GST on medical and health services

Most practices already charge no GST on their clinical work and assume that settles the question. It doesn't. Two things sit behind that GST-free label that catch practices out: it doesn't mean you lose the input tax credits on what you buy to run the practice, and it doesn't mean that income falls out of the $75,000 registration threshold. Both mistakes cost real money, in opposite directions.

The test is purpose, not procedure

The medical exemption sits in two provisions of the GST Act. Section 38-7 covers medical services directly; section 38-10 lists other health services — dental, physiotherapy, psychology and podiatry among them — that qualify on the same underlying test. Neither provision classifies by the name of a procedure. Both classify by its purpose: clinically necessary treatment of a diagnosed condition, provided by a registered health practitioner, is GST-free. The identical-looking procedure performed for appearance, convenience or retail is not. That single distinction, applied consistently, does more to get a practice's GST treatment right than any list of procedure names.

It also means a procedure code alone never answers the question. Two patients can receive what looks like the same item on a billing system and get different GST treatment, because the purpose behind the treatment differs. The clinical note, not the item number, is what has to support the classification.

Four professions, four different edges

The purpose test lands differently depending on what the profession actually does, and each of the four professions we cover has its own edge case worth knowing in advance.

Dental. The dental-specific provision (s 38-10) follows the same clinical-necessity logic. A crown placed to restore a tooth is GST-free; the same crown reshaped for a purely cosmetic result is taxable. The distinction is restore versus reshape, not the procedure name on the item list.

Physiotherapy. Physiotherapy is a listed service under s 38-10, so assessment and treatment are GST-free. Massage is not automatically covered by the same exemption just because a registered physiotherapist performs it — the ATO treats remedial and relaxation massage as its own thing, so a stand-alone massage booking is taxable unless it genuinely follows an assessment as part of a clinical treatment plan. Bundling a clinical assessment with ongoing gym-based coaching creates two supplies, not one, and the invoice needs to split them.

Psychology. Treatment is GST-free. Reports and assessments are where practices get caught, because they fail the exemption on two separate grounds. First, the fee has to come from an eligible third party — an insurer, a statutory compensation scheme, a CTP insurer or a government agency — not just any referrer. Second, the work itself has to be treatment: a forensic assessment or a family-law report is not treatment, however clinical the assessment process behind it looks, and is taxable regardless of who pays for it.

Podiatry. A custom orthotic, fitted to the individual patient, is GST-free. A shelf-bought retail insole sold over the counter is a taxable retail sale, even when it is sold from the same premises by the same practitioner.

GST-free doesn't mean losing your credits

This is the single most expensive misunderstanding in practice GST. Supplying a GST-free service does not reduce the input tax credits a practice can claim on its own purchases. A practice that is registered for GST and makes GST-free supplies can still claim the full input tax credit on rent, equipment, consumables and other taxable purchases used in making those supplies. The GST-free label describes the output, not an input restriction, and treating it as the latter is an apportionment error that costs a practice credits it was always entitled to.

Where a practice makes a mix of GST-free and taxable supplies — clinical treatment alongside retail items, or cosmetic work alongside restorative work — the GST-free share of income does not reduce the claimable input tax credit proportionally. Apportionment applies to costs that relate to both kinds of supply, not as a blanket haircut on credits because some of the practice's income happens to be GST-free.

The $75,000 threshold counts GST-free turnover too

Registration turnover is calculated on total turnover, and GST-free supplies count toward it in full. A practice that bills Medicare exclusively, and charges GST on nothing at all, can still be well over the $75,000 registration threshold, because the threshold test doesn't care whether the turnover is taxable or GST-free. Assuming a GST-free practice sits outside the registration question by default is the other expensive mistake, and it runs the opposite direction to the credits one above.

There is a case for voluntary registration even below the threshold. A practice that is mostly GST-free and buys a meaningful amount of taxable inputs — fit-out, equipment, ongoing consumables — can end up with more input tax credits than GST collected, producing a net refund most BAS periods. The trade-off is that voluntary registration also means charging GST on any taxable income the practice has (retail items, cosmetic work) and taking on the BAS lodgement and record-keeping that comes with registration. It is a genuine trade-off to model, not an automatic yes.

What to do next

For a specific service, procedure or item, Is This GST-Free? Quick Check walks through the same purpose test above and gives a fast answer with the section of the GST Act behind it. For your whole practice's position — GST-inclusive and exclusive figures, apportionment and the registration threshold on your own numbers — use the GST & BAS calculator. Both are estimation and explanatory tools. Where a material amount turns on the classification of a specific service — especially a borderline one like stand-alone allied health treatment, a psychology report, or a mixed cosmetic and restorative procedure — confirm the position with a registered tax agent.