ATO Interpretative Decision
ATO ID 2003/1157
Goods and Services Tax
GST and medical services supplied to a health service providerFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Is entity A, a health service provider, making a GST-free supply under subsection 38-7(1) of the A New Tax System (Goods and Services Tax) Act 1999 ( GST Act), when it supplies medical assessment facilities and support services, under an agreement with entity B (another health service provider), to enable entity B to conduct medical examinations on clients?
Decision
No, entity A is not making a GST-free supply under subsection 38-7(1) of the GST Act when it supplies medical assessment facilities and support services, under an agreement with entity B, to enable entity B to conduct medical examinations on clients as entity A is not supplying appropriate treatment to entity B.
Entity A is making a taxable supply under section 9-5 of the GST Act.
Facts
Entity A is a health service provider. Entity A has entered into an agreement with entity B. Under this agreement, entity A provides medical assessment facilities and support services to enable entity B to conduct medical examinations on particular clients.
Under this agreement, entity A will provide the following services to entity B at pre-determined times throughout the year:
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- scheduling of appointments
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- making pre-medical arrangements for any tests or referrals that may be required
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- provide reception services during consultation periods
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- provide nursing services for pre-medical health checks
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- provision of consumables for pre-medical examinations
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- provide examination and consultation rooms
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- collection of fees from clients.
The supply of the actual medical assessment to clients is made by doctors who have been engaged by entity B.
A medicare benefit is not payable for the supply of services by entity A.
Entity A is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.
Reasons for Decision:
Under subsection 38-7(1) of the GST Act, the supply of a medical service is GST-free.
A 'medical service' is defined under section 195-1 of the GST Act to mean:
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- a service for which a medicare benefit is payable under Part II of the Health Insurance Act 1973, or
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- any other service supplied by or on behalf of a medical practitioner or approved pathology practitioner that is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.
There is no medicare benefit payable for the services provided by entity A. As such, the service does not fall within the first limb of the definition of medical service as provided in section 195-1 of the GST Act.
Therefore, it is necessary to determine whether entity A is making a supply under the second limb of the definition of medical service provided in section 195-1 of the GST Act. One of the requirements of the second limb of the definition of medical service is that the supply is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.
Appropriate treatment is established where a practitioner assesses the recipient's state of health and determines a process to pursue in an attempt to preserve, restore or improve the physical or psychological wellbeing of the recipient and includes subsequent supplies for the assessed process.
Section 195-1 of the GST Act defines 'recipient' in relation to a supply to mean the entity to which the supply was made. There is an agreement that entity A will provide medical assessment facilities and support services to enable entity B to conduct medical examinations on clients. Entity B is the recipient of the supply of these services and the services being provided by entity A are commercial in nature. In addition, the supply of the actual medical assessment to clients is made by doctors who have been engaged by entity B.
As such, entity A is not supplying appropriate treatment to entity B, the recipient of the supply. Therefore, entity A is not making a GST-free supply under subsection 38-7(1) of the GST Act.
Entity A is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision of Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, entity A is making a taxable supply under section 9-5 of the GST Act when it supplies medical assessment facilities and support services, under an agreement with entity B, to enable entity B to conduct medical examinations on clients.
Date of decision: 19 December 2002
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
section 9-5
Division 38
subsection 38-7(1)
Division 40
section 195-1
Keywords
Goods and services tax
GST free
GST health
Section 38-7 - medical services
GST supplies & acquisitions
Taxable supply
ISSN: 1445-2782
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