr O G. However this does not dictate the GST status of the supply between Dr O G. and Dr Standin, which can only be determined by reference to the arrangements made between the Doctors. On the facts it appears that Dr Standin is not acting as agent for Dr O G. but is an independent sub-contractor, which is evidenced by the fact that Dr Standin receives 80% of the fee. Dr Standin would have to remit one-eleventh of this amount. It is a matter of contract between Dr Standin and Dr O G. whether the amount is grossed up to take into account GST. Dr O G. will be entitled to an input tax credit.

The fact that the patient didn't have any arrangement with Dr Standin indicates that Dr Standin was not engaged by the patient to provide a service to her independent of Dr O G's previous involvement during the course of the pregnancy. It is evident from the above that the name of the biller does not necessarily dictate the GST status of the supplies between the two doctors.

2. What is/are the criterion(a) used in determining the liability for collecting and charging GST as between Doctors O G and Standin?

Section 9-40 of the GST Act establishes that the supplier is liable to remit GST on any taxable supplies made.

As indicated in the answer in (a) above, the facts of each individual case, including any written or oral agreements and the surrounding circumstances, will determine the parties to the transaction, the supply made between the parties, the status of each supply and the liability for GST.

3. What further information (if any) is required in order to determine GST liability?

Reference should be made to the concepts in (a) and (b) above.

4. Does the name of the biller have a material impact on the GST status?

As indicated in (a) above, the name of the biller does not necessarily dictate the GST status of the supplies between the two Doctors.

The name of the biller will have material impact where it is evidence of the entity that is supplying the service to the patient (as opposed to performing the service) and evidence that the entity is entitled to seek recovery from the patient in their own name.

5. What should Doctors O G and Standin do to ensure that the GST liability is appropriately clarified to the satisfaction of the ATO?

Private binding rulings may be sought in relation to other situations.

Subject to their own advice, Doctors O G and Standin may wish to consider reducing their agreement to writing. The terms of the agreement could identify what supplies are contemplated, by whom each supply will be made, and to whom. However, it should be noted that any written agreement may be evidence of the factual situation but is not a replacement for the actual facts of the situation.

1.b. *Medical services rendered for cosmetic reasons

Related questions - The following questions explore what is within the concept of 'cosmetic reasons'to in section 38-7. None of the following questions and answers should be read in isolation but rather as part of the whole of the information contained within this document.

1.b.1. What is the GST status where a doctor provides an item number for a cosmetic procedure, however the health fund disallows the claim and states that it is cosmetic. Does the health funds determination of whether a procedure is cosmetic override the doctor's determination for GST purposes?

1.b.2. What is the GST status of anaesthetic services rendered to patients undergoing procedures for cosmetic reasons for which a Medicare benefit is not payable?

1.b.3. What is the GST treatment of medical photography (including x-rays) for cosmetic procedures?

For source of ATO view, refer to issues 1.b and 1.b.2 of this issues register.

To determine the GST treatment it is necessary to consider the application of the definition of '*medical service' in section 195-1 as it appears in section 38-7. The question further requires a consideration of section 38-7(2), which excludes certain cosmetic procedures.

If the medical photography is supplied by, or on behalf of, the medical practitioner and is not for an excluded professional service (for example in relation to tattoo removal) or rendered for cosmetic reasons, it will be GST-free. The service must also be generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

Where the service is one for which a Medicare benefit is payable, the service will be GST-free and it is not necessary to consider whether it is rendered for cosmetic reasons.

In relation to pathology and diagnostic imaging, it is understood that these services are performed before a cosmetic procedure and after a cosmetic procedure. Advice from the Department of Health and Aged Care is that Medicare benefits are payable under the Medicare Benefits Scheme as these services may be performed without the cosmetic procedure going ahead (before) and in relation to assessing damage (after). They have indicated that they would consider these services would satisfy the requirements for the payment of a Medicare benefit that it be clinically relevant and listed in the Medicare Benefits Schedule.

1.c. Goods supplied 'in the course of supplying' a GST-free *medical service

Related questions - The following questions explore what is within the concept of goods supplied 'in the course of supplying to him or her, a *medical service the supply of which is GST-free' for the purposes of section 38-7. None of the questions and answers should be read in isolation but rather as part of the whole of the information contained within this document.

1.c.1 During surgery a medical practitioner fits a patient with an appliance for the purpose of correcting an illness or disability. Will these goods supplied at that time be GST-free?

For source of ATO view, refer to:

•

issue 1.c of this issues register

•

GSTD 2012/4 - Goods and services tax: what is 'hospital treatment' for the purposes of section 38-20 of the A New Tax System (Goods and Services Tax) Act 1999

This question requires the consideration of sections 38-20, 38-45 and 38-7 and focuses upon the supply of the goods during a surgical process.

