GST and psychological services

To be registered for the GST, you must complete an application for an Australian Business Number (ABN) and indicate at the appropriate question that you wish to register for the GST.

No. It is possible to have an ABN without being registered for the GST. It is advisable to obtain an ABN because if you do work for a government organisation and cannot supply an ABN, then the government organisation is legally obliged to withhold 48.5% of your payment.

You do not have to register for the GST as long as your annual income generated from private practice remains lower than $75,000. If it exceeds $75,000, then you are legally obliged to register for the GST.

If the services of a practitioner have any chance of being GST-free, they must be delivered by a recognised health professional. Registered psychologists are assessed as being a recognised health professional. In addition, the psychological service must be 'generally accepted' by the profession as being necessary for the 'appropriate treatment' of a client.

Appropriate treatment is not defined by the legislation, but it is considered that appropriate treatment will be established where the recognised professional 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 that recipient insofar as that recognised professional’s particular area of training allows and will include subsequent supplies for the determined process.

A ‘trainee’ psychologist would satisfy the definition of ‘recognised professional’ in their own right, provided that they have permission or approval or are registered by the relevant federal body.

Some services are not considered to fit the criteria of “appropriate treatment” of a client, therefore you must charge GST. These include:

• Career counselling is not considered appropriate treatment, and is therefore taxable;
• Training work; and
• Supervision, if it is conducted for purposes of professional development.

Where an individual is assessed and a report is provided to them, the supply:

• will be GST-free if it is for the ‘appropriate treatment’ of the individual
• will not be GST-free if it is provided to the individual to be used by a third party for a purpose other than the appropriate treatment of the recipient.

Where an individual sees a psychologist and a report is prepared for another medical practitioner, the report will be GST-free if it is prepared for the ‘appropriate treatment’ of the individual.

UPDATE: Some changes were made to GST July 1 2012 relating to third parties as the recipient of supply.

From July 1 2012, if the underlying supply of health service to an individual is GST-free (that is, is for the “appropriate treatment” of an individual) then the supply of service to the recipient of supply - the third party - will also be GST-free.

This applies where the recipient of supply is:

• an insurer settling a claim under an insurance policy (with GST-free private health insurance and taxable insurance policies)
• an operator of a statutory compensation scheme (e.g. Workers Compensation, Motor Accident Authorities)
• an operator of a compulsory third party scheme
• an Australian government agency (e.g. Department of Veterans’ Affairs, Family Court)

If you need clarification of who the recipient of supply is in an individual situation, you can seek direct advice from the ATO – details here

This depends on who the recipient of supply is. If the employer organisation is an insurer, scheme operator or an Australian government agency (as defined above in question 9), the supply will be GST-free to the extent that the underlying supply to the individual is GST-free.

Should the organisation not fit into any of the categories of third party and therefore a private sector, non-government organisation etc., then the service will be subject to GST and will include any retainers or upfront charges as well as the fees in relation to each individual service performed.

Where an EAP provider contracts a psychologist to make a supply to a client under a contract that the EAP has entered into, it is considered that the recipient of supply is to the EAP, not the individual. As such, the third party conditions apply. That is, if the recipient of supply is an insurer, scheme operator or an Australian government agency, the supply will be GST-free to the extent that the underlying supply to the individual is GST-free. Should the organisation not be one of these third parties then the service will be subject to GST and will include any retainers or upfront charges as well as the fees in relation to each individual service performed.

Where other EAP providers contract an EAP provider for a right to have the services provided to their clients, the other organisations will be taken to be the recipient of the supply of the EAPs. Again, the third party conditions apply. If the recipient of supply is an insurer, scheme operator or an Australian government agency, the supply will be GST-free to the extent that the underlying supply to the individual is GST-free. Should the organisation not be one of these third parties then the service will be subject to GST and will include any retainers or upfront charges as well as the fees in relation to each individual service performed. Where registered for GST the other organisations will be entitled to an input tax credit in respect of the GST paid.

In this instance the Medicare Locals are the “recipient of supply”. As Medicare Locals are independent organisations and not an insurer, scheme operator or an Australian government agency (see GST Update below), services provided to Medicare Locals as a third party will be subject to GST. This means that psychologists providing ATAPS services to Medicare Locals must charge GST, on the proviso that the psychologist is registered for GST.