Edited version of private advice

Authorisation Number: 1051558617694

Date of advice: 13 August 2019

Ruling

Subject: GST and Retirement Villages

Question

Will the lease of the apartments, located at the specified address, by Entity A as trustee for Entity B, to residents of the assisted living apartments (the ALA Levels), qualify as GST-free supplies pursuant to subsection 38-25(4A) of the GST Act?

Answer

Yes. Where you supply by way of a lease, residential premises consisting of a serviced apartment (as defined in section 195-1) in a retirement village to a resident of that apartment, the supply of accommodation will be GST free where:

a)    there is in force a written agreement under which the Operator of the retirement village provides daily meals and heavy laundry services to all the residents of that apartment and

b)    a resident has been assessed as requiring the care 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 as documented in the Care Plan.

Relevant facts and circumstances

Entity C is a member of the corporate group. Entity C is a wholly owned subsidiary of Entity D, being the ultimate holding company of the corporate group.

The corporate group provides care for members under a "specified care" model. Pursuant to that model, it aims to provide the most suitable accommodation, care and support for its members to support their wellbeing.

In line with its objective to provide a broad range of care services to its members, the corporate group provides a range of independent services that assist people with their daily living. These services include the provision of in-home care services as well as the provision of assisted living services in retirement villages and aged care services in aged care facilities.

The Development

The Complex will consist of x levels, including x floors of aged-care facilities ("the Aged Care Floors") and x levels of assisted living apartments ("the ALA Levels"), as well as communal facilities exclusively for the ALAs and levels dedicated to building management services and a medical centre.

All references in this ruling to ALA's are to apartments that will be located on the ALA Levels of the Complex.

The construction of the Complex will occur within a special purpose vehicle ("SPV"), being Entity A as trustee for Entity B.

Following construction, the Complex will be transferred to a long-term operator ("LTO"). Under this strategy there are two distinct phases:

1.    Retirement village construction.

2.    Retirement village operation.

During Phase 1, the development SPV holds title to the land and after an occupancy permit has been issued, Entity B will lease all serviced apartments to residents. Entity A atf Entity B will enter into all lease agreements with residents in its own right. During this phase, Entity A atf Entity B is the Operator of the village.

Phase 2 begins once all apartments have been leased. At this time, Entity A atf Entity B will dispose of the retirement village to the LTO. The LTO will make supplies of residential premises to residents in in its own capacity and not as agent of the development SPV or any other entity.

Entity A and Entity B are both members of the GST Group, and are wholly owned entities within the corporate group.

The Complex

Whilst they will be co-located in the same building, the Aged Care Floors and the ALA Levels will essentially constitute separate and distinct complexes. In this regard, we note the current design plans for the Complex reflect the following:

·         The ground floor of the Complex will have separate entrances and separate lobbies for the Aged Care Floors and the ALA Levels.

·         Residents of the ALA Levels will be able to come and go as they please via the designated ground floor entry to the ALA Levels.

·         There will be lifts specially dedicated to servicing the ALA Levels and other lifts dedicated to the Aged Care Floors.

The ALAs

The ALA Levels will comprise levels X to X within the Complex. The ALAs on levels X to X will be 1-bedroom apartments, whilst the apartments on levels X to X will be 2-bedroom apartments. Each ALA will be fully self-contained but will also be designed to support the ongoing independent living of older residents with decreased mobility. In this regard, the current design plans for the ALAs reflect the following design features:

·         There will be no stairs within any of the ALAs.

·         Separate bedroom with wardrobe and en-suite designed to accommodate assistance and use with mobility aids.

·         The two-bedroom assisted living apartments will have an additional bedroom and second bathroom, for example, to accommodate grandchildren who may come to visit.

·         L shaped or linear kitchen with small fridge, small oven, 2 or 4 place induction burner, single dish draw, pantry and microwave. Whilst all apartments will have kitchen facilities, it is expected that residents will only make limited use of these facilities. It is expected that the significant majority of meals consumed by residents will be the meals prepared and provided by the operator of the Complex.

·         Combined washer-dryer and trough in European -laundry style arrangement.

·         Living space adequate for two-seater couch and armchair.

·         Dining space adequate for 2 people.

·         Small balcony.

·         There will be grab-rails in the bathrooms (including in the shower).

·         The ALAs will have wider doorways and hallways to allow easy passage of wheelchairs.

·         Key areas within the ALAs (e.g. the kitchen and laundry) will be designed to accommodate wheelchair users. This will ensure that wheelchair users have sufficient space to manoeuvre and turn around in front of key appliances such as the fridge, oven and washing machine.

·         There will be a space near the front door deliberately designed to provide a convenient space for the storage of a walking frame or wheelchair.

·         There will be a nurse-call system providing residents with 24-hour access to nursing staff located on premises within the Complex in the event that assistance is required.

·         In addition, there will be a range of other design features to make life easier for older residents. For example, larger "rocker" light switches, easy-use handles on drawers, cupboards and doors, non-slip floor finishes, etc.

