Edited version of your private ruling

Authorisation Number: 1012560260917

Ruling

Subject: GST and Health and specialist disability services

Question

Is the entity making a GST-free supply of disability support services to disabled persons under Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it provides the services to those persons under a variety of arrangements?

Answer

The entity is making GST-free supplies of disability support services in circumstances where it satisfies section 38-25, section 38-30 or section 38-40 of the GST Act.

Relevant facts and circumstances

The entity is a not for profit organisation and is registered for the goods and services tax (GST).

It is registered under the relevant State legislation as a 'disability service provider' who can provide disability services to people with disabilities.

In some cases, the entity receives funding from the relevant State department to provide disability support services and accommodation to disabled persons under service agreements.

The entity also provides its services to disabled persons under agreements that it has with those persons and is paid for the services directly by the persons or their representatives.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 Division 38

A New Tax System (Goods and Services Tax) Act 1999 section 38-25

A New Tax System (Goods and Services Tax) Act 1999 section 38-30

A New Tax System (Goods and Services Tax) Act 1999 section 38-40

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

Subsection 7-1(1) of the GST Act provides that GST is payable on taxable supplies.

Section 9-5 of the GST Act provides that you make a taxable supply if:

· you make the supply for consideration

· the supply is made in the course or furtherance of an enterprise that you carry on

· the supply is connected with Australia, and

· you are registered, or required to be registered for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

GST-free supply

Division 38 of the GST Act sets out those supplies which are GST-free. Where a supply is GST-free, no GST is payable on the supply and the entity is entitled to an input tax credit for anything it acquires to make the supply.

Of relevance to this case are the following provisions in Subdivision 38-B of the GST Act:

38-25 Residential care etc.

(1) A supply of services is GST-free if:

(a) it is a supply of services covered by Schedule 1 to the *Quality of Care Principles; and

(b) it is provided through a residential care service (within the meaning of the Aged Care Act 1997); and

(c) the supplier is an approved provider (within the meaning of that Act).

(2) A supply of services is GST-free if:

(a) the services are provided to one or more aged or disabled people; and

(b) the *Aged Care Minister has determined in writing that the services are of a kind covered by Schedule 1 to the *Quality of Care Principles; and

(c) the supplier receives funding from the Commonwealth, a State or a Territory in connection with the supply.

(3) A supply of services is GST-free if:

(a) the services are provided to one or more aged or disable people in a residential setting; and

(b) the *Aged Care Minister has determined in writing that the services are of a kind covered by Schedule 1 to the *Quality of Care Principles; and

(c) the services include, and are only provided to people who require, the services (care services) set out in:

(i) item 2.1 (daily living activities assistance) of Part 2 of that Schedule; or

(ii) item 3.8 (nursing services) of Part 3 of that Schedule.

(4) A supply of accommodation is GST-free if it is made to a person in the course of making a supply to person that is GST-free under subsection (1), (2) or (3).

Section 38-25 of the GST Act addresses the GST treatment of services and accommodation provided to aged or disabled persons in residential care. Residential care is defined in the Aged Care Act 1997 to include personal care and/or nursing care provided to a person in a residential facility, and specifically excludes care provided to a person in their private home.

Subsections 38-25(1), (2) and (3) of the GST Act all refer to services listed in Schedule 1 to the Quality of Care Principles, or to services of a kind covered by Schedule 1 to the Quality of Care Principles.

Subsections 38-25(1) and (2) of the GST Act apply to situations where the supplier qualifies for or is in receipt of government funding.

In contrast, subsection 38-25(3) of the GST Act allows equivalent care services to be supplied GST-free to aged or disabled people who are living in privately funded residential care facilities.

Subsection 38-25(4) of the GST Act only applies if services and accommodation are supplied at the same time and the services are GST-free under subsections 38-25(1), (2) or (3) of the GST Act. The services supplied to a resident must be of a sufficient level that it can be said that the accommodation facilitates the supply of the care services and therefore, the accommodation is being supplied in the course of supplying those care services.

38-30 Community care etc.

(1) A supply of *community care is GST-free if community care subsidy is payable under Part 3-2 of the Aged Care Act 1997 to the supplier for the care.

(2) A supply of care is GST-free if the supplier receives funding under the Home and Community Care Act 1985 in connection with the supply.

(3) A supply of *community care is GST-free if the supply is of services:

(a) that are provided to one or more aged or disabled people; and

(b) that are of a kind covered by item 2.1 (daily living activities assistance) of Part 2 of Schedule 1 to the *Quality of Care Principles.

