GST issues registers

Health industry partnership

Issue 7 - General concepts from A New Tax System (Goods and Services Tax) Act 1999

(a) added, (u) updated, (w) withdrawn

7.a.1. Consultancy to a rehabilitation provider provided on a contractual basis

Non-interpretative - other references (refer to GSTR 2006/9 - Goods and services tax: supplies).

Where a service is provided to a third party the supply to that third party will be a taxable supply (unless that practitioner is an employee of that third party or section 38-60 applies). The supply of a service by that third party to a patient will be GST-free if the practitioner performing the service on behalf of that third party is:

•

a *medical practitioner or an *approved pathology practitioner and a Medicare benefit is payable, or

•

a *medical practitioner/approved pathology practitioner/*recognised professional and it is generally accepted in that profession as being necessary for the appropriate treatment of the patient.

If the third party is an insurer, an operator of a statutory compensation or compulsory third party scheme or an Australian Government agency, the supply by the medical practitioner, approved pathology practitioner or recognised professional is GST-free under section 38-60 to the extent that the underlying supply to the patient is GST-free under Subdivision 38-B. See issue 1.a.6.

If the service is being supplied to a patient and the third party is only paying for the service (and is not the recipient of a supply), it will be GST-free.

7.a.3. Are autopsies GST-free?

Non-interpretative - straight application of the law.

An autopsy is requested by a third party and does not involve 'appropriate treatment', as such it will be a taxable supply.

7.a.4. What is the GST status of fees charged for being on call?

Non-interpretative - other references (see GSTR 2006/9 - Goods and services tax: supplies).

The fees are subject to GST. The supply is not appropriate treatment and the recipient is a third party.

7.a.5. What is the GST status of police drug testing, water and food testing, pre employment drug screening and veterinary tests?

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

Drug testing, for either police or employers, are provided as a requirement of the Police Department or employers respectively for the purposes of the Police Department or employers respectively and does not involve 'appropriate treatment'. As such, the recipient will be the Police Departmentor employers respectively and they will be taxable supplies.

General water and food testing are not a 'treatment of the recipient' andare not GST-free under subdivision 38-B.

The performance of services on animals will not be 'appropriate treatment of the recipient of the supply'. '*Recipient' is defined in section 195-1 as '… the entity to which the supply was made' and the definition of 'entity' in section 184-1(1) does not include animals.

7.a.6. Some Herbalists and naturopaths work as contractors to stores. It is understood that if a practitioner operates as an incorporated entity, the services to the store attract GST. If the practitioner is not registered for GST will the store will need to withhold tax from the gross payment for practitioner services.

Non-interpretative - straight application of the law.

In accordance with section 12-190 of Schedule 1 of the Taxation Administration Act 1953, the store may be required to withhold an amount from the payments it makes where the supplier has not quoted an ABN.

If the practitioner has supplied an ABN but is not required to be registered then there would be no GST liability for the practitioner and the store will not need to withhold.

If the practitioner has supplied an ABN and is required to be registered, then there would be a GST liability for the practitioner and the store will not need to withhold.

For further information refer to No ABN withholding - questions and answers

7.a.7. Are payments under the Practice Incentives Program, General Practitioner Immunisation Incentives Program, Australian Childhood Immunisation Register Information (Notification) Program and Rural Retention Program consideration for a taxable supply?

For source of ATO view, refer to GSTR 2012/2 - Goods and services tax: financial assistance payments.

No, pursuant to GSTR 2012/2, payments under the Practice Incentives Program, General Practitioner Immunisation Incentives Program, Australian Childhood Immunisation Register Information (Notification) Program and Rural Retention Program are not consideration for supplies, and therefore cannot be consideration for taxable supplies.

Payments under these programs are made by the Health Insurance Commission (known as 'Medicare Australia' as from 1 October 2005).

Applicants for these payments do not enter into binding obligations with the payer to do anything for which the payment is consideration.

Applicants for these payments lodge an application for payment of an entitlement or automatically receive a payment based on the initial application and information held by the payer. While the information contained in the application for payment is a supply, the information contained in the application is not the purpose for which the payment is paid. For GST purposes the payment is therefore not consideration for the information contained on the application.

There is nothing 'given up' by the grantee in exchange for the grant. The application is machinery to take advantage of an entitlement.

