BAS for Medical Practices: Understanding GST-Free Health Services

"Medical" Doesn't Automatically Mean GST-Free

It's a common assumption that anything provided by a medical practice is GST-free. It isn't. Generally, services that attract a Medicare benefit are GST-free, but cosmetic procedures, some specialist services without a Medicare item number, and administrative outputs like medico-legal reports are typically taxable supplies.

Medico-Legal Reports Are a Common Trap

Reports prepared for legal, insurance or employment purposes, not for treating the patient, are generally taxable, even though they're written by a medical practitioner using clinical knowledge.

What Getting It Wrong Costs

Treating taxable services as GST-free understates GST payable, which the ATO can assess retrospectively with penalties and interest once identified.

Setting Up Xero to Handle the Split Correctly

• Separate income accounts for GST-free clinical services and taxable services.
• Default tax codes set on each account so data entry doesn't require manually deciding GST treatment.
• Periodic review as the practice's service mix changes.

A Quarterly Check Worth Doing

Before each BAS, a quick review of any unusual income items, new service types, one-off procedures, catches misclassification before it's locked into the quarter's figures.