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Edited version of your written advice

Authorisation Number: 1012804998425

Ruling

Subject: GST and supply of accommodation and services in a retirement village

Question

Are you liable to pay GST on the supplies of care and personal services, accommodation and general services supplied to residents in the Retirement Village pursuant to section 58-10 of the GST Act?

Answer

No

The supplies of care and personal services, accommodation and general services to residents will be GST free where:

Where these requirements are not met, the supplies will be input taxed.

Relevant facts and circumstances

Entity A is the owner and operator of the Retirement Village. Entity A is registered for GST.

The financier holds a first registered mortgage over the Retirement Village.

On ddmmyyyy, the mortgagee took possession of the Retirement Village as mortgagee in possession.

On ddmmyyyy, you were appointed as Managing Controllers and agents for the Mortgagee in Possession.

You supplied a copy of the deed of appointment to the ATO on the ddmmyyyy.

The Retirement Village

The Retirement Village consists of xx separate apartments plus one apartment used for respite, administration and communal facilities. The RV was completed in two stages.

Stage 1, is made up of XX units, completed in yyyy. The units are accessed via covered verandahs and stairs. The buildings have lift access and stairs, and also feature a wheelchair lift.

Stage 2 was completed in early yyyy and incorporates XX apartments. The apartments are accessed via a common corridor.

Each unit has one or two bedrooms, a kitchen, bathroom and laundry.

The basic facilities outlined above have been specially modified to assist aged people, in particular units include:

The communal facilities consist of the following:

The current average age of residents is X years old. The two youngest residents are Y and Z years old.

When residents enter the retirement village they complete a number of contracts and forms. These include:

Village contract

The arrangement with residents is governed by the Village Contract and attachments.

Support Services & Care Services Agreement

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section ,

A New Tax System (Goods and Services Tax) Act 1999 Section and

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

Reasons for decision

In this reasoning, unless otherwise stated,

Under section 58-10 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 managing controller over a number of assets including those of Entity A. Accordingly, as a controller 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 A (Controller appointed) is an incapacitated entity.

To the extent that you are exclusively responsible for the supplies made by Entity A (Controller Appointed), you will have exclusive responsibility for the GST consequences of the supplies and acquisitions from ddmmyyy.

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:

Retirement Village

The term retirement village is defined to mean:

Your premises meet the definition of a retirement village.

Serviced apartments

A serviced apartment is defined in section 195-1 Act to mean an apartment (however described) in relation to a retirement village if:

However, a detached house, row house, terrace house, town house or villa unit is not a serviced apartment.

Requirement (a) - Designed to be occupied by aged residents who require 2.1 and 3.8 services

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 items 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. 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) - One responsible person within proximity of the apartment.

Paragraphs 37 and 38 state:

You have advised that residents have access to both a registered nurse (RN) and or an enrolled nurse (EN).

Requirement (c) - common corridor.

Paragraph 40 of GSTR 2012/3 states:

A 'common corridor' for the purposes of paragraph (c) of the 'serviced apartment' definition, read purposively in context, includes a covered walkway that provides an access link between apartments in a complex that (A) may be external to the building where that is necessary, (B) has a functional purpose of facilitating provision of item 2.1 or 3.8 services to residents, and (C) is substantial in the sense of providing adequate protection from weather, darkness and usual hazards.

Stage 1, is made up of XX units. The units are accessed via covered external verandahs. The buildings have lift access and stairs, and also feature a wheelchair lift. From the plans and photos provided, the external verandahs are 'common corridors' for the purposes of paragraph (c) of the definition of 'serviced apartment'. The verandahs on both levels have a functional purpose of facilitating provision of item 2.1 or 3.8 services to residents and providing adequate protection from weather, darkness and usual hazards.

Accordingly, the apartments in Stage 1 meet requirement (c) as they are part of a single complex with a common corridor.

From the plans provided, the apartments in Stage 2 meet requirement (c) as they are part of a single complex with a common corridor.

Requirement (d) - communal dining facility.

From the plans provided, the apartments in Stage 2 meet requirement (d) as there is in the retirement village a communal dining facility that is available for use by the residents of apartments in the retirement village.

As the Stage 1 and Stage 2 apartments meet requirements (a) to (d), they are serviced apartments.

Residential Setting

Under section 38-25(3A) services provided to a resident of a retirement village are taken, for the purposes of paragraph (3)(a), to be provided in a residential setting if:

Services to residents of Stage 1 and Stage 2 apartments will be provided in a residential setting if there is 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

Meals

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.

'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. 'Repast' from the Macquarie Dictionary means:

The requirement for the Operator to provide daily meals is not expressly stated in the Village Contract.

However, you provided a separate document (Retirement Village Meals Provision) for one of the residents, whereby the Operator provides the meals (breakfast, morning tea and light dinner) to the resident and the resident acknowledges that the meals are available from the Operator.

Laundry services

The requirement for the Operator to provide heavy laundry services is not expressly stated in the Village Contract.

However, the list of care services available (in the Schedule to the Village Contract) includes 'Housekeeping duties including washing and ironing'.

The Care Plan provided for one of the residents allocates xx minutes per week for 'Weekly washing and ironing'.

Where there is 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 a particular apartment, services supplied to the residents of the particular apartment will be supplied in a residential setting.

Paragraph 38-25(3)(b)

The care and personal 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 )

Paragraph 75 of GSTR 2012/3 provides that:

In your case, all residents are assessed for care needs prior to entering the Retirement Village and are reassessed on a regular ongoing basis. The assessments are completed by an 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 2.1 or 3.8 services.

Therefore, your supply of care and personal services to a resident will be GST free where:

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.

Therefore, your supply of accommodation to a resident will be GST free where:

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, the supply of general services to residents will be GST free where:

Input taxed supplies

The supply of care and personal services, accommodation and general services to residents will not be GST free where:

In these circumstances, the supplies will be input taxed.


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