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Edited version of your written advice

Authorisation Number: 1012784388018

Ruling

Subject: Goods and services tax: GST free care services and accommodation in a retirement village

Question

Are you, Entity A, as Receiver of Entity B and Controller of the assets of Entity C, liable to pay GST on the supplies of the specified services, the general services and the accommodation supplied to residents in the Retirement Village pursuant to section 58-10 of the GST Act?

Answer

No. Where a resident has been assessed as requiring the item 2.1 or 3.8 services as documented in the Care Plan, your supplies of the specified services, the general services and the accommodation will be GST free.

The scheme commences on:

On or after 25 September 2014

Relevant facts and circumstances

On ddmmyyyy, Entity D registered for GST.

On ddmmyyyy, Entity D acquired vacant land in Australia, for $X. A portion of the property was developed as a retirement village.

The financier of the project was entity B who advanced funds to a borrower associated with Entity C. The associate of Entity C holds a first registered mortgage over the Entity C's property through Entity E which acts as custodian of the mortgage on behalf of Entity B.

On ddmmyyyy Entity D became part of a GST group. There were 3 consecutive Group representatives. Each of these entities became incapacitated in some form and had Representatives appointed over them. Entity D then exited the GST group and began reporting its GST obligations on its own BAS.

On ddmmyyyy, the name of Entity D changed its name to the current name of Entity C.

Retirement Village (RV)

The development of the retirement village commenced in 200X and was to continue over several stages with a proposal to construct X units.

The first stage of development has been completed with X accommodation units constructed. These units are spread across X buildings. The units in each building are set either side of a central internal corridor and accessed through this corridor.

The communal facilities are located in separate buildings and are connected by covered walkways The communal facilities comprise a commercial kitchen, dining area, library, reception area, hairdresser, transition room, lifestyle co-ordinators office, bathroom and storeroom together with the nurses office.

As at mmyyyy, X of the apartments were occupied with a total of Y residents. The rest of the units were vacant. While residents must be over 65, given the average age of residents is XX, the village environment is not suited to 'young' totally independent residents. They are not attracted to the village & are discouraged from taking up residence. Marketing of the village emphasises "supported living" and is directed to residents who require some level of care."

The apartments have the following features:

RV operations

Entity C initially appointed, Entity F as its agent, to provide management services in respect of the retirement village.

At the same time Entity F, entered into an agreement with Entity G to operate and manage the retirement village.

The agreement states that the relationship between Entity F and Entity G was one of principal and agent. A management fee of $XX was to be invoiced monthly by Entity G to Entity F who was to then invoice Entity C for its services. The GST registration of Entity F was terminated on ddmmyyyy and it ceased to be involved in the running of the RV.

Entity G has continued to manage the operations of the RV up until the current time on behalf of Entity C under the same terms as Entity F had contracted with Entity C. Entity B have continued to fund the operations of the retirement village through the different controllers up until the current time.

A registered nurse is on call 24 hours a day to render emergency assistance to residents and an Enrolled Nurse (EN) is available on all shifts.

Residents are assessed before entering the village by entity G staff to establish their need for services. Further ongoing and regular reviews are performed by a nurse on site to assess and monitor their care needs. The assessments are kept by Entity G on behalf of Entity C. The initial assessment form is called 'Initial Health & Service Assessment'. The ongoing Assessment form is titled Care Plan and sets out the services the resident requires.

All residents require services that are listed at either item 2.1 (daily living activities assistance) of Part 2, or item 3.8 (nursing services) of Part 3 of Schedule 1 to the Quality of Care Principles 2014.

Residents

When residents enter and occupy the Retirement Village (RV) they are supplied with a number of agreements which include a:

They or their representative are required to read the PID, be assessed for the services they need under the Initial Health and service Assessment form and then sign the lease agreement.

Public Information document (PID) (Dated ddmmyyyy)

X Support/Care services

Lease arrangements

Relevant legislative provisions

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

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

A New Tax System (Goods and Services Tax) Act 1999 195.

Reasons for decision

Division 58

Under section 58-10 of the (A New Tax System (Goods and Services Tax) Act 1999) GST Act, a representative is liable to pay any GST that an incapacitated entity would, but for this section, be liable to pay on a taxable supply.

The term representative is defined in section 195-1 to include:

On ddmmyyyy, you were appointed as a Receiver over a number of assets including those of Entity C. On dmmyyyy you were also appointed as agent of Entity E, who held the mortgages over Entity C's assets. Accordingly, you are a representative.

An incapacitated entity (IE) is defined in section 195-1 as an entity which has a representative appointed over it. Therefore, Entity C is an incapacitated entity.

To the extent that you are exclusively responsible for the supplies made by Entity C, you will have exclusive responsibility for the GST consequences of the supplies and acquisitions from ddmmyyyy.

The specified services

You have asked whether the specified services, the general services and accommodation will be GST free when supplied to residents of an apartment in the retirement village. The specified services are:

The general services are upkeep of gardens, chaplain, maintenance and emergency call system"

The supplies made in the retirement village are:

Therefore, the supplies will be taxable supplies unless they are GST free or 'input taxed supplies.

GST free supplies

Subsection 38-25(3) provides that a supply of services is GST-free if:

The background to section 38-25 of the GST act is set out in Goods and Services Tax Ruling GSTR 2012/3 Goods and services tax: GST treatment of care services and accommodation in retirement villages and privately funded nursing homes and hostels. (GSTR 2012/3). It relevantly provides the following commentary in paragraphs 107 to 112.