(4) A supply of care is GST-free if:

(a) the supplier receives funding from the Commonwealth, a State or a Territory in connection with the supply; and

(b) the supply of the care is of a kind determined in writing by the *Aged Care Minister to be similar to a supply that is GST-free because of subsection (2).

Community care is defined in the Aged Care Act 1997 as a package of personal care services and other personal assistance provided to a person who is not being provided with residential care. Community care services provide assistance to people to enable them to stay in their own homes.

38-40 Specialist disability services

A supply of services is GST-free if the supplier receives funding under the Disability Services Act 1986 or under a complementary *State law or *Territory law in respect of the services.

The term 'State law' is defined in section 195-1 of the GST Act to have the meaning given in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). Section 995-1 of the ITAA 1997 defines 'State law' as a law of a State. The DA 2006 is a State law that is complementary to the Disability Services Act 1986 (DSA 1986).

In this case, the entity is registered for GST and makes the supply of its services, including respite care with accommodation, for consideration in the course or furtherance of the enterprise that it carries on as a registered disability service provider in Australia.

In some cases, the entity receives funding from the relevant State department under service agreements it has with the department to deliver services to a disabled person. The question that arises under section 9-5 of the GST Act in this case is whether the entity's supply of disability services including respite care with accommodation are supplies that are GST-free under subsection 38-25 (2), subsection 38-25(4) or section 38-40 of the GST Act.

In some cases, the entity provides its services under service agreements that it has with the disabled persons and is paid directly by those persons. The question that arises under section 9-5 of the GST Act in this case is whether your supply of disability support services including respite care with accommodation are supplies that are GST-free under subsection 38-25(3) or subsection 38-30(3) of the GST Act, both of which deal with supplies of care where the supplier receives no funding.

Two or three party transactions

The arrangements under which the entity provides its services (other than when it contracts directly with the disabled person or their representative) involve more than two parties (sometimes referred to as tripartite transaction or arrangements

This is the setting in which section 9-5, section 38-25, section 38-30 or section 38-40 of the GST Act are to be applied. In a two party transaction, such as when the entity contracts with the disabled person or their representative for the provision of services, the services supplied to that entity is typically also provided to that entity.

The ATO has considered the concept of 'supply' in the context of arrangements involving a supplier and ultimate recipient as well as in the context of tripartite arrangements in Goods and Services Tax Ruling GSTR 2006/9.

Under a tripartite arrangement, it is possible that a supply is 'made' to one entity under the terms of the agreement, but the supply is 'provided' to another entity (see paragraphs 130 to 176 of GSTR 2006/9).

The term 'made' in the context of 'a supply made' takes its meaning from the definition of 'recipient' in section 195-1 of the GST Act:

Recipient, in relation to a supply, means the entity to which the supply is made.

'Provide' is used to contrast with 'made' to distinguish between the contractual flow of the supply to the recipient (the entity to which the supply is made) and the actual flow of the supply to another entity (the entity to which the supply is provided) (see paragraph 132 of GSTR 2006/9).

These concepts are important in relation to your circumstances because under the GST health provisions in Subdivision 38-B of the GST Act (except for sections 38-45, 38-47, 38-55 and 38-60 of the GST Act), the supply is only GST-free where an individual receiving that service or specific health treatment is the recipient of that supply. This outcome results from the specific wording in some health provisions, whilst in other provisions it is due to the nature of the services themselves. This means that a GST-free supply of a health service cannot be made to a business entity or a non-profit body (see paragraph 155 of GSTR 2006/9).

The difficulty in tripartite transactions is how to identify to whom a supply is made.

Various propositions are set out in GSTR 2006/9 to assist in analysing tripartite transactions (see paragraph 117 of GSTR 2006/9 for details).

Examining the agreement or other reciprocal legal relationships is the starting point in analysing the arrangements that you have in relation to the provision of your services.

In some cases, the entity provides its services without accommodation to a disabled person pursuant to a service agreement that it has with the relevant State department and receives funding from the department to deliver those services. Of relevance in this case is section 38-40 of the GST Act which provides that a supply of services is GST-free if the supplier receives funding under the DSA 1986 or under a complementary State or Territory law in respect of the services.

The entity receives funding under a State law that is that is complementary to the DSA 1986 to provide disability support services to a particular disabled person. The recipient of its supply is the disabled person. As it receives the funding for the purpose of funding services to that person, the supply of its services to that person satisfies section 38-40 of the GST Act and is GST-free.

