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Do i have to register for GST when i can't possibly charge GST?

Discussion in 'Money matters' started by Xscaper, Dec 28, 2012.

  1. Xscaper

    Xscaper New Member

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    Hi guys,

    I've been a long time visitor to this site and love all the useful information here.
    I am in a bit of a unique situation and hope someone here can give me some good advice.

    First, a few basic facts about myself and my situation. I am a General practitioner working as a contractor with a Locum Medical Service. I do home visits that are bulk billed i.e. Medicare pays for them(not the actual patient). The service i work with deducts 30% plus a GST amount from the Medicare payment they receive and transfers the rest to me. My gross income would probably be around 300,000.

    I have an ABN but i wasn't sure if i should register for GST since i am in no position to charge my patients any GST at all. The payments that are received by the service and consequently by myself are fixed by Medicare(And most are GST Free). It appears that the Service i work with is actually charging me the GST. Every time i receive my payment summary from the service there is a significant amount of GST that has been deducted from the money that could have come to me.

    I realize that they are deducting it from my share as per the contract and i also understand that the only way i can claim that GST back in my BAS is if i am registered for GST however it looks like i would be expected to charge my patients an extra 10% for the visit.

    1)Since i can't charge my patients any GST, would i still be expected to provide ATO with the GST amount if i register for it?
    2) Do i even have to register for GST considering that i invariably provide GST free service?

    Thanks in advance to whoever takes the time to help this noob out!

    Syed
    Last edited: Dec 28, 2012
  2. cinns

    cinns Member

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    Hi Syed,
    The provision of medical services is GST free. A medical service can best be described as anything covered by Medicare. There are other exemptions pertaining to medical services, but in most cases, if Medicare covers it, it is GST Free.
    Often a health practitioner will subcontract to a larger medical practice and that medical practice remains the “owner” of the patient. In cases such as this, a health practitioner is deemed to be subcontracting employment services (not medical services) and accordingly, must charge GST on their time.
    The medical practice will be GST free, as it is the one providing the service to the patient. The opposite arrangement can also occur. If you have any doubt on the services you are providing and whether they are subject to GST, you should seek advice from the ATO.

    All practices that are subject to GST, the PAYGW system, the PAYGI system, or FBT, will be required to lodge a BAS at the end of each tax period. Typically, this will be quarterly for doctors, but sometimes can be on a monthly basis. GST registration is compulsory if your business turns over more than $75,000 per annum.

    Have you supplied your ABN to the Medical Practice? If you haven’t they can withhold 46.5% of the payment unless the total payment for the goods or services is $75 or less. I hope this helps you out a bit.
    Gnewbie and Xscaper like this.
  3. Couple It

    Couple It Well-Known Member

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    If you provide services seemed to be GST free then no, you don't charge GST to your patients, even if registered. No different to the local supermarket not charging GST on some basic food items.

    In my opinion, if the services you provide are GST free, but a portion of the costs and expenses you pay include GST, then it would make sense to register for GST to enable you to claim the GST paid.



    Wendy :)
  4. CindyK

    CindyK Active Member

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    Hi Syed,

    I agree that you would be best to contact the ATO or find yourself a bookkeeper or accountant.

    For the most part - there are only two options in Australia for earning income - working as an employee for an employer - (who pays you, remits your PAYG tax to the ATO and pays super and other liabilities) or working as a contractor in the provision of a service. The second is subject to you having an ABN and recording/paying tax on your income through that.

    I assume you have an ABN. Is that correct? Unless medicare (or someone similiar) remit PAYG withholding tax on your behalf to the ATO - you will have an Income tax bill each year and soon be required to pay installments on a regular (probably quarterly basis).

    If you do - then you do not have a choice - you will need to register for GST. It isn't about whether you charge or get paid amounts with GST in it - registering for GST is about the revenue or earnings through your ABN - if they are over $75000 then you must register for GST (regardless of whether you sell/provide GST free services or not).

    After that you need consider what items you are receiving GST with and what items you are paying it out on. How have you been operating in the past? Generally if alot of the services you provide are GST free then the rebate of any purchases you make (applicable to the business) that contain GST becomes a credit owing to you on your account with the ATO.

    I suggest you find a bookkeeper to help prepare you BAS etc. in order to make sure that you are both paying and claiming everything correctly according to your individual situation.

    Have a great week!
    Gnewbie and Xscaper like this.
  5. Xscaper

    Xscaper New Member

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    Thank you so much for your input guys! It does clear up a few things.

    I will definitely look for a book keeper now but i just wanted to know a little bit about the workings of the system before i did that.

    It appears that i absolutely have to register for GST. Am I correct in deducing that it may actually be monetarily beneficial for me to do so since i provide a GST free service and yet have had lots of expenses such as Fuel/Equipment etc with GST on them to run my practice?

    @Cinns No i haven't provided them with the ABN. Didn't even know i was supposed to before. It doesn't look like they're with holding any money from me because of that though. The only amount they're taking out is their 30% share along with charging me a 10% GST on their share e.g if their 30% share is 9000 dollars they deduct an additional 900 dollars on top of it. I am actually interested in finding out if that second amount i.e. 900 dollars in the above example is something that i will be able to claim back if i am registered for GST.