7.a.8. What is the appropriate process for determining the GST status of financial assistance to doctors administered by the Department of Health and Community services?

For source of ATO view, refer to:

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GSTR 2012/2 - Goods and services tax: financial assistance payments

•

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

GSTR 2012/2 addresses financial assistance payments and provides information for determining whether the financial assistance is a taxable supply. This Ruling examines the elements of section 9-5 which deals with taxable supplies.

Whilst the Ruling examines all of the elements of a 'taxable supply' and looks at various types of grants, many of the issues in relation to providing funds to doctors relate to:

a.

whether the funds provided are consideration for a supply by the doctor to the grantor, or

b.

whether the funds provided are consideration for a supply by the doctor to a patient.

Generally, and without limiting the effect of GSTR 2012/2, where consideration is provided by a third party for a GST-free supply from a doctor to a specific patient, the funds provided will not be consideration for a supply by the doctor to the third party payer. Section 9-15(2) states that it does not matter who provides the consideration. For example, Medicare may provide the consideration for the supply of medical services by a doctor to a specific patient and this will not be a supply by the doctor to Medicare.

However, it should be noted that performance of a service by a doctor on a patient will not always represent a supply from the doctor to the patient. In some circumstances, the doctor will be making a supply to another entity (for example a hospital) and that other entity will make the supply to the patient but the doctor performs the service on the patient. In this situation, the supply is by the doctor to the other entity and is a taxable supply where the other elements of section 9-5 are satisfied. In some instances, depending on the arrangement or framework, the medical practitioner may make a supply to both the other entity and the patient. Refer to Issues 1.a.6. and 1.a.13 for further explanation.

From 1 July 2012, where the other entity 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 other entity 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 other entity, or supplies of a kind that include that supply, not to be treated as GST-free (section 38-60(4)).

If the funds provided are for the purpose of providing services to patients in general (including entry into an obligation to provide services) or for assisting in the operation of the practice or for the provision of information to the third party, then it is considered that this is not consideration for a supply to a patient. Generally, and without limiting the effect of GSTR 2012/2, it would be expected that the funds provided will be consideration for a supply by the doctor to the grantor and will be a taxable supply where the other elements of section 9-5 are satisfied.

Where the status of the funds provided are not addressed above, reference should be made to GSTR 2012/2. If the GST status is not apparent from reading the Ruling, it is suggested that the doctor request a private ruling.

7.a.9. What is the situation with internet purchases of goods from overseas by individuals or bulk purchases of goods by organisations for the treatment or amelioration of a condition, which would be GST-free if supplied by a medical practitioner?

Non-interpretative - straight application of the law.

If the goods supplied satisfy the requirements of section 38-45, the goods will be GST-free at all points in the supply chain.

If the goods are supplies of drugs or medicinal preparations, section 38-50 requires that the goods be supplied to an individual for their own consumption. It is considered that the only drugs or medicinal preparations that may be supplied to an individual for their own consumption that will be GST-free, where not supplied by a medical practitioner, dental practitioner or pharmacist, are drugs that are supplied in small quantities which would be Schedule 2 drugs if purchased in a larger quantity. As the supply is for bulk goods, it is considered unlikely that this condition will be satisfied.

If the goods are those to which section 38-7(3), section 38-10(3) or section 38-10(4) apply, the supply will not be GST-free as the goods have not been supplied 'in the course of supplying' a GST-free medical or other health service and have not been supplied at the premises at which the service was supplied.

7.a.10. I'm a health professional who does a considerable amount of voluntary work on a professional basis. Part of this is altruistic and the part is marketing oriented. Can I claim input tax credits for expenditure I incur on those voluntary activities that are considered GST-free if I was to charge for them?

Non-interpretative - straight application of the law.

If these activities are performed in carrying on your enterprise, then an input tax credit may be available if the other conditions in section 11-20 are satisfied. Section 11-20 provides that you are entitled to an input tax credit for any *creditable acquisition that you make.

Pursuant to section 11-5, you make a *creditable acquisition when:

a.

you acquire anything solely or partly for a *creditable purpose, and

b.

the supply of the thing to you is a *taxable supply, and

c.

you provide, or are liable to provide, *consideration for the supply, and

d.

you are *registered, or *required to be registered.

