GST and supply of blood product preservation services

Is the entity, an approved pathology practitioner, making a GST-free supply of a medical service under subsection 38-7(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it collects, processes and stores blood products obtained from a healthy individual for use in the treatment of possible future illnesses of that individual?

No, the entity is not making a GST-free supply of a medical service under subsection 38-7(1) of the GST Act when it collects, processes and stores blood products obtained from a healthy individual for use in the treatment of possible future illnesses of that individual.

The entity is making a taxable supply under section 9-5 of the GST Act.

The entity is an approved pathology practitioner. The entity provides a service of collecting, processing and storing blood products.

This service includes: • collection of blood products from an individual by a recognised health professional • transportation of the blood products to the laboratory • pathology testing of the blood products to determine the viability of the sample • processing of the blood products to extract the relevant components for storage, and • cryopreservation of the blood products.

Prior to commencement of the entity's services, there is no assessment made on the individual's health and the individual does not present with an illness or any other medical condition requiring treatment.

The stored blood products may be used in the future to treat various illnesses or medical conditions that the individual may contract in the course of that individual's life.

There is no medicare benefit payable under Part II of the Health Insurance Act 1973 for the entity's service.

The supply is made to the individual.

The entity's service is not of a kind specified in the table in subsection 38-10(1) of the GST Act nor of a kind specified in the A New Tax System (Goods and Services Tax) Regulations 1999 .

The entity is registered for goods and services tax (GST) and the supply satisfies the other positive limbs of section 9-5 of the GST Act.

Subsection 38-7(1) of the GST Act provides that the supply of a medical service is GST-free. A 'medical service' is defined under section 195-1 of the GST Act to mean: • a service for which a medicare benefit is payable under Part II of the Health Insurance Act, or • 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 under Part II of the Health Insurance Act for the entity's service. As such, to be GST-free the service must satisfy the second limb of the definition of 'medical service' in section 195-1 of the GST Act.

The entity is an approved pathology practitioner. Therefore, it remains to be determined whether the entity's services are generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient of the supply.

The phrase 'appropriate treatment' is not defined in the GST Act. However, the Tax Office's guidelines as to the meaning of this term are reported in the 'Health Industry Partnership - Issues Register' (Issues Register) published on the Tax Office website. Issue 1.a of the Issues Register provides that '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.

Prior to commencement of the entity's services, there is no assessment made on the individual's health. The individual does not present with any illness or any other medical condition which is treated by the process of collecting, processing and storing that individual's blood products. The blood product service does not preserve, restore or improve the physical or psychological wellbeing of the individual at that time. Ultimately, the blood products which are collected, processed and stored may be used to treat a future illness or medical condition and may improve the individual's chances of recovery from that illness or condition. However, at the time it is supplied, the service itself does not affect the individual's health in any way.

Issue 1.a. of the Issues Register also states that 'appropriate treatment' includes the principles of preventative medicine. Therefore, 'appropriate treatment' is not limited to treatment undertaken in response to illness, but also includes treatment undertaken to prevent or reduce the incidence of an illness (for example, a vaccination) or processes used to determine whether an illness is present despite there being no indication of its presence (for example, a pap smear).

Unlike a vaccination, the collection, processing and storage of the blood products will not prevent or reduce the chance of an illness or other medical condition occurring. Further, unlike a pap smear, the blood product service is not performed for the purpose of determining the presence of an illness or other medical condition in that individual. As such, the entity's service is not a form of preventative medicine.

Therefore, although the entity is an approved pathology practitioner, the entity's service is not for the 'appropriate treatment of the recipient of the supply' as per the second limb of the definition of 'medical service' in section 195-1 of the GST Act.

Accordingly, the supply of the entity's service does not satisfy the definition of a medical service under section 195-1 of the GST Act. As such, the entity is not making a GST-free supply under subsection 38-7(1) of the GST Act.

The entity 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, the entity is making a taxable supply under section 9-5 of the GST Act when it collects, processes and stores blood products obtained from a healthy individual for use in the treatment of possible future illnesses of that individual.