    @CindyK I have been keeping it very simple so far. I just do my job i.e. seeing patients and then send the claim forms to Medicare who pay on behalf of the patients. The payment initially goes to a trust established by the Medical service i work with. They deduct their 30% share and charge me an additional GST surcharge(10% of the amount they initially deducted). I get my share i.e. 70% minus the GST into my bank account. I have been keeping a record of all the expenses incurred by me in the course of traveling to patients houses or obtaining medical equipment etc. My plan was to file a tax return at the end of the financial year and get those expenses deducted from my tax. That was obviously before i learned about the ABN and the GST side of things. I have an ABN now as a Sole Trader. It looks like i not only have to register for GST but also need to file monthly/quarterly BAS statements.
    Last edited: Dec 29, 2012
  6. Couple It

    Couple It Well-Known Member

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    Yes

    For which they should be providing you with either a purchase order so you can invoice them, or providing you with a recipient created invoice. Either way, the invoice will show the amount of GST.

    If it is $900 GST then yes, you will include it in your BAS to claim back.

    Yes. I believe you only have to file monthly if the gross wages you pay to employees is over $25k a month, but you should have that confirmed.

    Wendy :)
  7. TehCamel

    TehCamel Active Member

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    Based on what you've said about the situation, and information others have provided, you do not provide a GST free service.

    If the medical center owns the clients, bills the clients, but sends you to do the work, and you will the medical center, then your services are not GST free and you should be charging GST.

    that's my take anyway
  8. CindyK

    CindyK Active Member

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    Hello Again!

    I would advise you to book an appointment with a Bas Agent to sort out your specific situation and set you up with software.

    You may not need an ongoing bookkeeper/BAS Agent - but you definitely need someone who is qualified and legally able to provide the advice - to check over your actual documentation and look at your services and how it operates.

    The different types of registration and when they must be lodged depends on a number of things - so it is best to have the correct guidance rather than end up with a tax office nightmare.

    What area are you in may I ask?
  9. JamesMillar

    JamesMillar Well-Known Member

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    Let’s clear this up

    1. As a GP almost all of the medical services you are providing to patients will be classified as entirely "GST Free supplies". (as opposed to "input taxed" - see below).

    2. The "admin fees" the clinic are charging you are not GST free and provided they are registered for GST (which they will be), then they will issue you with tax invoices for their fees. These tax invoices will outline the GST you are paying to them.

    3. Where a business (your business) makes "GST free supplies" then provided it is registered for GST it can claim the GST input tax credits against that income. Yes this is a great outcome - the GST Holy Grail that we pursue. This can be contrasted with business supplies made that are "input taxed" - which no GST credits can be claimed against.

    4. Based on your numbers the following is the forecast benefit if you register for GST.

    $300,000 x 30% = $90,000 Exc GST admin fee to you. The GST on top of this fee is $9,000. . Add some other GST input tax credits associated with accounting fees etc then you stand to gain at least $10,000 per annum if you register for GST and if your medical services are all GST free. (please still get some advice to review of there are other longer term issues for you)

    5. There may be some confusion here between the ABN PAYG withholding requirements versus the commercial admin practice typical of a locum arrangement. The 30% withholding is for their admin fee - it is not related to the ABN PAYG withholding tax regulations. Typically the GP is the legal entity that bills the patient (a requirement of the Medicare system) but the admin entity handles the process. In these circumstances even without an ABN I doubt any PAYG Withholding would apply between the practice and the GP because the practice is unlikely to be considered a labour hire firm. You have an ABN this is a non-issue anyway.

    I’d suggest this category of advice is beyond scope of a basic bookkeeping advisory arrangement (and possibly that of some accountants) so be mindful of what advice you take for this. There may be other implications if you register for GST (for example – triggering GST on business assets if you deregister or cease business at a later point in time).

    Moral of the story (once again) - find a professional accountant or a professional certified BAS agent and pay for some good advice to hang your hat on.
    Last edited: Jan 8, 2013
  10. CindyK

    CindyK Active Member

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    Hi James,

    While there are always those who don't provide adequate services, it seems a little unfair to say that persons (such as BAS Agents) who have the legal provision to provide services related to GST and its interpretatation as well as PAYG, FBT, FTC... etc and who have had to provide (before being able to offer such services) demonstrated experience, qualifications, understanding and ability, to say that they are not able to advise. After all, that is a considerable part of the role.

    While you might be right in some cases and even in this one, and where the situation may delve further into income tax law than usual, there are a great many bookkeepers/BAS Agents with years of experience who would (as far as I understand) be in no way out of their depth providing those services. I even know a few who work solely with medical practitioners.

    That's my two cents worth. Have a great day!
  11. JamesMillar

    JamesMillar Well-Known Member

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    Cindy I accept your point that my comments re bookkeepers are a generalisation and If you and your network are exceptions then I stand corrected. I can only really comment based on our experiences with various bookkeepers over the years and in my view this is outside scope.

    I've amended the final sentence recommendation to include reference to professional certified BAS agents.
  12. CindyK

    CindyK Active Member

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    Hi James,

    I really appreciate your comments and your ammendment, thank you.

    It's a tough industry to clean up and it will be awhile before all the rogue bookkeepers are weeded out - but hopefully with new legislation, higher understanding for clients and better collaboration with accountants we shall all eventually be shining stars....(here's hoping).

    :)
  13. AK47

    AK47 New Member

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    Sorry to drag up an old post but have found it whilst searching for an answer to a similar question about my wife's situation. We are new to the country and are trying to work out a few things

    She is also a GP but working in a self employed position in a mainly bulk billing practice of 5 other GP's, she has her own ABN and is registered for GST. She gets a % of her billings with the practice taking the rest. She also gets and additional 10% of her take home % under the title GST.

    She has already submitted 2 BAS statements and payed the GST portion deferring the tax until the end of year.

    After speaking to some friends here they found it strange as they said medical services are GST free and she shouldn't be paying GST. Are the practice basically giving her 'free' additional money?
  14. AK47

    AK47 New Member

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