*Creditable purpose is in turn defined in section 11-15(1) which provides you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. You do not acquire for a creditable purpose to the extent that the thing acquired is used for producing input tax supplies (section 11-15(2)(a)) or it is used for a private or domestic nature (section 11-15(2)(b)).

The amount of the input tax credit is reduced if it is only partly creditable (section 11-25). It will be partly creditable where it is only partly for a creditable purpose or you provide, or are liable to provide, only part of the consideration for the supply (section 11-30).

7.a.11. Can a self-employed health practitioner claim an input tax credit on CPD fees?

Non-interpretative - straight application of the law.

If these activities are performed in carrying on your enterprise, then an input tax credit may be available if the other conditions in section 11-20 are satisfied. Section 11-20 provides that you are entitled to an input tax credit for any *creditable acquisition that you make.

Pursuant to section 11-5, you make a *creditable acquisition when:

a.

you acquire anything solely or partly for a *creditable purpose, and

b.

the supply of the thing to you is a *taxable supply, and

c.

you provide, or are liable to provide, *consideration for the supply, and

d.

you are *registered, or *required to be registered.

*Creditable purpose is in turn defined in section 11-15(1) which provide you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. You do not acquire for a creditable purpose to the extent that the thing acquired is used for producing input tax supplies (section 11-15(2)(a)) or it is used for a private or domestic nature (section 11-15(2)(b)).

The amount of the input tax credit is reduced if it is only partly creditable (section 11-25). It will be partly creditable where it is only partly for a creditable purpose or you provide, or are liable to provide, only part of the consideration for the supply (section 11-30).

7.a.12. Can an employer claim the GST included in CPD fees paid on behalf of an employee as an input tax credit?

Non-interpretative - straight application of the law.

If these activities are performed in carrying on your enterprise, then an input tax credit may be available if the other conditions in section 11-20 are satisfied. Section 11-20 provides that you are entitled to an input tax credit for any *creditable acquisition that you make.

Pursuant to section 11-5, you make a *creditable acquisition when:

a.

you acquire anything solely or partly for a *creditable purpose, and

b.

the supply of the thing to you is a *taxable supply, and

c.

you provide, or are liable to provide, *consideration for the supply, and

d.

you are *registered, or *required to be registered.

*Creditable purpose is in turn defined in section 11-15(1) which provide you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise. You do not acquire for a creditable purpose to the extent that the thing acquired is used for producing input tax supplies (section 11-15(2)(a)) or it is used for a private or domestic nature (section 11-15(2)(b)).

The amount of the input tax credit is reduced if it is only partly creditable (section 11-25). It will be partly creditable where it is only partly for a creditable purpose or you provide, or are liable to provide, only part of the consideration for the supply (section 11-30).

If the employee originally paid and is subsequently reimbursed by the employer, then the employer may be entitled to an input tax credit for the reimbursement. Creditable acquisitions relating to reimbursements are covered in Division 111 and require that the reimbursement be 'directly related to activities' as an employee. The reimbursement will be treated as consideration. However, it will not be a creditable acquisition if the person receiving the reimbursement is entitled to an input tax credit or it was not a taxable supply to that person. The amount of the input tax credit is dealt with in section 111-10.

7.a.13. Health professional students and trainees often stay in basic accommodation provided by the hospital (nurses' quarters) as part of their training. Hospitals charge a basic fee, and this also covers meals at staff (not public) canteens. As it is often a requirement of their training that they do stay on campus, is this short-term accommodation subject to GST?

Non-interpretative - straight application of the law.

The supply of accommodation and meals as part of the training of professional students and trainees is not GST-free under the provisions dealing with GST-free Health supplies. Also, these supplies are not GST-free under the provisions dealing with GST-free Education supplies. However, a supply of this nature may be GST-free under section 38-250 where the supplier is an endorsed charitable institution (from 1 July 2005), an endorsed trustee of a charitable fund (from 1 July 2005) or a gift-deductible entity and the supply is for consideration that is:

a.

for accommodation, less than 75% of either the market value or cost of the accommodation, or

b.

for other supplies, less than 50% of the market value or less than 75% of the cost of that supply.

Where the supply of accommodation does not satisfy the requirements of section 38-250, the accommodation will be treated in the same manner as for other accommodation:

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residential rent (section 40-35)

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supplies of residential premises by way of long-term lease (section 40-70), and

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commercial residential premises (Division 87).

