GST answers
GST on private health fund benefits
A private health fund benefit is GST free where the treatment it pays for would be GST free supplied to the patient. In the usual claim the fund pays part of the member's account, so the supply stays with the patient and the benefit and the gap carry the same rate. A benefit for a service that is neither a medical service nor a listed health service is taxable.
Key facts
- What sets the treatment
- The recipient of the supply is whoever engages the health practitioner, and in the usual fund claim that is the patient5
- The usual arrangement
- Where the third party is only paying the practitioner on the patient's behalf, the supply is GST free if it falls under the definition of a medical or other health service3
- The other arrangement
- Where a fund contracts the practice to settle claims made under its policies, the supply to the fund is GST free if the same service would be GST free to the member3
- The provision behind that second case
- s38-60, third party procured GST-free health supplies, in the GST Act9
- Where an opt out is available
- The supplier and the insurer can agree not to treat the supplies as GST free, which is an agreement available where the fund is the recipient3
- What a benefit does not do
- Paying a benefit does not put a service on the listed health services, and the ATO's own example is remedial massage, which is not physiotherapy4
- The three conditions for a health service
- A listed health service, performed by a recognised health professional in that service, generally accepted in that profession as necessary for the appropriate treatment of the recipient4
- Where the allied health template posts it
- Account 403, Clinical services, private health fund benefit, at the GST Free Income tax rate10
- Whether the benefit and the gap are split
- The template's confirm note says some practices prefer one revenue line at the patient level, so the split is the practice's call and the rate is the same either way10
The fund pays, and the patient is who you supplied
Much of what comes back for this question is written for the member: whether premiums carry GST, whether cover is worth holding. The practice question is narrower and has a posting attached to it. A patient books, the fund approves a benefit at the desk, the patient pays the rest, and two amounts arrive from two payers. What rate does the revenue line carry.
The rate is settled by the service, not by the payer. The ATO puts the recipient of the supply first, and the test is who engaged the practitioner. A patient who booked their own appointment engaged the practitioner, and the fund is settling part of that patient's account under a policy the patient holds.
The recipient of the supply is whoever engages the health practitioner to provide the service. In many cases, this will be the patient. However, in some cases, it will be a business.5
The third party page then confirms it for a payment made on somebody's behalf.
Where a supply is not made to a third party (for example the third party is paying the medical practitioner on behalf of the patient), the supply is GST-free if it falls under the definition of a medical or other health service.3
One supply, two payments
The consequence a bookkeeper needs is short. There is one supply, and the benefit and the gap are both consideration for it, so they carry the same treatment. A GST free session does not become part taxable because the fund covered some of it, and a taxable service does not become part GST free because the fund covered some of it.
The fee position on that drawing matters for the deposit rather than for the tax rate. HICAPS states that card processing and terminal rental are charged to the practice's nominated account, so the amount a fund settles is the amount it approved. The settlement rails are laid out on HICAPS settlements in Xero and Tyro EFTPOS and HealthPoint.
Four arrangements, read the same way
A fund benefit reaches a practice in more than one shape, and the shape changes who the recipient is rather than the rate the service carries.
| The arrangement | Who engaged the practitioner | What the revenue line carries |
|---|---|---|
| Benefit claimed at the desk, gap paid on the spot | The patient | One supply to the patient, GST free where the service qualifies, with the gap at the same rate as the benefit |
| The member pays in full and claims the benefit back from the fund | The patient | No fund payment reaches the practice, and the whole fee is a patient line at the rate the service carries |
| The fund contracts the practice to treat its members and settles the claims | The fund | A supply to the fund, GST free if the service would be GST free supplied to the member, unless the parties agree otherwise |
| The fund pays a benefit for a service that is neither a medical service nor a listed health service | The patient | Taxable, because the benefit does not change what the service is |
The arrangement where the fund is the recipient
The third row is the one the ATO chose to illustrate, and search results quote its conclusion without its setup. In the example a fund has an agreement with a physiotherapy practice for services supplied to settle claims made under its policies, and a member is referred to the practice by the fund.
Under this arrangement, the payment to Phil's Physio is for the supply made to ABC Health Fund of providing the services to Peter.3
The supply there is to the fund and is still GST free, because a fund is an insurer and that limb borrows the answer from the supply the member would have received. The provision is s38-60. Two things follow that do not follow in the ordinary claim.
