For GP’s from the UK, our GST here in Australia is a slightly different concept to VAT back at home.
What is GST?
The GST (Goods and Services Tax) is a broad-based tax of 10% on most goods, items and services sold in Australia. For instance, if you visit the supermarket and buy a packet of biscuits that cost $2.00, you will actually pay $2.20. In Australia, prices are displayed in almost all cases already inclusive of the GST.
How does GST affect GPs?
In the healthcare setting, any service performed by a GP that attracts a medicare rebate is GST free, no matter if the service is bulk billed or fully charged to the patient. Some medical aids, appliances and medicines are also not liable for GST. There may be a rare occasion where a GP performs a service that is not medicare rebate but this would be an exception.
The other important aspect to consider is in the billing arrangements for GPs who will generally work under a contractor agreement in Australia. For instance, when a doctor agrees to an arrangement to keep 70% of gross billings and pay the practice 30% as a service fee, the practice will charge GST on the 30% ‘service fee’. The most common method of dealing with this issue is that the doctor contributes 33% to the practice, then claims the additional 3% back from the ATO (Australian Taxation Office) each quarter. Overall the doctor still ends up receiving their 70%, but there is some administration to take care of. This is done via the Activity Statement the GP will need to lodge with the ATO each quarter.
How is GST different from VAT?
The GST and VAT are somewhat similar in that both are a broad-based consumption tax. VAT is a little more complex than the GST, with three rates charged and more difficult definitions around VAT zero-rated items. For instance – clothing and footwear for children under 14 are zero rated, but usually, clothing and footwear attract full 20% VAT. A biscuit could be subject to 20% VAT if it is chocolate covered and VAT free without the chocolate!
The GST is a constant 10% with a limited number of exclusions so is slightly easier to understand and deal with on a day to day basis – and most importantly, as a medical practitioner billing consultation fees, not something you will have to worry about too often!