7.a.14. In-house professional, clinical skills update / development programs run by a public hospital for internal staff and also for external private practitioners. Differential fees are charged. Are such course fees subject to GST?

Non-interpretative - straight application of the law.

The supply of a professional or trade course is GST-free where it is a course leading to a qualification that is an essential prerequisite:

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for entry into a particular profession or trade in Australia, or

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to commence the practice of (but not to maintain the practice of) a profession or trade in Australia.

A distinction is to be made between courses undertaken to obtain qualifications and those undertaken to maintain them. Courses to maintain qualifications - such as undertaking continuing professional development to retain membership of a professional body - are not GST-free.

For further information refer to GSTR 2003/1 - Goods and services tax: supplies that are GST-free as professional or trade courses.

7.a.15. Where an insurance provider makes payments directly to health service providers in relation to supplies to insured patients, is there any need for the insurance provider to withhold where an ABN is not provided by that health service provider?

Non-interpretative - straight application of the law.

Under the new pay as you go (PAYG) system, if a 'business' (an entity making supplies in the course or furtherance of an enterprise carried on in Australia) makes a supply to a second business and does not quote an Australian business number (ABN), the second business is required to withhold tax from the payment to the first business (section 12-190 in Schedule 1, Part 2-5 of the Taxation Administration Act 1953).

There are some exceptions from withholding for not supplying an ABN. These include:

a.

where the recipient is an individual and the payment is wholly of a private or domestic nature for that individual

b.

where the payment does not exceed $75, or

c.

where the whole of the payment is exempt income of the supplier (for example, the supplier is a charity).

Where an insurer makes a payment to the health service provider, the insurance company is generally making the payment on behalf of the patient to the health service provider for medical expenses incurred by the patient. There is no supply between the insurance company and the health provider in relation to the payment; the relevant supply occurs between the health service provider and the patient.

Generally, the supply to the patient would be private or domestic for the patient and there is no requirement for a withholding if no ABN is provided by the health provider.

It is only where the payment by the insurance provider is for a supply that is made to that insurance provider (and not payment for a supply to a patient) that there will be a requirement to receive an ABN and to withhold an amount if the ABN is not supplied.

7.a.16. Does GST apply to the facility fee charged by a hospital when a salaried staff specialist exercises a right of private practice and earns fees from private patients?

Non-interpretative - straight application of the law.

On occasion, a medical practitioner will be able to exercise a right of private practice in a hospital. The medical practitioner sees private patients and the hospital may collect the fees from the provision of the medical service. The hospital may retain a certain portion of the total fees which relate to the provision of the facility to the medical practitioner.

In this situation, the total fees for the provision of the medical services are included in the turnover of the medical practitioner. Generally, these fees will be GST-free under section 38-7.

Also, the facility fee retained by the hospital may be consideration for a taxable supply by the hospital to the medical practitioner. In this case, the amount which is retained will include a GST component which will be one-eleventh of the total amount retained.

7.a.17. Where two or more people have an expense sharing arrangement whereby common expenses are paid from a shared bank account, is there an entity (eg: an unincorporated association of persons or a partnership) that has to register for GST?

For source of ATO view, refer to:

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

•

MT 2006/1 - The New Tax System: the meaning of entity carrying on an enterprise for the purposes of entitlement to an Australian business number.

In most cases, each person in an expense sharing arrangement as outlined above,will need to be separately registered for GST.

The circumstances where an unincorporated association of persons will be considered to be carrying on an enterprise are discussed in Miscellaneous Taxation Ruling MT 2006/1.

Paragraph 50 of MT 2006/1 details some of the characteristics of an unincorporated association. An example of a model train club satisfying these characteristics is detailed in paragraphs 55-56.

By contrast, paragraphs 57-58 of MT 2006/1 provide an example of an expense sharing arrangement that does not amount to an unincorporated association of persons. It is understood that in most cases a contractual arrangement exists between the persons in the expense sharing arrangement. There is not a separate entity that has a continuing identity separate to that of the individual members. Therefore an unincorporated association will not exist. Each of the persons in the expense sharing arrangement will need to be separately registered for GST purposes where the necessary registration requirements are satisfied.

This means that where expenses are paid from a shared bank account but the parties to the account do not meet the requirements of a partnership, the input tax credits are generally claimed in proportion to the liability of those expenses. Where only one party to the account has a liability to pay the expense, that person is entitled to the input tax credits.

