Common GST categories
Health services
Health services are medical, dental, allied health and similar services that are GST-free when supplied by recognised practitioners and generally accepted as necessary for treating an ailment.
Health services are a major GST-free category. Many services provided by recognised health professionals are GST-free, which means the provider charges no GST but can still claim credits for the GST on their business costs. This applies to services by medical practitioners, dentists, psychologists, physiotherapists, chiropractors, osteopaths, optometrists, podiatrists, and a range of other allied health professionals, along with certain hospital and ambulance services.
To qualify, the service generally must be one that is generally accepted in the medical profession as being necessary for the appropriate treatment of the recipient. That is why treatments that are purely cosmetic are generally taxable, while the same procedure performed for medical reasons can be GST-free. A practitioner must also be of a type recognised under the GST law, and the supply must be made by or on behalf of that practitioner.
A health practice that is mostly GST-free still has GST obligations. Its taxable supplies, such as cosmetic procedures, medico-legal reports, sales of some goods or fitness classes, may be taxable. If a practice makes both GST-free and taxable supplies, it counts all of them when working out whether it reaches the registration threshold, and it must register once it does. Credits are claimable on costs for its GST-free supplies in the normal way.
The distinction from input-taxed supplies is essential. Health services are GST-free, not input-taxed, so providers keep their full credits on purchases such as equipment and rent. By contrast, input-taxed supplies would have no credits. A practitioner who rents out surplus space also makes a separate supply that may be taxable or input-taxed.
Common misunderstandings include assuming that anything done in a clinic is GST-free, or that anything in a health-related field is GST-free. Alternative therapies by non-recognised practitioners, gym memberships, wellness retreats and some counselling services may be taxable. Another is thinking that Medicare rebates decide GST treatment. The two are related but not identical, so you need to check the GST rules themselves.
If your business provides health services, review each service type, document whether it meets the GST-free test, and keep clinical or administrative records to support the treatment. This page is general information only, so confirm whether your particular services are GST-free with the ATO or a registered tax professional.
Worked example
A GST-registered physiotherapy clinic charges $120 for a treatment, which is GST-free, and sells a $44 branded water bottle including GST. Over a day it takes $1,200 from treatments (no GST) and $440 from merchandise. GST included on merchandise is $440 / 11 = $40. The clinic reports $40 as GST payable and can claim credits on its rent and equipment.
Practical tips
- Separate GST-free treatments from taxable extras in your billing system so each is coded correctly.
- If you offer cosmetic or non-medical services alongside treatment, check them individually because they may be taxable.
- If you are a patient, check whether a bill includes GST and ask the provider to explain it, since cosmetic and non-medical items often do.