GST and the provision of ambulance services under an agreement with a third party

Is the entity, an ambulance service provider, making a taxable supply to a third party, a business entity, under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it provides ambulance services to a patient pursuant to an existing agreement with the third party for the provision of those services?

Yes, the entity is making a taxable supply to the third party under section 9-5 of the GST Act when it provides ambulance services to a patient pursuant to an existing agreement with the third party for the provision of those services.

The entity is a provider of ambulance services. The entity is permitted to operate as an 'ambulance service' under the law in the state or territory in which it operates.

A third party, a business entity, engages the entity to provide ambulance services. The third party and the entity enter into a written agreement. The agreement creates a binding obligation for the provision of ambulance services by the entity and for payment by the third party. The agreement specifies the services to be provided.

The entity is registered for goods and services tax (GST). The supply is made for consideration, in the course or furtherance of the entity's enterprise and is connected with Australia.

Under section 9-5 of the GST Act, an entity makes a taxable supply if: • it makes the supply for consideration • the supply is made in the course or furtherance of an enterprise that the entity carries on • the supply is connected with Australia, and • the entity is registered or required to be registered for GST.

However, section 9-5 of the GST Act further states that a supply is not a taxable supply to the extent that the supply is GST-free or input taxed.

The entity's supply satisfies the positive limbs of section 9-5 of the GST Act, but will only be a taxable supply if it is not GST-free under Division 38 of the GST Act or input taxed under Division 40 of the GST Act.

Of relevance, is subsection 38-10(5) of the GST Act, which provides that a supply is GST-free if it is provided by an ambulance service in the course of the treatment of the recipient of the supply. Therefore, a supply is GST-free under this provision if the supply is: • provided by an ambulance service, and • provided in the course of the treatment of the recipient of the supply.

The phrase 'ambulance service' is not defined in the GST Act. After consideration of relevant state and territory legislation, for GST purposes an 'ambulance service' is an entity that is primarily established for the purpose of rendering, and which does render, first aid or emergency treatment to, and the transport of, sick and injured persons and will include all organisations that are permitted to operate as an 'ambulance service' under a state or territory law in the state or territory in which it operates.

The entity is permitted to operate as an ambulance service in the state or territory in which it operates, and is therefore an 'ambulance service' for the purposes of subsection 38-10(5) of the GST Act.

However, for the entity's supply of ambulance services to be GST-free, the services must be provided 'in the course of the treatment of the recipient of the supply'. A supply can only be one of 'treatment' if it is made to the person requiring that treatment. Therefore, 'treatment' cannot, by its nature, be something that is supplied to a business entity. Accordingly, where ambulance services are provided to a patient in the course of their treatment pursuant to an agreement with a third party that is a business entity, and the terms of the agreement are such that the third party is the recipient of a supply, that supply to the third party is not a supply covered by subsection 38-10(5) of the GST Act, because as a business entity, the third party cannot be in receipt of 'treatment'.

Therefore, in considering the application of subsection 38-10(5) of the GST Act to the entity's supply, it is necessary to determine who is the recipient of the entity's supply.

Section 195-1 of the GST Act defines 'recipient' in relation to a supply to mean 'the entity to which the supply was made'. Where there are only two parties involved generally there is a single supply to which the GST Act applies. For example, where those two parties are an ambulance service and the patient, the recipient of the single supply of ambulance services is the patient.

Where there is a third party involved in a transaction there may be more than one supply to which the GST Act applies. For example, the terms of an agreement between an ambulance service and a third party may result in the ambulance service making a supply to the third party which is not GST-free ambulance services. This supply is additional to any supply made to the patient.

The GST status of each supply is considered separately. The supply from the ambulance service to the third party is taxable where the requirements of section 9-5 of the GST Act are met, whilst the supply to the patient is a GST-free ambulance service where the requirements of subsection 38-10(5) of the GST Act are met.

A third party will be the 'recipient of a supply' by an ambulance service where: • the third party engages the ambulance service to provide something to them or to someone else • the third party, by agreement with the ambulance service, determines what is required to be provided to them or to someone else, and • there is a binding obligation between that third party and the ambulance service for the thing to be provided and the third party is liable to provide payment.

The third party engages the entity to provide ambulance services. The written agreement between the entity and the third party specifies the services that are to be provided (that is, ambulance services), and it creates a binding obligation on the entity to provide those services to patients and for the third party to pay for those services. Therefore, the third party is the recipient of a supply by the entity.

As a business entity cannot receive 'treatment', the supply to the third party cannot be in the course of treatment of the third party and therefore, cannot be a GST-free supply of ambulance services under subsection 38-10(5) 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 not GST-free under any other provision in Division 38 of the GST Act nor is it input taxed under Division 40 of the GST Act. As such, the entity is making a taxable supply to the third party under section 9-5 of the GST Act when it provides ambulance services to a patient pursuant to an existing agreement with the third party for the provision of those services. Note 1. As the entity is registered for GST, it is liable to remit 1/11th of the payment made by the third party. Where the third party is registered for GST, it is entitled to claim an input tax credit equal to the GST payable on the supply. Note 2. In circumstances where the arrangement between the ambulance service and third party is such that the third party does not engage the ambulance service but merely makes payment on behalf of the patient, the patient is the recipient of the supply. This supply will be GST-free where all the requirements of subsection 38-10(5) of the GST Act are satisfied.