For example:

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two doctors (A and B) have an expense sharing contract/agreement

•

both are individually registered for GST

•

the business premise is leased by A from the building owner

•

all tax invoices in relation to the lease are made out to A, and

•

expenses are paid through a shared bank account.

In this situation, A makes the creditable acquisition of the premises from the lessor and is entitled to claim all the input tax credits on the lease payments. A simultaneously makes a taxable supply of the premises to B.

Normal attribution rules apply in relation to the taxable supply (from A to B) and the creditable acquisition (by B from A). If B is entitled to the input tax credits in relation to the acquisition of part of the premises from A, subject to the normal rules that B must hold a tax invoice (from A).

7.a.18 Where doctors share the costs of operating a practice (an association which is not a separate entity) and each doctor operates independently of the other doctors, what are the requirements for each doctor to claim input tax credits for their share of the costs?

Non-interpretative - straight application of the law.

The answer will depend upon the actual facts of the case. The entity making a creditable acquisition will be entitled to an input tax credit. Whether the entity makes taxable supplies to another entity or entities will be a question of fact.

In certain circumstances, doctors (or other people) will enter into arrangements whereby common expenses are paid from a shared bank account. The common expenses often include lease/rental payments, rates, telephone and electricity expenses.

In order to establish entitlement to input tax credits, it must be established whether there is a creditable acquisition and if so, by whom. In most instances, the manner in which invoices are presented, that is who has the liability in respect of the relevant expenses, will provide the required information.

The following scenarios, which are not necessarily the only ones that could arise, provide an example of how these type of situations may be arranged.

Scenario 1

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two doctors have an expense sharing contract/agreement

•

both are individually registered for GST

•

they have a joint bank account into which is deposited the fees received by the doctors and from which joint expenses are paid

•

they jointly lease a property for their surgery, have electricity and telephone connected

•

tax invoices for all expenses are made out to both doctors jointly, and

•

the surplus of fees received for the doctor less the proportionate share of expenses is paid to each doctor on a periodic basis.

In this situation, the basic GST rules apply (Div 11, in particular sections 11-20 to 11-30) and each doctor can claim their relevant percentage of the input tax credit on the creditable acquisitions. The contract and tax invoices made out to both parties are considered to be sufficient to support the claims.

Scenario 2

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two doctors (A and B) have an expense sharing contract/agreement

•

both are individually registered for GST

•

the business premise is leased by A

•

all tax invoices in relation to the lease are made out to A

•

expenses are paid through A's bank account, and

•

A claims an agreed percentage from B as a 'reimbursement'.

In

this situation, A is making the creditable acquisition of the premises from the lessor and is entitled to claim all the input tax credits on the lease payments. A simultaneously makes a taxable supply of an agreed percentage of the premises to B.

Normal attribution rules apply in relation to the taxable supply (from A to B) and the creditable acquisition (by B from A). If B is entitled to the input tax credits in relation to the acquisition of part of the premises from A, subject to the normal rules that B must hold a tax invoice (from A).

Scenario 3

•

two doctors (A and B) have an expense sharing contract/agreement

•

both are individually registered for GST

•

the business premise is leased by A

•

all tax invoices in relation to the lease are made out to A

•

lease expenses are paid from a joint account between A and B, and

•

A claims an agreed percentage from B as a 'reimbursement'.

In this situation, A is making the creditable acquisition of the premises from the lessor and is entitled to claim all the input tax credits on the lease payments. A simultaneously makes a taxable supply of an agreed percentage of the premises to B.

Normal attribution rules apply in relation to the taxable supply (from A to B) and the creditable acquisition (by B from A). If B is entitled to the input tax credits in relation to the acquisition of part of the premises from A, subject to the normal rules that B must hold a tax invoice (from A).

7.a.19. The following two situations represent common working arrangements between doctors and surgeries. In the first situation, Dr A and Dr B agree that Dr A will receive (or keep) 50% of Dr B's billings. In the second situation, Dr A and Dr B agree that Dr B will receive (or keep) the greater amount of $45.00 an hour or 50% of Dr B's billings. The other facts are the same for both situations:

1.

Dr A owns and operates a private medical practice and surgery.

2.

Dr A and Dr B enter an arrangement whereby Dr B practises at Dr A's surgery (but not on the basis of an employment relationship).