Daily meals and heavy laundry services

Whilst all the ALAs will have kitchen and laundry facilities, residents of those ALAs will also be provided with meals and laundry services. In this regard, the base-level contract (representing the minimum level of services that will be provided to apartment residents) will include the provision of:

·         daily continental breakfast, as well as cooked lunch and cooked dinner, with all three meals to be enjoyed in the communal dining room or in a resident's own apartment;

·         daily fresh towels; and

·         laundering of bed linen on a weekly basis.

Communal facilities

The communal dining room will be located on level X of the Complex. In addition to the communal dining room, residents of the ALAs will also be able to access the following communal facilities which will also be located within the Complex:

·         the residents lounge;

·         sky room;

·         craft room;

·         cinema; and

·         rooftop terrace and garden.

Care services provided to residents

In addition to the meal and laundry services which will be provided to residents of the ALAs in the Complex, those residents will also require care services to enable them to continue to live independently. Accordingly, it is expected that residents living in the ALAs will be provided with care services including, but not limited to, the following:

·         bathing and personal hygiene services;

·         assistance with dressing and undressing;

·         mobility-related assistance services, including assistance with moving, walking and wheelchair use;

·         communication-related assistance services, for example, checking hearing aid batteries;

·         nursing services, including:

-        initial assessment of residents' requirements when they move into the Complex;

-        ongoing supervision, management and evaluation of residents by formally qualified nursing staff;

-        assisting residents to manage taking prescriptive medication products; and

-        provision of assistance in the event of an emergency.

The exact care services to be provided will be tailored to an individual resident's needs. In this regard, an individual resident's particular care requirements will be determined by way of a formal evaluation of that resident's requirements, resulting in a comprehensive care plan (e.g. by a registered nurse) at the time the resident moves into one of the ALAs in the Complex.

Further, it is expected that for some individual residents, care needs may increase over time and this may necessitate a transition into a residential care environment.

There will be nursing staff on call 24-hours within the Complex. The nursing staff will provide residents of the ALAs with the nursing services described above. In addition, in case of emergency, residents will be able to call the nursing staff using the emergency contact facilities found in their apartments as well as in other convenient locations throughout the Complex.

Documents provided:

You are unable to provide a copy of the documentation relevant to the ALA's to be constructed at this time. Consequently, our ruling is based on the facts as outlined above. Should the proposed arrangements differ in the future, this ruling may not be relied upon for the purpose of the question posed above.

Relevant legislative provisions

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

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

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

Reasons for decision

Subsection 38-25(4A) specifically relates to a supplies made to residents of serviced apartments in retirement villages. A supply is GST-free under subsection 38-25(4A) if:

·         it is a supply of residential premises, consisting of a serviced apartment in a retirement village, by way of sale, lease, hire, licence, or a supply of a right under a security to participate in a retirement village scheme (a share arrangement) [paragraph 38-25(4A)(b)];

·         the premises are supplied to a resident, who requires daily living activities assistance (item 2.1 of Part 2 of Schedule 1 to the Quality of Care principles)) or nursing services (item 3.8 of Part 3 of Schedule 1 to the Quality of Care Principles) [paragraph 38-25(4A)(a)]; and

·         the premises are supplied in connection with one or more supplies of care services, or proposed supplies of care services, to the person that are, or will, be GST-free under subsection 38-25(3) [paragraph 38-25(4A)(d)].

Paragraph 189 of GSTR 2012/3 provides further that a supply of a serviced apartment in a retirement village, of kind contemplated by subsection 38-25(4A), is 'in connection with' a GST-free supply of care services under subsection 38-25(3) if it is supplied to a resident in order for them to access and receive those care services.

For a supply of a serviced apartment to be GST -free under section 38-25(4A), the supply must be made to a person of a kind referred to in paragraph 38-25(3), that is a person who requires item 2.1 or item 3.8 services. The resident must also be receiving, or will receive, care services that are GST-free under subsection 38-25(3). However, the supplier of the services does not need to be the same entity that supplies the serviced apartment to the resident.

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

(a)  the services are provided to one or more aged or disabled 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.

The background to section 38-25 of the GST act is set out in GSTR 2012/3. It relevantly provides the following commentary in paragraphs 108 to 112.

108. Each of subsections 38-25(1), 38-25(2) and 38-25(3) refers to services listed in Schedule 1 to the Quality of Care Principles, or services of a kind covered by Schedule 1 to the Quality of Care Principles. Schedule 1 to the Quality of Care Principles specifies the services and care required to be provided to residents of residential care facilities that qualify for Commonwealth funding under the Aged Care Act.

109. Subsection 38-25(1) specifically addresses the GST treatment of services supplied by an approved provider, in a residential care facility that qualifies for government funding from the Commonwealth under the Aged Care Act.

110. Subsection 38-25(2) treats as GST-free the supply of services of a kind covered by Schedule 1 to the Quality of Care Principles to aged or disabled people when the supplier receives government funding from the Commonwealth state or territory in connection with the supply. Unlike subsection 38-25(1), the scope of subsection 38-25(2) extends to government funded programs outside the ambit the Aged Care Act, and specifically applies to disabled people.