The goods may be GST-free pursuant to section 38-45 if they are:

a.

a medical aid or appliance covered by Schedule 3 or subsequent regulation, and

b.

the medical aid or appliance is specifically designed for people with an illness or disability, and

c.

the medical aid or appliance is not widely used by people without an illness or disability.

Once an item meets all of the above criteria its supply will be GST-free. The GST-free status will apply all the way down the supply chain and not only when supplied to a person who has an illness or disability. The elements do not require the recipient of the aid or appliance to use it in a particular way. An example of medical aids and appliances that are contained in Schedule 3 are heart monitors and pacemakers (Items 1 and 2 of Schedule 3).

With effect from 26 March 2009, the definition of 'hospital treatment' changed from subsection 67(4) of the National Health Act 1953 to section 121-5 of the Private Health Insurance Act 2007. This means that goods used to manage a disease, injury or condition supplied to a hospital patient will generally be GST-free as part of hospital treatment under subsection 38-20(1).

In addition, subsection 38-20(3) also provides that a supply of goods will be GST-free if it is directly related to the supply of the GST-free hospital treatment and it is supplied by, or on behalf of, the supplier of GST-free hospital treatment. The supply of goods which are not 'directly related' to the supply of GST-free hospital treatment will not be GST-free under subsection 38-20(3).

If neither section 38-45 nor section 38-20 applies to the goods it is necessary to consider the application of subsection 38-7(3). This section requires the supply of goods be made to an individual 'in the course of supplying to him or her, a *medical service the supply of which is GST-free' and be 'made at the premises at which the medical service is supplied'. It is considered that the fitting of an appliance during the course of a surgical procedure would be provided in the course of supplying to the patient a medical service at the premises, being the hospital, at which the medical service is supplied. It is also necessary that the appliance be supplied at that same point in time as the GST-free medical service. Goods supplied to a patient prior to the *medical service, for fitting during the *medical service, will not be supplied 'in the course of supplying to him or her, a *medical service'.

1.c.2. Where an attendance takes place at a patients' premises, will any goods supplied at that time be GST-free?

Non-interpretative - straight application of the law.

Yes, goods will be GST-free if they are supplied at the premises at which the GST-free *medical service is supplied, which may in certain instances take place at the patients premises.

Additionally, in order to be GST-free the goods must be supplied at the same point in time at which the GST-free *medical service is supplied and the goods must have been either:

a.

customised or manipulated for the exclusive treatment of the illness or disability of the particular patient who is the recipient of the GST-free *medical service, or

b.

necessarily utilised as an integral part of the patient's treatment required immediately during that specific attendance.

1.c.3. What is the GST status of an appliance that is fitted to a person for the purpose of treatment of an illness or disability?

For source of ATO view, refer to issue 1.c of this issues register.

This question requires the consideration of sections 38-45 and 38-7 and focuses upon the supply of goods.

The goods may be GST-free pursuant to section 38-45 if they are:

a.

a medical aid or appliance covered by Schedule 3 or subsequent regulation, and

b.

the medical aid or appliance is specifically designed for people with an illness or disability, and

c.

the medical aid or appliance is not widely used by people without an illness or disability.

Once an item meets all of the above criteria its supply will be GST-free. The GST-free status will apply all the way down the supply chain and not only when supplied to a person who has an illness or disability. The elements do not require the recipient of the aid or appliance to use it in a particular way. An example of medical aids and appliances that are contained in Schedule 3 are heart monitors and pacemakers (Items 1 and 2 of Schedule 3).

If section 38-45 does not apply to the goods it is necessary to consider the application of section 38-7(3) which will allow the goods to be GST-free if they are supplied at the premises at which the GST-free *medical service is supplied. Additionally, the goods must be supplied at the same point in time at which the GST-free *medical service is supplied and the goods must have been either:

a.

customised or manipulated for the exclusive treatment of the illness or disability of the particular patient who is the recipient of the GST-free *medical service, or

b.

necessarily utilised as an integral part of the patient's treatment required immediately during that specific attendance.

1.c.4. What is the GST status of the purchase of copies of x-rays and other medical imaging records by patients of a hospital?

Non-interpretative - straight application of the law.

The provision of diagnostic imaging (including x-rays and medical imaging records) will be GST-free to a hospital patient where the elements of section 38-7 of a 'medical service' are satisfied.

The supply of multiple copies of x-rays or medical imaging records will be GST-free where:

a.

it is necessary for the appropriate treatment of a person

b.

is supplied to the person who is the recipient of the treatment, and

c.

the copies are supplied to that patient at the same time and at the same premises at which the GST-free medical service is supplied.

Any copies supplied after a GST-free medical service has been supplied will be taxable. The copies will not have been supplied 'in the course of' supplying a GST-free medical service.

Where the copies of the x-rays and medical imaging records are to be posted, for example to other health care providers, the supply will be GST-free provided that they are supplied at the same point in time as the GST-free medical service.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).