Table of Contents

Introduction

The Goods and Services Tax (GST) is a critical component of Australia’s taxation system, impacting a wide range of goods and services. However, when it comes to health services, the application of GST is not always straightforward. This article aims to demystify the complexities of GST in the health sector, providing a comprehensive overview of how it applies to various health services, the exceptions, and the implications for both healthcare providers and consumers. Whether you’re a healthcare professional navigating the intricacies of GST compliance or a consumer seeking to understand your financial obligations, this guide will offer valuable insights into the intersection of GST and health services in Australia. Let’s delve into the world of GST in health services.

A group of medical practitioners. Filed under Health Services GST.

Understanding Businesses in Australia

The Goods and Services Tax (GST) in Australia is a broad-based tax of 10% on most goods, services, and other items sold or consumed in the country. Here’s a brief overview:

1. Application: Most sales in Australia are subject to GST. This means that businesses registered for GST generally include GST in the price of sales to customers and claim credits for the GST included in the price of their business purchases.

2. Collection: If your business is registered for GST, you have to collect this extra money (one-eleventh of the sale price) from your customers. You pay this to the Australian Taxation Office (ATO) when it’s due.

3. Reporting: Businesses use a Business Activity Statement (BAS) to report and pay the GST amounts they’ve collected and to claim GST credits.

4. Exceptions: Some things don’t have GST included, these are called GST-free sales.

Remember, this is a general explanation and should not be considered legal or financial advice. It’s always recommended to seek professional advice to understand the implications fully.

Understanding the Goods and Services Tax (GST) is crucial for businesses in Australia, including those in the health sector. Here’s why:

1. Compliance with Tax Obligations: Businesses need to understand how GST works to fulfill their tax obligations accurately. This includes knowing when to charge GST, how to issue tax invoices, how to claim GST credits, and how to report and pay GST amounts.

2. Financial Management: Understanding GST can help businesses optimize their financial management strategies. For example, businesses can claim credits for the GST included in the price of goods and services they buy for their business.

3. Stability and Prosperity: Complying with GST requirements contributes to the overall stability and prosperity of both individual businesses and the national economy.

For businesses in the health sector, understanding GST is particularly important because certain health services and equipment are GST-free. This includes medical services, certain health goods, and goods supplied as part of a GST-free health service. However, some services provided as part of healthcare do not come under the definition of commonly used health services and may be subject to GST. Therefore, businesses in the health sector need to understand which of their services are GST-free and which are not, to ensure accurate GST reporting and compliance.

A doctor and patient having a consultation. Filed under Health Services GST.

GST and Health Services

1. Medical Services: Medical services are GST-free. A medical service is either one of the following: a service for which a Medicare benefit is payable.

2. Other Health Services: Health services that are not defined as medical services, are GST-free, if all the following apply:

  • It is a listed health service.
  • The service is performed by a recognised health professional in that listed health service or, under certain circumstances, their assistant.
  • The service is generally accepted in that listed health profession as being necessary for the appropriate treatment of the recipient of the supply.

3. Goods Supplied as Part of a GST-free Health Service: A supply of goods is GST-free if it is both:

  • A necessary part of providing the GST-free health service.
  • Supplied at the same time and place as the service.

4. National Disability Insurance Scheme (NDIS): The ATO guides the GST-free status of NDIS supplies.

5. Medical Aids and Appliances: Certain conditions apply for GST-free treatment of medical aids and appliances.

6. Health Goods: Certain conditions apply for GST-free treatment of health goods.

Remember, it’s recommended to seek advice from a professional business adviser, lawyer, or accountant before making decisions about GST.

In Australia, certain medical services are considered GST-free, meaning they are not subject to the Goods and Services Tax (GST). Here are the conditions that apply for these services:

1. Medicare Benefit: A medical service is GST-free if a Medicare benefit is payable for the service.

2. Necessary Treatment: A 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 is GST-free.

3. Recipient of the Supply: Where the recipient of the supply is not the patient but is another business or organisation, the supply is not GST-free as a medical service unless a Medicare benefit is payable.

4. Services Performed on Behalf of a Medical Professional: A service is performed on behalf of a medical professional if it is billed in the name of the medical professional, they accept full responsibility for the service, and it is part of the service the medical professional provides.

5. Exclusions: Some medical services are not GST-free, including cosmetic procedures where no Medicare benefit is payable².

6. Other Health Services: Health services that are not defined as medical services are GST-free if it is a listed health service, the service is performed by a recognised health professional in that listed health service, or, under certain circumstances, their assistant.