3.

Dr B has some existing patients who now attend Dr A's surgery (to be treated by Dr B) and Dr B also treats a proportion of new patients as they attend the surgery. If they do not express a preference, new patients are allocated by the receptionist/practice manager employed by Dr A based on the respective availability of Doctors A and B.

4.

The patients Dr B sees are billed in Dr B's name (and provider number).

5.

The medical records of all of Dr A's and Dr B's patients are kept and maintained by Dr A's staff and held at the surgery.

6.

Dr B is responsible for payment of Dr B's medical indemnity insurance and will be sued by his/her patients in the event of an adverse medical outcome. Dr B also provides some but not all the equipment used in Dr B's practice.

7.

Dr A provides to Dr B premises for Dr B to practise in (including payment by Dr A of all outgoings (insurance, rates, electricity, water supply etc), a reception and billing service, some (but not all) equipment used in Dr B's practice; as well as the opportunity for Dr B to increase his/her income by being introduced to new patients who attend Dr A's surgery.

Non-interpretative - straight application of the law.

(a) Who is responsible for charging and collecting GST?

This question focuses on a medical association.

It is understood that Dr A owns a medical practice and makes facilities available for Dr B to practice in. Dr A operates as an independent contractor, owns the premises and employs administrative staff. Dr B also operates as an independent contractor, renting premises and administrative services from Dr A.

In this situation, Dr A is liable to remit GST on the supply of rental premises, administrative services and facilities to Dr B, where the requirements of section 9-5 are satisfied.

The supply of a 'medical service' by Dr A or Dr B to a patient, will be GST-free where the requirements of section 38-7 are satisfied (for a discussion of these requirements, refer to Part 1.a. and 1.b. of the Health Issues Log).

(b) What is (are) the criterion(a) used in determining the liability for collecting and charging GST as between Doctors A and B?

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

The criteria that determine whether a supply is taxable, are established in section 9-5 (unless the supply is GST-free or input taxed).

What supplies are made and to whom, is determined by ascertaining the true character of the transactions between the parties and is dependent on the facts of each particular case.

In the present scenario, the supplies are determined by ascertaining the true character of the transactions between both Doctors A and B, and between the patient.

Examining the transaction, in part, involves considering what legal relationship/entity exists between Doctors A and B, which entity is engaged by each patient and which entity, Doctor A or Doctor B, is entitled to seek recovery from the patient in their own name.

Where Doctor A is supplying the service to the patient with Doctor B performing the service and Doctor A is entitled, in their own name, to seek recovery from the patient for the performance of the service, Doctor B will be supplying professional services to Doctor A.

However, where Doctor B is supplying and performing the service to the patient and is entitled, in their own name, to seek recovery from the patient for the performance of the service, Doctor A will be supplying facilities and administrative services to Doctor B.

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

It would be necessary to have evidence of the nature of the relationship between Doctor A and Doctor B (including any written contracts, agreements or letters), which entity is supplying the service to the patient (as opposed to performing the service) and which entity is entitled to seek recovery from the patient in their own name.

(d) What should Doctors A and B do to ensure that the GST liability is appropriately clarified to the satisfaction of the ATO?

This question focuses on a medical association. Private binding rulings may be sought in relation to other situations.

Subject to their own advice, Doctors A and B 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.

7.a.20. What is the GST status of services in the following scenarios? In each case the Clinic is a separate entity and is registered for GST, the massage therapist earns less than $75,000 and is not registered for GST and the services that are being supplied to the clients are not GST-free health supplies.

Non-interpretative - straight application of the law.

Scenario A

The health clinic contracts with the massage therapist to operate in the clinic. The massage therapist is operating as an independent practitioner treating his or her own clients (that is the clients are not clients of the clinic). The clinic makes bookings for the massage therapist and collects the fees for the massage therapist. The massage therapist then pays the clinic a percentage of their gross turnover as a rent/administration fee.

The massage therapist is supplying services to the clients which are not GST-free but, as the massage therapist is not registered and not required to be registered, the supply will not be subject to GST. Accordingly, the full amount of the fee from the client to the massage therapist will not be subject to GST.

The clinic is supplying administrative services to the massage therapist. The supply of these services will be subject to GST and the clinic as the supplier is liable for that GST. The amount of GST is one-eleventh of the amount retained by the clinic.

