Navigating the GST system for Health Service Professionals

Posted 23 Sep

Navigating the Goods and Services Tax (GST) rules in Australia can be a tricky process for small business owners in the health sector. If you're a doctor, speech therapist, chiropractor, psychologist, or any other professional in the healthcare industry, it's crucial to understand how GST applies to your services.

While many health-related services are GST free, not all income is treated the same. A careful examination of your specific situation, especially regarding contracts and service arrangements, is necessary to avoid errors in the treatment of the income you earn.

GST Free Medicare Services for Healthcare Professionals

There is often an assumption that all services are automatically considered GST free for health professionals. However, this isn’t always the case. In fact, depending on how your services are contracted, you may find yourself liable for GST on certain income streams.  It can also depend on the type of medical services being provided and ensuring they fit within the definitions of the GST Act.

It's essential to avoid applying this blanket approach methodology when assessing GST liability. We generally recommend consulting a legal expert to review contracts and agreements to ensure you're aware of the nature of the arrangement and your obligations before signing any contracts.  At Empire Accountants once the arrangement is determined, we can assist with ensuring GST is accounted for appropriately.

Differences in Agreements

It is commonplace for health practitioners to provide their services through a contracted arrangement in a shared clinic environment. The two most common scenarios we see are.

1. Clinic contracts the Practitioner to provide the services to their patients

When a clinic contracts a practitioner to offer services to its patients, the services are provided to the clinic and not direct to the patient.  The Practitioner would send an invoice to the Clinic for their time spent consulting for the Clinic patients.

As the services are not provided directly to the patient, normal GST supply rules would apply. Provided all conditions of GST registration/requirements are met, GST should be charged on this income.

GST is payable by the health practitioner and GST is claimable by the Clinic.

2. Clinic provides facilities for the Practitioner to provide services direct to the patient.

When a practitioner has a contract with a clinic where the clinic provides facilities (i.e. room to use, receptionist, stationery, phone, computer subscriptions etc) yet the services to the patient are delivered direct to the patient.

As the services are provided direct to the patient, the GST Free medical services provisions can apply to this arrangement.  This is provided all conditions are met to classify as a medical service under this provision of the act.

As the practitioner pays a fee to the Clinic for the facilities usage, this would constitute a taxable supply by the clinic.  GST is charged on this transaction whereby GST is payable by the Clinic and claimable by the healthcare provider.

The Importance of the Contract

When dealing with the complexities of GST in healthcare services, clear written contracts between practitioners and clinics are essential. Here’s why:

1. Defining GST Obligations

Your contract should clearly state who is contracting whom and outline the GST implications. This ensures that both parties are fully aware of their tax responsibilities, which can help prevent misunderstandings and disputes.

2. Detailing GST Treatment

A well-drafted contract should detail how GST is handled for various service components, such as practitioner fees and clinic administrative services. This level of detail is crucial for managing GST liabilities effectively and staying compliant.

GST Registration—When Do You Need to Register?

Knowing whether and when to register for GST is vital to managing a healthcare business. Here are the key points to consider:

Mandatory Registration

If your annual turnover (sales) exceeds $75,000, you must register for GST. For non-profit organisations, the threshold is higher at $150,000. If your earnings are at or above these limits, GST registration is not optional.  This threshold applies regardless of whether the income is required to have GST paid on it or not.

Voluntary Registration

You can voluntarily register for GST if your turnover is below $75,000. Doing so may be beneficial if you wish to claim GST credits on your business expenses.

The Value of Expert Guidance on GST for Health Services

Understanding GST in the health services sector can be quite tricky to navigate and calls for careful examination of contracts and close attention to the specifics of the contractual arrangements.

For expert guidance tailored to your specific circumstances, contact the Empire Accountants team. Laura Stauder and Aiko Miyake have experience navigating GST complexities for healthcare professionals and are here to help you!