It’s important to note that the Australian Taxation Office (ATO) provides detailed guidelines and updates on its website about GST-free medical services. Therefore, it’s always a good idea to consult with a tax professional or advisor to understand the specific conditions that apply to your situation.

A. Health Services:

1. Medical Services: Medical services that are GST-free include those performed by health professionals such as doctors, nurses, and dentists.

2. Other Health Services: These include services like acupuncture, audiology or audiometry, chiropody, chiropractic, dental, dietary, herbal medicine (including traditional Chinese herbal medicine), naturopathy, nursing, occupational therapy, optometry, osteopathy, paramedical, pharmacy, psychology, physiotherapy, podiatry, speech pathology, speech therapy, social work.

3. Hospital Treatment: Hospital treatments are GST-free.

4. Residential, Home, and Flexible Aged Care: These services are GST-free.

5. Disability Services: Disability support provided to NDIS participants and specialist disability services are GST-free.

B. Health Equipment:

1. Medical Aids and Appliances: Certain medical aids and appliances are GST-free. The conditions for GST-free treatment of these items can be found on the Australian Taxation Office (ATO) website.

2. Health Goods: Certain health goods are GST-free. The conditions for GST-free treatment of these items can be found on the ATO website.

Please note that this is a general overview and the specifics can vary depending on the circumstances. It’s always recommended to consult with a tax professional or advisor for personalized advice.

1. Definition: “Appropriate treatment” refers to the necessary health services provided to a patient. This includes preventative medicine and routine check-ups. For example, procedures such as pap smears, breast cancer screening, and vaccinations are considered “appropriate treatment” and are GST-free as they are appropriate for the people involved.

2. GST-Free Services: Health services that are not defined as medical services are GST-free if all the following apply:

  • It is a listed health service.
  • The service is performed by a recognised health professional in that listed health service or, under certain circumstances, their assistant.
  • The service is generally accepted in that listed health profession as being necessary for the appropriate treatment of the recipient of the supply.

3. Recipient of the Supply: The recipient of the supply by the health professional will not always be the patient. In some cases, it may be another business.

4. Billing: If the practice bills the patient directly and the patient pays the practice, then the service you have provided is to the practice and not to the patient. In such a case, your service to the practice, providing it is an appropriate treatment, would be GST-free.

Remember, this is a general explanation and the actual application may vary based on specific circumstances. Always consult with a tax professional for advice tailored to your specific circumstances.

A male doctor smiling while talking to a patient. Filed under Health Services GST.

Related Information

1. Medical and Health Services: Medical and other health services are sometimes provided under multi-party arrangements, where the service for a patient is organised and paid for by a third party. If the service is GST-free when provided to the patient, it is also GST-free when you are contracting with:

  • An insurer
  • An operator of a statutory compensation scheme
  • A compulsory third party scheme (scheme operator)
  • An Australian Government agency

2. Agreement to Treat Supplies as Not GST-Free: The supplier and the recipient (the insurer, scheme operator, or Australian Government agency) can agree not to treat the supplies as GST-free. This may be easier for the parties where they have a combination of taxable and GST-free supplies.

3. Supplies to Other Third Parties: Medical and other health services supplied to any other third party are not GST-free. However, where a supply is not made to a third party (for example the third party is paying the medical practitioner on behalf of the patient), the supply is GST-free if it falls under the definition of a medical or other health service.

4. Examples:

Service provided via an insurer: If a health fund has an agreement with a physiotherapist for services supplied to settle claims made under their health insurance policies, the payment to the physiotherapist is for the supply made to the health fund of providing the services to the member. If the physiotherapist supplied the service to the member directly it would be GST-free. The supply by the physiotherapist to the health fund is GST-free.

Service provided via an Australian Government agency: If an Australian Government agency contracts a health services provider to vaccinate its staff against influenza, the supply by the health services provider to the agency is GST-free.

These rules are designed to ensure that GST does not become a cost to businesses and organisations that make GST-free supplies.

The National Disability Insurance Scheme (NDIS) is a significant social welfare initiative in Australia, providing support to people with disability, their families, and carers. It is administered by the National Disability Insurance Agency (NDIA).

A. NDIS Overview:

  • The NDIS provides funding for support and services. If you’re an NDIS participant, the payments you receive, including funds you self-manage, are tax-free.
  • However, you can’t claim deductions for expenses you incur or assets you buy under the scheme.
  • You can’t claim a deduction for anything paid for by the NDIS, even if the expense is used to produce your income.