Where the entity does not receive any funding from the relevant State department and it provides its services without accommodation to a disabled person, the only GST-free provision that may apply is subsection 38-30(3) of the GST Act which provides that a supply of community care is GST-free if the supply is of services:

· that are provided to one or more aged or disabled people, and

· that are of a kind covered by item 2.1 (daily living activities assistance) of Part 2 of Schedule 1 to the Quality of Care Principles (Item 2.1).

The kinds of services listed in Item 2.1 are as follows:

Personal assistance, including individual attention, individual supervision, and physical assistance, with:

(a) bathing, showering, personal hygiene and grooming;

(b) maintaining continence or managing incontinence, and using aids and appliances designed to assist continence management;

(c) eating and eating aids, and using eating utensils and eating aids (including actual feeding if necessary);

(d) dressing, undressing, and using dressing aids;

(e) moving, walking, wheelchair use, and using devices and appliances designed to aid mobility, including the fitting of artificial limbs and other personal mobility aids; and

(f) communication, including to address difficulties arising from impaired hearing, sight or speech, or lack of common language (including fitting sensory communication aids), and checking hearing aid batteries and cleaning spectacles.

Excludes hairdressing.

Where the entity supplies any of the services listed above directly to a disabled person, the supply of that service will be GST-free. It is important to note that it is only the supply of the individually listed services that are GST-free. To the extent that the entity's supply of services do not satisfy the requirements of subsection 38-30(3) of the GST Act, they will be a taxable supply under section 9-5 of the GST Act.

Sometimes the entity provides a disabled person with respite care and accommodation pursuant to a service agreement that it has with the relevant State department and receives funding for it.

As the entity receives funding from the State department to provide the services, its supply needs to be considered under subsection 38-25(2) and subsection 38-25(4) of the GST Act.

A supply of services is GST-free under subsection 38-25(2) of the GST Act if:

· the services are provided to one or more aged or disabled people (paragraph 38-25(2)(a))

· the Aged Care Minister has determined in writing that the services are of a kind covered by Schedule 1 to the Quality of Care Principles (paragraph 38-25(2)(b)), and

· the supplier receives funding from the Commonwealth, a State or a Territory in connection with the supply (paragraph 38-25(2)(c)).

The entity provides its services to a disabled person and as such, the first requirement in subsection 38-25(2) of the GST Act is satisfied.

With regard to the second requirement under paragraph 38-25(2)(b) of the GST Act, the Aged Care Minister has issued GST-free Supply (Residential Care - Government-Funded Supplier) Determination 2000 (the Minister's Determination). Schedule 1 to the Minister's Determination lists the kind of services that would be GST-free and they are essentially of a kind covered by Schedule 1 to the Quality of Care Principles. Paragraph 38-25(2)(b) of the GST Act will be satisfied where the entity supplies any of the services listed in the Minister's Determination.

The entity receives funding under a State law to provide respite care and accommodation to a disabled person. Therefore, paragraph 38-25(2)(c) of the GST Act is also satisfied.

It follows that as all the requirements of subsection 38-25(2) of the GST Act are satisfied, the entity is making a GST-free supply of respite care.

With respect to the entity's supply of accommodation to the disabled person, it would be GST-free under subsection 38-25(4) of the GST Act if it is supplied in the course of making a supply to the person that is GST-free under subsection 38-25(2) of the GST Act. In other words, the accommodation must be provided to the person in the course of providing care to that person and the person must have moved into the accommodation specifically to receive the care.

The entity also provides respite care and accommodation to a disabled person on a user-pays basis. That person uses your service on a regular basis. The person pays the entity directly for the supply.

As the person pays for the entity's services directly and the entity does not receive funding from the relevant State department, its supply needs to be considered under subsection 38-25(3) and subsection 38-25(4) of the GST Act.

Goods and Services Tax Ruling GSTR 2012/3 provides guidance on when residential care services will be GST-free under subsection 38-25(3) of the GST Act.

A supply of residential care is GST-free under subsection 38-25(3) of the GST Act if:

· the services are provided to one or more aged or disabled people in a residential setting (paragraph 38-25(3)(a))

· the Aged Care Minister has determined in writing that the services are of a kind covered by Schedule 1 to the Quality of Care Principles (paragraph 38-25(3)(b)), and

· the services include, and are only provided to people who require, the services set out in item 2.1 (daily living activities assistance) of Part 2 of that Schedule or item 3.8 (nursing services) of Part 3 of that Schedule (paragraph 38-25(3)(c)).

The first requirement in subsection 38-25(3) of the GST Act is that the services are provided to one or more disabled people in a 'residential setting'.

