Issue
Is the entity, a supplier of hospital care services, making a GST-free supply under subsection 38-20(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it supplies hospital care services to a patient recovering from cosmetic surgery?
Decision
No, the entity is not making a GST-free supply under subsection 38-20(1) of the GST Act, when it supplies hospital care services to a patient recovering from cosmetic surgery. The entity is making a taxable supply under section 9-5 of the GST Act.
Facts
The entity is a registered private hospital. The entity is providing hospital care to patients recuperating from cosmetic surgery. The hospital care involves accommodation and nursing services.
The cosmetic surgery is not a professional service for which a medicare benefit is payable under Part II of the Health Insurance Act 1973 . No post-operative complications, such as infection, develop in the course of supplying the hospital care.
The entity is registered for goods and services tax (GST). The supply satisfies the other positive limbs of section 9-5 of the GST Act.
Reasons for Decision
Under subsection 38-20(1) of the GST Act, a supply of hospital treatment is GST-free.
'Hospital treatment' is defined in section 195-1 as having the meaning given by subsection 67(4) of the National Health Act 1953 . 'Hospital treatment' is defined in subsection 67(4) of the National Health Act to mean:
'accommodation and nursing care, whether provided for the purpose of permitting the provision of professional attention or, in the case of a nursing-home type patient, as an end in itself, and includes: (a) the provision at, or on behalf of, a hospital of relevant health services to a patient of the hospital; and (b) the provision at a hospital of a facility for a patient of the hospital.'
Accordingly, 'hospital treatment' covers supplies of accommodation and nursing services made by the entity to its patients.
However, subsection 38-20(2) of the GST Act provides that a supply of hospital treatment is not GST-free to the extent that it relates to a supply of a professional service that, because of subsection 38-7(2) of the GST Act, is not GST-free.
A service is not GST-free under paragraph 38-7(2)(b) of the GST Act, to the extent that it is rendered for cosmetic reasons and is not a professional service for which a medicare benefit is payable under Part II of the Health Insurance Act.
In this case, the surgery is not GST-free as it has been rendered for cosmetic reasons and is not a professional service for which a medicare benefit is payable under Part II of the Health Insurance Act. No post-operative complications, such as infection, develop in the course of supplying the hospital care.
Therefore, the supply of hospital treatment by the entity is not GST-free under subsection 38-20(1) of the GST Act, as it is directly related to a supply of cosmetic surgery that is not GST-free because of subsection 38-7(2) of the GST Act.
The entity is registered for GST and all the other positive limbs of section 9-5 of the GST Act are satisfied. Furthermore, the supply is neither GST-free under Division 38 of the GST Act, nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it supplies accommodation and nursing services to patients recovering from cosmetic surgery. [Note: The term 'cosmetic reasons' is not defined in the GST Act and is therefore given its ordinary meaning. The Macquarie Dictionary 1997 defines 'cosmetic' as: • serving to beautify; imparting or improving beauty, especially of the complexion; • designed to effect a superficial alteration while keeping the basis unchanged. A 'medical service' is 'rendered for cosmetic reasons' if it is predominantly performed for, or is rendered for the purpose of permitting, the improvement of the personal appearance of a patient, such as a face-lift. Whether a service is for cosmetic reasons must be evaluated on a case by case basis. Procedures that alter or enhance a patient's appearance but have no medical or reconstructive purpose are considered to be cosmetic and are not GST-free. However, a procedure that is performed for medical or reconstructive reasons is not cosmetic and may be GST-free. An example of this is skin grafting performed on a burn victim].