Australia’s consumption tax, known as the Goods and Services Tax, applies to everything you pay for, with a few exceptions. Most healthcare – but importantly, not all – is exempt from GST. If you are planning on doing any health care work where you are not paid a salary, such as in private practice or as a Visiting Medical Officer, then you may have to collect GST. The current GST is an extra 10% of the value of the service. So if your fee is $100 and GST applies, then the total invoice is $110.
In a nutshell, there are two criteria that must be satisfied to make services you provide, known as “supply”, GST-free. The first is that the supply must attract a Medicare benefit. So that rules out cosmetic cases, workplace medicals or writing medical reports about a patient. There’s no MBS item numbers you can use here, so add GST to your invoice. So far pretty easy!
The second is that the supply must be to the patient directly. Surely this applies all the time as we only look after patients, right??? Nope! So I have to apply GST to all my accounts the health funds pay in full? Wrong again!
The best way to think about it is to work out who asked you to come to work. In private practice, it’s almost always the patient (in a roundabout way, even if the surgeon asked you to cover the list). It doesn’t matter who pays the bill – health fund, patient or workcover – the patient still asked you to come and gas them, and MBS item numbers apply, so it’s GST-free.
But if you turn up for work and don’t really have any say in who you’re anaesthetising, then GST applies. The common examples here are non-salaried VMOs and “public in private”. In both these examples, your supply is being provided to a company, not the patient. It doesn’t matter if your remuneration is based on an hourly rate or MBS item numbers and units.
So, in a nutshell, you need to add GST for the following:
Otherwise, the service is free from GST!
If you’re looking for the authoritative explanation, head to the ATO’s very confusing website here.
There’s a third reason NOT to add GST, but we’ll talk about that next.
If you are doing any work where you charge fees, you almost certainly will need to have an Australian Business Number and Register for GST (two distinct requirements). Technically, you are only required to register for GST if your actual or expected turnover (the total amount of all fees you charge, excluding GST) is more than $75,000 in any financial year. Once registered, you stay registered unless you cancel your registration.
You should only charge GST if you are registered for GST or about to be. Be warned though – if you don’t register for GST, and are legally obliged to, you may be personally liable for the GST you didn’t charge from the date you were required to register, plus penalties.
At the end of the day, it’s probably better to register for GST, even if you’re under the threshold and only making GST-free supplies. There’s a few other perks that we’ll talk about later. Head here to get an ABN and register for GST. Have your Tax File Number ready and don’t forget you’re a “sole trader”.
Perk alert! Remember that stethoscope you just bought? You paid GST on it. And your indemnity insurance? Ditto.
All of these things are required to provide your services, or supply, in private practice. Long story short: Even if you do not produce any fees that attract GST, any GST you paid on goods or services as part of providing your services, should effectively be reimbursed to you.
And that’s why, even if you don’t reach the $75,000 threshold, it might be in your interests to register for GST.
Note that if you do claim GST you paid, you can’t also claim a tax deduction on that component of the invoice.
Every financial quarter you’ll be required to submit a Business Activity Statement or BAS. We’ll explain more in another blog, but a BAS is how you let the tax office know the amounts of both the GST you’ve collected and paid (like for your shiny new stethoscope). A bit like your annual income tax assessment, whatever the difference is, you’ll either have to pay to the ATO or you’ll get a refund. So make sure you set aside any GST you collect, ready to send to the ATO when required.
If you’re in private practice and registered for GST, you’ll need to submit a BAS every quarter. While an accountant can do it for you, you’ll still need to do the bulk of the work. So doing it yourself or using Quickbooks can be simpler, more cost-efficient methods.
This advice is general in nature and does not consider your personal circumstances. Get professional advice if you’re in any doubt.
Dr. Simon McLaughlin is an anaesthetist who likes to keep his administration simple and cost-effective. Solo Practice Management is designed to be just that, so if we can help you, please contact us to find out more!