GST for Medical & Health Services
Most medical and health services in Australia are GST-free — but the rules are specific. Whether a health service is GST-free depends on who provides it, what the service is, and whether it qualifies as appropriate treatment. Getting it wrong can mean overcharging patients or under-reporting GST.
Overview
Medical services supplied by a medical practitioner are GST-free under section 38-7 of the GST Act if the service is covered by a Medicare benefit — regardless of whether the patient actually claims that benefit. If no Medicare benefit is payable, the service may still be GST-free if it is not rendered for cosmetic reasons.
Beyond GPs and specialists, section 38-10 lists 21 other health services that are GST-free when supplied by a recognised professional and the service constitutes 'appropriate treatment'. These include chiropractic, dental, physiotherapy, psychology, optometry, nursing, podiatry, occupational therapy, speech pathology, naturopathy, acupuncture, herbal medicine, audiology, dietetics, osteopathy, pharmacy, social work, Aboriginal health services, and paramedical services.
The key test for allied health professionals is 'appropriate treatment' — the practitioner must use their professional skills to determine a course of action aimed at preserving, restoring, or improving the patient's physical or psychological wellbeing. Routine check-ups and preventative care qualify. Services that are primarily for relaxation, recreation, or personal enjoyment (such as recreational massage or aroma therapy without a clinical purpose) are taxable.
Cosmetic procedures are taxable if no Medicare benefit is payable and the procedure is predominantly for improving personal appearance. However, reconstructive surgery following trauma, disease, or congenital abnormality is GST-free — even if it also improves appearance — because its primary purpose is medical or reconstructive.
Common items & GST status
The table below shows the GST treatment of common items and transactions in the medical & health sector.
| Item | GST Status | Notes |
|---|---|---|
| GP consultations | GST-free | Medicare-covered medical services under section 38-7 |
| Specialist consultations | GST-free | Medicare-covered specialist services |
| Dental services | GST-free | Listed health service under section 38-10 (item 6) |
| Physiotherapy | GST-free | Listed health service under section 38-10 (item 17) |
| Psychology services | GST-free | Listed health service under section 38-10 (item 16) |
| Chiropractic | GST-free | Listed health service under section 38-10 (item 5) |
| Optometry | GST-free | Listed health service under section 38-10 (item 12) |
| Cosmetic surgery (no Medicare benefit) | Taxable | Procedures predominantly for improving appearance — e.g. tattoo removal, elective rhinoplasty |
| Reconstructive surgery (post-trauma) | GST-free | Medical/reconstructive purpose, even if appearance also improves |
| Prescription medicines (PBS/SUSMP Schedule 4 & 8) | GST-free | Prescription-only drugs under section 38-50 |
| Over-the-counter vitamins and supplements | Taxable | Not prescription medicines — standard GST applies |
| Private health insurance premiums | Input-taxed | Financial supply — no GST charged, no input credits for the insurer |
| Medical aids and appliances | GST-free | Listed medical aids (wheelchairs, hearing aids, etc.) under Schedule 3 |
| Ambulance services | GST-free | Emergency medical transport |
| Recreational massage (no clinical purpose) | Taxable | Relaxation massage without a treatment plan is not 'appropriate treatment' |
Common mistakes & traps
These are the most frequent GST errors the ATO sees in the medical & health industry. Avoiding them can save your business from penalties and back-payments.
1Assuming all health services are GST-free
Not all services provided by a health practitioner are automatically GST-free. The service must be an 'appropriate treatment' provided by a 'recognised professional' in one of the listed categories.
How to fix it
Check three conditions: (1) the service is listed in section 38-7 or 38-10, (2) the supplier is a recognised professional for that service, and (3) the service constitutes appropriate treatment. All three must be met.
2Not charging GST on cosmetic procedures
Some practitioners forget that cosmetic procedures — where no Medicare benefit is payable and the purpose is to improve appearance — are taxable. This includes laser hair removal, teeth whitening for cosmetic purposes, and elective cosmetic surgery.
How to fix it
If no Medicare benefit is payable, assess whether the service is predominantly cosmetic. If yes, charge 10% GST. Document the clinical rationale for any borderline cases — the ATO assesses cosmetic status on a case-by-case basis.
3Failing to register for GST when turnover exceeds $75K
Health practitioners sometimes assume they don't need to register because their services are GST-free. GST registration is required once turnover exceeds $75,000 — regardless of whether your supplies are taxable or GST-free.
How to fix it
Register for GST once your total business turnover exceeds $75,000. Even if all your supplies are GST-free, registration allows you to claim GST credits on your business purchases (rent, equipment, insurance).
4Not claiming input tax credits on business expenses
Because most medical services are GST-free (not input-taxed), practitioners can claim GST credits on their business expenses. Some practitioners miss this benefit, thinking GST-free means no GST interaction at all.
How to fix it
GST-free is different from input-taxed. With GST-free supplies, you don't charge GST to patients but you CAN claim input tax credits on business purchases like rent, equipment, and insurance. Register for GST and claim these credits on your BAS.
Input tax credit guide
Which business purchases can you claim GST credits on? This table covers the most common purchases for medical & health businesses.
| Purchase | Credit? | Notes |
|---|---|---|
| Medical equipment and instruments | Yes | Full GST credit on clinical equipment — stethoscopes, examination tables, diagnostic tools |
| Practice management software | Yes | GST credit on software subscriptions and IT equipment |
| Commercial rent (clinic premises) | Yes | Commercial rent is a taxable supply — claim the GST component |
| Professional indemnity insurance | Yes | Insurance premiums include GST |
| Cleaning and sterilisation supplies | Yes | Medical-grade cleaning and sterilisation products |
| CPD courses and professional development | Yes | Training courses and conference registration fees |
| Reception and admin wages | No | No GST on wages — wages are not a taxable supply |
| Prescription medicines (for dispensing) | No | GST-free purchases — no GST charged means no credit to claim |
| Bank fees and merchant charges | No | Financial supplies are input-taxed — no GST credits |
BAS tips for medical & health
Report GST-free sales at label G3 on BAS
GST-free health services are reported at label G3 (GST-free sales) on your BAS. They are included in your total sales (G1) but separated as GST-free. This is important for the ATO to verify your GST status.
Track mixed-use expenses for apportionment
If your practice earns both GST-free income (consultations) and taxable income (cosmetic procedures, product sales), you may need to apportion input tax credits on shared expenses.
Quarterly or annual BAS lodgment
Health practices with turnover under $10 million can lodge BAS quarterly. If your turnover is under $75,000 (and you've voluntarily registered), you may be eligible for annual GST reporting.
Frequently asked questions
ATO sources & references
All information in this guide is based on the following ATO publications and rulings.