Paragraph 38-25(3)(a)

Are the services supplied to one or more aged or disabled people in a residential setting?

Residential setting

For the purposes of paragraph 38-25(3)(a), the term residential setting is expanded in section 38-25(3A) to include services provided to a resident of a retirement village under certain circumstances. In this instance, the services are provided in a residential setting if, and only if:

Resident of a serviced apartment in the retirement village.

Retirement Village

The term retirement village is defined to mean:

Your premises meet the definition of retirement village.

Serviced apartments

A serviced apartment is defined in the GST Act to mean an apartment (however described) in relation to a retirement village if:

GSTR 2012/3 explains what it means when a unit is designed to be occupied by aged residents who require either or both of the following:

Paragraphs 34 to 36 provide the following information:

Therefore, it is necessary for your apartments to have been designed with features that enable them to be physically distinguished from independent living units (ILU's). It is not enough that they are merely able to accommodate those that have a need for item 2.1 and 3.8 services they must have been designed especially for this purpose.

Your apartments have many features that are common to ILUs in that there is a full laundry and kitchen with a lounge and dining room and have one or two bedrooms. Photos you supplied confirmed these details. There are emergency buzzers in the apartments, similar to most ILU's in retirement villages.

However, in addition, the apartments have larger than normal power and light switches, wider doorways through which wheelchairs can be moved and hand rails.

We consider that, with these additional features, the 'built form of the apartments' are designed for individuals who may require item 2.1 and 3.8 services.

Requirement (b) of the serviced apartment definition - One responsible person within proximity of the apartment.

Paragraphs 37 and 38 provide that:

You have advised that both a registered nurse (RN) is on call and an Enrolled Nurse (EN) are present on all shifts and so you meet this requirement.

Requirements (c) and (d) of the serviced apartment definition.

Further, you meet requirements (c) and (d) as the apartments are part of a single complex with a central corridor and there is in the retirement village a communal dining facility that is available for use by the residents of apartments in the retirement village.

Therefore, we consider that the residents occupy serviced apartments in a retirement village as defined.

There also need to be in force a written agreement under which the operator of the retirement village provides daily meals and heavy laundry services to all of the residents of the apartment.

Written agreement in force

Paragraph 53 of GSTR 2012/3 provides that

A use of the word 'generally' is an intention to refer to a practice that is common to most/many and can be indefinite.1

'Meal'

1. A meal is taken to mean a 'regular repast of the day, as breakfast, lunch or dinner'; or 'the food eaten or served for repast.'2

2. 'Repast' from the Macquarie Dictionary means:

1. a quantity of food taken at or provided for one occasion of eating: to eat a light repast.

2. a taking of food; a meal: the evening repast.

3. obsolete food.

3. The meaning of meal is 'one of the regular quantities of food taken at or provided for one occasion of eating' of the day, for example, breakfast, lunch, or dinner.

4. The RV operator is required to provide meals of adequate variety, quality and quantity for each resident of the serviced apartment, served each day at times generally acceptable to both residents and management, which is generally three servings per day.

We consider that the PID meets the definition or a written agreement in force under which the retirement village provides daily meals and heavy laundry services to all residents of an apartment.

Therefore, we consider that you meet the requirements of subsection 38-25(3) (a) in that services are provided to one or more aged or disabled people in a residential setting.

Paragraph 38-25(3)(b) of the GST Act

The specified services are listed in Schedule 1 of the Minister's Determination. Therefore paragraph 38-25(3)(b) is met with respect to the specified services.

Paragraph 38-25 (3)(c )

The services include and are only provided to residents who require (care services) item 2.1 and item 3.8 service and who have a continuing need for those services.

Paragraph 75 of GSTR 2012/3 provides that:

In your case, the assessment is completed by an Enrolled Nurse (EN) with a registered health professional supervising the process.

The services the resident is assessed as needing include item 2.1 or item 3.8 services. You have advised that all residents have been assessed as having a need for some of the item 2.1 or 3.8 services.

Where a resident has been assessed as requiring the item 2.1 or 3.8 services as documented in the Care Plan they meet this criteria.

Therefore, where a resident has been assessed as requiring the item 2.1 or 3.8 services as documented in the Care Plan, your supplies of the specified services are GST free pursuant to subsection 38-25 (3) of the GST Act.

Accommodation and general services

Accommodation

Subsection 28-25 (4A) relevantly provides that a supply is GST-free if it is made to a person who is of a kind referred to in paragraph (3) (c ) and it is a supply by a way of lease of residential premises consisting of a serviced apartment in a retirement village.

You supply, by way of lease, residential premises consisting of a serviced apartment in a retirement village. Therefore, where a resident has been assessed as requiring the item 2.1 or 3.8 services as documented in the Care Plan, your supplies of accommodation will be GST free.

General Services

Goods and Services Tax Ruling GSTR 2012/4 Goods and services tax: GST treatment of fees and charges payable on exit by residents of a retirement village operated on a leasehold or licence basis (GSTR 2012/4) provides the Commissioners view on treatment of amounts which a resident becomes liable to pay to the operator of a retirement village when the resident's interest in the village terminates (exit payments)

Paragraph 12 of GSTR 2012/4 sets out that:.

The principle here also applies to GST free supplies of accommodation. We consider that the upkeep of gardens, chaplain, maintenance and emergency call system services are incidental to the supply of accommodation. Therefore, where a resident has been assessed as requiring the item 2.1 or 3.8 services as documented in the Care Plan, your supply of general services will be GST free.

1 Macquarie Dictionary, online, definition.

2 Macquarie Dictionary, online, definition.


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