Scenario B

The health clinic contracts with the massage therapist to operate in the clinic. The massage therapist is operating as an independent practitioner treating his or her own clients (that is the clients are not clients of the clinic). The clinic makes bookings for the massage therapist and collects the fees for the massage therapist. The clinic retains a percentage of the fee as a rent/administration fee and pays the balance to the massage therapist.

The massage therapist is supplying services to the clients which are not GST-free but, as the massage therapist is not registered and not required to be registered, the supply will not be subject to GST. Accordingly, the full amount of the fee from the client to the massage therapist will not be subject to GST.

The clinic is supplying administrative services to the massage therapist. The supply of these services will be subject to GST and the clinic as the supplier is liable for that GST. The amount of GST is one-eleventh of the amount retained by the clinic.

Scenario C

The health clinic contracts the massage therapist as an independent practitioner to supply massage services to clients of the clinic (that is the clients are not clients of the massage therapist). The clinic makes bookings for massage services, collects the fees for the massage services and the income forms a part of the gross income of the clinic. The clinic then pays the massage therapist an agreed percentage of the fees collected for the massage services.

In this situation, there are two supplies. Firstly, the clinic is supplying services to the clients. The supply of these services are not GST-free and, as the clinic is registered, the supply will be subject to GST. Accordingly, the full amount of the fee paid by the client to the clinic will be subject to GST and the amount of GST is one-eleventh of that fee.

Secondly, the massage therapist is supplying services to the clinic. However, as the massage therapist is not registered and not required to be registered, the supply will not be subject to GST. Accordingly, the fee paid by the clinic to the massage therapist will not be subject to GST.

Scenario D

The health clinic employs the massage therapist to supply massage services to clients of the clinic (that is the clients are not clients of the massage therapist). The clinic makes bookings for massage services, collects the fees for the massage services and the income forms a part of the gross income of the clinic. The clinic then pays the massage therapist wages for the time worked.

In this situation, the clinic is supplying services to the clients. The supply of these services are not GST-free and, as the clinic is registered, the supply will be subject to GST. Accordingly, the full amount of the fee paid by the client to the clinic will be subject to GST and the amount of GST is one-eleventh of that fee.

The massage therapist is supplying services to the clinic. However, the massage therapist is an employee of the clinic. The supply of services as an employee do not come within the meaning of 'enterprise' and are not subject to GST when supplied by the employee to the employer. Accordingly, the wages paid by the clinic to the massage therapist will not be subject to GST.

7.a.21. In what circumstances would conduct monies payable to medical practitioners for production of documentation NOT incur GST under Division 81?

Non-interpretative - straight application of the law.

Conduct monies payable to medical practitioners for production of documentation are not covered under Division 81. They are not a tax imposed under an Australian law. Also, the medical practitioner is not an Australian government agency which is defined by reference to section 195-1 of the GST Act and section 995-1 of the Income Tax Assessment Act 1997 as:

a.

the Commonwealth, a State or a Territory, or

b.

an authority of the Commonwealth or of a State or a Territory.

Division 81 can only ever relate to taxes and monies payable to Australian government agencies. As such, Division 81 will not apply to conduct monies payable to medical practitioners. Further, conduct monies payable to medical practitioners are not GST-free under any other provision of the GST Act including section 38-7.

For more information on Division 81, see 'Payments to government agencies under Division 81'.

7.c. The Therapeutic Goods Associations (TGA) is a part of the Australian Government Department of Health and Aging and is responsible for administering the Therapeutic Goods Act 1989 .

Medicines and devices are evaluated and eventually listed or registered on the Australian Register of Therapeutic Goods (ARTG). Individual firms seeking registrations are charged fees for the various services provided by the TGA. Over recent years the percentage of the TGA's outlays to be recovered has been increased progressively (currently 100%).

7.c.1. Is GST payable on fees and charges levied by the TGA for its services to industry?

Non-interpretative - straight application of the law.

The service supplied does not come within any of the sections in subdivision 38-B. The evaluation of medicines or devices is not a supply of a drug or medicinal preparation to an individual for private or domestic use, appropriate treatment of a recipient, nor the supply of a medical aid or appliance. However, GST may not apply to taxes, fees and charges levied by the TGA where Division 81 applies. For more information on Division 81, see 'Payments to government agencies under Division 81'.

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