Paragraph 7 of GSTR 2012/3 explains that the meaning of 'residential setting' in the context in which it appears in paragraph 38-25(3)(a) of the GST Act does not include a person's private home, and excludes settings in which care may be provided but is medical in nature, such as a hospital or a psychiatric facility.

GSTR 2012/3 further explains at paragraph 8 that privately funded nursing homes and aged care hostels that provide care to disabled people are considered to be a 'residential setting' if they have the following characteristics:

· residents do not have a proprietary interest in the property

· residents can be moved at the operator's discretion under certain circumstances

· premises are marketed and held out to the public as a place for care and accommodation, rather than just accommodation, and

· residents have limited rights compared to residents who lease or own their premises.

On the basis that the premises at which the entity provides care and accommodation to the disabled person comes within the meaning of a 'residential setting', the first requirement for a GST-free supply under paragraph 38-25(3)(a) of the GST Act will be satisfied.

With regard to the second requirement for a GST-free supply under paragraph 38-25(3)(b) of the GST Act, the Aged Care Minister has issued GST-free Supply (Residential Care - Non-Government-Funded Supplier) Determination 2000 (the Determination). The Determination essentially lists services which mirror those in the Quality of Care Principles and specifies that to be GST-free the services must be provided in the following circumstances:

· the care recipient has a continuing need for services mentioned in item 2.1 or 3.8 of Schedule 1

· the services are supplied, under a written agreement with the supplier, as a package made up of

o the services mentioned in item 2.1 or 3.8 of Schedule 1

o other services mentioned in Schedule 1 that are needed by the care recipient

o accommodation, and

· the charges for the services and accommodation are payable to the same entity.

Paragraph 80 of GSTR 2012/3 explains that the written agreement required under the Determination must stipulate a package of services that the operator is obligated to provide to the resident, consistent with the resident's care requirements, and those services must include some item 2.1 or item 3.8 services. A general provision in an accommodation agreement, lease, licence or hire agreement stating that the provision of item 2.1 or item 3.8 services can be arranged if the resident requires them is not sufficient to satisfy the requirements of the Determination.

Where the entity contracts with a third party for the provision of some items in the package, the requirement in the Determination that the package be supplied by the one entity is met when the third party is the entity's agent or subcontractor and the charges are payable to the entity (paragraph 78 of GSTR 2012/3).

However, if the entity merely facilitates or arranges the provision of some part of the package by a third party and the third party is making supplies in its own right directly to the resident, then both the entity and third party are making separate supplies and neither of them will be making a GST-free supply of residential care under subsection 38-25(3) of the GST Act.

The third requirement in paragraph 38-25(3)(c) of the GST Act requires services to be provided to a resident who requires item 2.1 services for daily living activities assistance or item 3.8 services. The Determination referred to in paragraph 38-25(3)(b) requires a care recipient to have a continuing need for those services. Paragraph 74 of GSTR 2012/3 explains that it is not necessary for the care recipient to have a continuing need for all the item 2.1 and item 3.8 services listed in Schedule 1 to Quality of Care Principles and in Schedule 1 to the Determination. However, a resident must have a current existing need for one or more of those services that is ongoing rather than isolated or sporadic.

Paragraph 75 of GSTR 2012/3 further provides that in determining whether this third requirement is satisfied, the Commissioner will consider objective evidence of a resident's requirement and continuing need for item 2.1 or item 3.8 services. The evidence may include a report of an assessment of a resident's care requirements by a medical practitioner, a registered nurse, a registered physiotherapist, a registered occupational therapist or by more than one person including at least one registered health professional.

It follows that where the entity's supply of respite care and accommodation to a disabled person on a user-pays basis satisfies the requirements in subsection 38-25(3) of the GST Act, as explained above, its supply will be GST-free.

Further, the entity's supply of accommodation to the disabled person is GST-free under subsection 38-25(4) of the GST Act when it is made to the person in the course of making a supply of services to that person that are GST-free under subsection 38-25(3) of the GST Act.

Paragraph 91 of GSTR 2012/3 explains that accommodation is only supplied in the course of making a supply of services that is GST-free under subsection 38-25(3) of the GST Act if the services and accommodation are supplied at the same time. If a person enters a facility only for the provision of accommodation without any of the GST-free care services, the supply of accommodation is not GST-free under subsection 38-25(4) of the GST Act.

As explained in paragraph 92 of GSTR 2012/3, for the supply of the accommodation to be GST-free under subsection 38-25(4) of the GST Act, it must be integral to the supply of the care and the residents must be accommodated at the facility so that they can receive the care services that they require.

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