B. GST-Free Status:

If you are a supplier of disability supports and registered for GST, your supplies to an NDIS participant may be GST-free.

A supply to an NDIS participant is GST-free if all the following requirements are met:

  • The NDIS participant has an NDIS plan in effect.
  • The supply is of reasonable and necessary supports that are specified in the statement of supports in the participant’s NDIS plan.
  • There is a written agreement between you and the NDIS participant (or another person).
  • It is a supply covered by one of the tables in the A New Tax System (Goods and Services Tax) (GST free Supply—National Disability Insurance Scheme Supports) Determination 2021.

This means that businesses providing NDIS support need to review their accounting systems to ensure the correct GST treatment of their supplies. As always, it’s recommended to seek professional advice to understand the implications fully. This information provides a general understanding and should not be considered legal or financial advice.

The sale of medical aids and appliances is GST-free if they meet all three of the following conditions:

1. Listed in Schedule 3 to the GST Act or in the GST Regulations: The medical aid or appliance must be listed in Schedule 3 to the A New Tax System (Goods and Services Tax) Act 1999 or in the A New Tax System (Goods and Services Tax) Regulations 2019.

2. Specifically Designed for People with an Illness or Disability: The medical aid or appliance must be specifically designed for people with an illness or disability. This means it must be made to assist people with an illness or disability in carrying out a particular function.

3. Not Widely Used by People Without an Illness or a Disability: The medical aid or appliance must not be widely used by people without an illness or a disability. This means it is not commonly used by people who do not have an illness or disability.

Medical aids and appliances that satisfy all these conditions are GST-free at every point in the supply chain – from manufacturer to consumer. If medical aids and appliances meet the conditions to be sold GST-free, they can also be hired out GST-free. For example, when a chemist hires a wheelchair out to a customer, they do not include GST in the rental fee. Spare parts that are specifically designed for a GST-free medical aid or appliance are sold GST-free. However, generic parts are taxable.

A female doctor talking to a patient. Filed under Health Services GST.

Other Health Services

1. Listed Health Service: The service must be one of the listed health services. These include services like acupuncture, audiology, chiropractic, dental, dietary, herbal medicine, nursing, occupational therapy, optometry, osteopathy, pharmacy, psychology, physiotherapy, podiatry, speech pathology, and social work. The service must be one of the listed services and cannot just be similar to one of these services.

2. Performed by a Recognised Health Professional: The service must be performed by a recognised health professional in that listed health service or, under certain circumstances, their assistant. A recognised health professional is a person who is registered, permitted, or approved under state or territory law to provide the listed health service. If there is no relevant state or territory law, a recognised professional is a member of a professional association that relates to the listed health service and has the same registration requirements nationally.

3. Generally Accepted as Necessary for Appropriate Treatment: The service must be generally accepted in that listed health profession as being necessary for the appropriate treatment of the recipient of the supply. The recipient of the supply by the health professional will not always be the patient. In some cases, it may be another business.

Remember, it’s recommended to seek advice from a professional business adviser, lawyer, or accountant before making decisions about GST.

1. Doctors (General Practitioners — GPs)
2. Community Nurses
3. Dentists
4. Pharmacists
5. Allied Health Professionals

  • Physiotherapists
  • Dietitians
  • Speech Pathologists

6. Aboriginal and Torres Strait Islander Health Workers and Practitioners
7. Art Therapists
8. Audiologists
9. Chinese Medicine Practitioners
10. Chiropractors
11. Diabetes Educators
12. Exercise Physiologists
13. Genetic Counsellors
14. Music Therapists
15. Occupational Therapists
16. Optometrists
17. Orthoptists
18. Orthotists/Prosthetists

It’s important to note that the recognition of these professionals is regulated either through the Australian Health Practitioner Regulation Agency (AHPRA) or through the relevant professional organization. They provide services that can include diagnosis, treatment, or rehabilitation.

Managing and planning for taxation for a fixed unit trust in Australia involves several strategies:

1. Utilize Tax Losses: Being treated as a ‘fixed trust’ has important tax implications, including the ability to carry forward and utilize tax losses from year to year.

2. Safe Harbour Compliance Approach: The Australian Taxation Office (ATO) provides a ‘safe harbour compliance approach’, which certain trusts can rely on without having to seek the exercise of the Commissioner’s discretion concerning fixed trust status.