- The opt out becomes available. The ATO says the supplier and the recipient can agree not to treat the supplies as GST free, which can be simpler where they have a mix of taxable and GST free supplies.
- The fund, not the patient, is who the invoice is to, which changes the contact it is raised against and the way aged receivables read.
Which arrangement a practice is in is answered by its agreement with the fund. Both reach the same rate for a qualifying treatment, which is why the posting is settled even where the characterisation is not. The other payers the same provision reaches are on third party payers.
A benefit is not a test of anything
This is where practices lose money in both directions. Funds pay extras benefits across a wide range of therapies, and a benefit says the member is covered, not that the supply is GST free. For a health service that is not a medical service, three things have to hold at once.
- It is one of the listed health services, and the ATO is strict that a service has to be one of them rather than similar to one of them.
- It is performed by a recognised health professional in that listed service, or in defined circumstances by their assistant.
- It is generally accepted in that profession as necessary for the appropriate treatment of the recipient of the supply.
The ATO's example on the first limb is a remedial massage therapist whose work may resemble physiotherapy: remedial massage is not physiotherapy, and it is not on the list. A fund paying a remedial massage benefit has not changed that. Naturopathy and herbal medicine sit differently, because both are on the list. Massage therapy takes the first case in full.
An extras benefit paid for a device is a different question
Plenty of extras benefits are paid for a thing rather than for a session: orthotics, a brace, a splint, a device dispensed at the appointment. Goods have their own test. A medical aid or appliance is GST free where it is listed in the GST Act or its regulations, is specifically designed for people with an illness or disability, and is not widely used by people without one.
The practical effect is that one invoice can carry a GST free session and a taxable item, with a fund benefit sitting across both. Products and equipment works through the goods side, and invoices with mixed rates covers what that does to the document.
What the canonical templates post
The templates carry the conclusion as a posting rather than as prose. The allied health template gives a health fund benefit its own revenue account at the GST free income rate, and its reason text says the same thing this page has said the long way: the benefit is still consideration for a supply made to the patient, so it follows the same test as any other listed health service, and the fund is only the payer.
The other two templates reach account 400 through their practice default row, at the same tax rate, which is why the record's agreement reads as differing: the account codes are not the same even though the treatment is. A practice starting from one of those templates and taking fund claims at the desk is telling the map something it does not hold yet, and that is a mapping question rather than a silent posting.
One revenue line or two
Because the fund benefit has an account of its own in that template, a practice can see the benefit separately from the patient's own money. The template does not insist on it. The confirm note attached to the account says some practices prefer one revenue line at the patient level rather than splitting fund benefit from patient gap, and both accounts carry the same tax rate, so the choice shows up in the profit and loss rather than in the activity statement.
- Splitting shows how much of the practice's revenue arrives through funds, which is useful where the practice is forecasting on that mix.
- One line at the patient level keeps the profit and loss shorter and matches the way many practices already read their own numbers.
- The choice is worth settling before the map is approved, because moving it later means recoding history rather than changing a setting.
The settlement leg is a separate posting
Everything above belongs to the revenue leg, which is the leg that carries the GST free income rate and the only leg with a tax consequence. The money then has to travel. Every clearing component in the canonical templates posts outside the activity statement, because the money it holds was already earned and already reported when the invoice was raised.
Keeping the two legs apart is what stops a fund settlement being posted at a revenue tax rate, which is the error that turns one deposit into a fortnight of chasing. A private patient paying in full raises the same question with only one payer, and private patient consults takes it from there.
What Ledger Map does with it
Ledger Map holds one standing map for the practice, approved before anything syncs. A fund claim resolves to its account and its tax rate through that map, so the benefit and the gap land the way the practice decided rather than the way an export happened to label them. The settlement is then posted as one balanced document set, which leaves one exact match in the bank feed for a person to accept.
The accounts and the rates come from the canonical template the practice starts from, not from the product, and a line the map cannot place becomes a question with the options laid out. How it works shows the map and the approval step, and the other GST answers carry the same treatment record for every funder in the mix.
Questions
Is a private health fund benefit GST free?