3. Distribute Income Pre-Tax: The net income and capital gains are distributed to the unit holders pre-tax. In other words, the unit trust doesn’t pay tax. Instead, each unit holder is taxed for their share of the distribution derived from the trust at their marginal tax rate.

4. Superannuation Contributions: A trust can also contribute superannuation for all unit holders in proportion to their unit holding, which means that the tax on income of the trust can be limited to the tax rate on contribution to a superannuation fund, which at the time of writing is 15%.

5. Consider the AMIT Regime: For many widely held managed investment trusts, the introduction of the Attribution Managed Investment Trust (AMIT) regime has removed the need to consider this issue on a go-forward basis. Trusts that are eligible for, and elect to apply, to the AMIT regime are deemed to be fixed trusts for tax purposes, and their members are treated as having fixed entitlements to their income and capital.

6. Seek Professional Advice: It’s important to seek professional advice when managing and planning for taxation for a fixed-unit trust. Tax laws can be complex and change frequently, so it’s beneficial to have a tax professional who can provide up-to-date advice.

Remember, these strategies are general and may not apply to every situation. Always consult with a tax professional to understand the best strategies for your specific circumstances.

A nurse checking for vital signs. Filed under Health Services GST.

Impact of GST in the Health Sector

Understanding the Goods and Services Tax (GST) can significantly impact businesses in the health sector in Australia. Here are some ways:

1. GST-Free Services and Equipment: Certain health services and equipment are GST-free. This can reduce the cost of these services and equipment for consumers, potentially increasing demand. However, it also means that businesses providing these services or selling these equipment cannot claim GST credits for the GST included in the price of their business inputs.

2. Increased Documentation Needs: The GST system requires businesses to keep detailed records of their sales and purchases to accurately calculate and report their GST obligations. This can increase administrative costs for businesses in the health sector.

3. Ambiguity in Rules: There can be ambiguity in the rules around what health services and equipment are GST-free. This can create uncertainty for businesses and may require them to seek professional advice.

4. Impact on Prices and Profit Margins: The application of GST can affect the prices of health services and products, which can in turn impact profit margins⁵. For example, the cost of raw materials may decrease, leading to more profits and attracting more investors⁵.

5. Impact on Healthcare Infrastructure Creation: While GST provides exemptions on healthcare infrastructure creation, lack of credit flow has negatively impacted the growth of healthcare facilities.

6. Impact on Medical Tourism and Innovations: GST rates can affect services, products, medical tourism, innovations, and strategies for affordability in health.

Understanding these impacts can help businesses in the health sector to better navigate the GST system, plan their finances, and make strategic decisions. It’s always recommended to consult with a tax professional or advisor for personalized advice.

While specific case studies are not readily available, there are several examples of how businesses in the health services sector navigate GST in Australia. Here are a few general scenarios:

1. Dietitians in Private Practice: Dietitians running their small businesses need to navigate GST for their services. For example, dietetic services are generally GST-free if they are necessary for the appropriate treatment of the recipient of the supply. However, dietetic services for which GST must be charged include those that are not generally accepted in the dietetics profession as being necessary for the appropriate treatment of the recipient⁵. In such cases, dietitians need to understand when to charge GST and when not to.

2. Health Industry Partnership: The Australian Taxation Office (ATO) has guided on issues identified during past consultations with industry participants. This includes major issues and subsidiary questions, which have been collated as a result of consultations with the Health sector. These discussions and consultations have been instrumental in the ATO undertaking a technical clearance process bearing in mind the intention of the policy for each major issue and outlining the ATO’s position for each subsidiary question.

3. Allied Health Services: Allied health professionals, such as physiotherapists, chiropractors, and occupational therapists, also need to navigate GST for their services. For example, a service that is not a listed health service, like remedial massage, is not GST-free even if it may be similar to those provided by physiotherapists.

Remember, these are general examples and the actual application of GST can vary based on specific circumstances. Always consult with a tax professional for advice tailored to your specific circumstances.

A doctor making notes. Filed under Health Services GST.

Conclusion

Understanding the Goods and Services Tax (GST) is crucial for businesses in the health sector in Australia. With certain health services and medical aids and appliances being GST-free, these businesses need to understand which of their services and products are exempt from GST. This not only ensures compliance with tax obligations but also allows for accurate financial management. As the health sector continues to evolve, staying informed about GST regulations will remain a key aspect of successfully navigating the Australian healthcare landscape. Remember, when in doubt, it’s always best to seek professional advice.