A fund benefit is GST free where it pays for a service that would be GST free supplied to the patient. In the usual claim the fund is settling part of the patient's own account, so the supply stays with the patient and the benefit carries the rate the service carries. Where the fund has contracted the practice to treat its members, the supply is to the fund and is GST free on the insurer limb instead, unless the parties have agreed otherwise.
Is the gap the patient pays GST free too?
The gap carries whatever the session carries, because the benefit and the gap are two payments for one supply. A GST free session does not become part taxable because a fund covered some of it. A service that is taxable stays taxable for its whole price, including the part a fund paid a benefit on.
Do you pay GST on private health insurance?
That question is about the member's premium, which is a different supply from the practice's fee and sits under its own provision in the GST Act. This page answers the practice's question instead: what rate the revenue line carries when a fund pays part of a patient's account. The premium's treatment does not set the rate on the practice's fee.
What health services are GST exempt?
The ATO uses GST free rather than exempt, and for a service that is not a medical service it lists the ones that qualify: acupuncture, audiology, chiropody, chiropractic, dental, dietary, herbal medicine, naturopathy, nursing, occupational therapy, optometry, osteopathy, paramedical, pharmacy, psychology, physiotherapy, podiatry, speech pathology, speech therapy, social work, and Aboriginal or Torres Strait Islander health services. The service also has to be performed by a recognised health professional and be generally accepted as necessary for appropriate treatment.
Does a fund paying a benefit make my service GST free?
No. The benefit says the member is covered under their policy, which is a question about the policy rather than about the supply. A service that is neither a medical service nor one of the listed health services is taxable whether a fund pays a benefit for it or not, and the ATO's example of a service that is not on the list is remedial massage.
Should the fund benefit and the patient gap be two revenue lines?
The canonical allied health template gives the fund benefit an account of its own and attaches a note that some practices prefer one line at the patient level. Both carry the same tax rate, so the activity statement reads the same either way and the split is about what the practice wants to see in its profit and loss. It is worth settling before the map is approved.
Sources
Open questions
- Which arrangement a given practice is in. The ATO's worked example is a fund that contracts a practice to treat its members, while the ordinary point of sale claim is the fund paying part of the member's account. Only the practice's own agreement with the fund settles it, and the answer decides whether the opt out is available.
- Whether any fund and practice have agreed not to treat the supplies as GST free. The ATO says the parties may agree; no published example was found for this page, so a practice's own arrangements are the answer.
- The full text of s38-55 and s38-60 was not read. The Federal Register of Legislation rendered its table of contents only on 3 Sep 2026, so the sections are cited for their headings and their location and the test itself is carried by the ATO page.
- Whether the day's fund benefits arrive as one deposit or one deposit per fund is not confirmed from a primary source in the corpus. It changes the settlement rather than the treatment.
- Whether the HICAPS Digital fee is netted from a settlement or billed separately is unverified in the corpus. The terminal fee position is sourced and is what the drawing above states.
- Where a practitioner holds more than one qualification, which one a session was supplied under is a fact about the booking and the practitioner rather than about the fund, and the listed service test is applied to that.
- GST and health, supply of services through a third party
Australian Taxation Office. Retrieved 3 Sep 2026. Source updated 12 Jun 2024.
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- GST and health, other health services
Australian Taxation Office. Retrieved 3 Sep 2026. Source updated 12 Jun 2024.
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- GST and health, recipient of the supply
Australian Taxation Office. Retrieved 3 Sep 2026. Source updated 12 Jun 2024.
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- GST and health, appropriate treatment
Australian Taxation Office. Retrieved 3 Sep 2026. Source updated 12 Jun 2024.
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- GST and health, medical services
Australian Taxation Office. Retrieved 3 Sep 2026. Source updated 12 Jun 2024.
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- GST and health, medical aids and appliances
Australian Taxation Office. Retrieved 3 Sep 2026. Source updated 8 Oct 2025.
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- A New Tax System (Goods and Services Tax) Act 1999, s38-60, third party procured GST-free health supplies
Federal Register of Legislation. Retrieved 3 Sep 2026. Source updated 1 Jan 2026.
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Review
Last reviewed 3 Sep 2026 by Shane
General information for Australian allied health practices, not tax advice. Confirm a treatment with your BAS agent or accountant before you post it.
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