111. In contrast to subsections 38-25(1) and 38-25(2), subsection 38-25(3) allows equivalent care services to be supplied GST-free to aged or disabled people through non-government funded residential care facilities. Subsection 38-25(3A) impacts upon the application of subsection 38-25(3) such that, in specified circumstances, residential care services can also be supplied GST-free to residents of serviced apartments in privately funded retirement villages.

112. Subsection 38-25(3) ensures that people in like care situations who are living in privately funded residential care facilities are treated similarly in their access to GST-free services as aged or disabled people living in Commonwealth funded residential aged-care services under the Aged Care Act.²³

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:

·  he or she is a resident of a 'serviced apartment' in the retirement village; and

·  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.

Resident of a serviced apartment in the retirement village - Subparagraph 38-25(3A)(a)

Retirement Village

The term retirement village is defined in section 195-1 to mean:

(a)  premises that are residential premises; and

(b)  accommodation in the premises is intended to be for persons who are at least 55 years old, or who are a certain age that is more than 55 years; and

(c)  the premises include communal facilities for use by the residents of the premises;

but the following are not retirement villages:

(d)  premises used, or intended to be used, for the provision of residential care (within the meaning of the Aged Care Act 1997) by an approved provider (within the meaning of that Act);

(e)  ) commercial residential premises.

Your premises meet the definition of retirement village.

Serviced apartments

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

(a)  the apartment is designed to be occupied by aged residents who require either or both of the following:

(i)            the services set out in item 2.1 (daily living activities assistance) of Part 2 of Schedule 1 to the Quality of Care Principles (2.1 Services);

(ii)          the services set out in item 3.8 (nursing services) of Part 3 of that Schedule (3.8 Services); and

(b)  at least one responsible person is continuously:

(i)            on call to render emergency assistance to the residents of the apartment; and

(ii)          in reasonable proximity to the apartment; and

(c)  the apartment is part of a single complex of apartments to which paragraphs (a) and (b) apply, and is accessible from a common corridor linking the apartment to the other apartments in the complex; and

(d)  there is in the retirement village a communal dining facility that is available for use by the residents of apartments in the retirement village to which paragraphs (a), (b) and (c) apply.

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

Requirement (a) of the definition of serviced apartment - Designed to be occupied by aged residents who require item 2.1 or 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:

(i) the services set out in item 2.1 (daily living activities assistance) of Part 2 of Schedule 1 to the Quality of Care Principles(2.1 Services)

(ii) the services set out in item 3.8 (nursing services) of Part 3 of that Schedule(3.8 Services)

Paragraphs 34 to 36 provide the following information:

34. Serviced apartments in retirement villages share many features and characteristics that are also common to other types of accommodation provided in retirement villages, such as independent living units. Independent living units are designed for people who are capable of living independently and do not require daily living activities assistance or nursing services, as set out in items 2.1 and 3.8 of Schedule 1 to the Quality of Care Principles. Independent living units are not serviced apartments as defined in section 195-1.⁹

35. It is expected that an apartment which is designed for a person who requires item 2.1 services, item 3.8 services, or a combination of both services, as required by paragraph (a) of the definition of serviced apartment in section 195-1 would include:

·         fixtures and fittings consistent with those required by a person who requires daily living activities assistance or nursing services, for example, bathroom hand rails, grab rails, wheelchair ramps, and wide doorways that allow for wheelchair access.

36. The following features, whilst they are not necessary and not determinative of whether an apartment satisfies paragraph (a) of the definition of serviced apartment in section 195-1, are also consistent with an apartment being designed for a person who requires item 2.1 services, item 3.8 services or a combination of both services:

·         a smaller physical layout, for example, a one room studio style apartment with no or only limited cooking facilities, comprising only one or two bedrooms and a separate living area;

·         limited self-catering services, for example, a small kitchenette with a microwave and bar fridge; or

·         no laundry, or only limited self-laundry facilities.

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 or 3.8 services they must have been designed especially for this purpose.

Your apartments have many features that are common to ILUs in that each ALA will be fully self-contained and will incorporate a full laundry and kitchen with a lounge and dining room and have one or two bedrooms. There will be a nurse-call system in the apartments, providing residents with 24-hour access to nursing staff located on the premises, similar to most ILU's in retirement villages.

However, in addition, the ALA's will have wider doorways and hallways to allow easy passage of wheelchairs, larger "rocker" light switches, easy-use handles on drawers, cupboards and doors and non-slip floor finishes.

Key areas within the ALA's (eg kitchen and laundry) will be designed to accommodate wheelchair users, e.g. to ensure that wheelchair users have sufficient space to manoeuvre and turn around in front of key appliances such as the fridge, oven and washing machine. There will also be space near the front door deliberately designed to provide a convenient space for the storage of a walking frame or wheelchair. The bathroom will be designed to accommodate assistance and use with mobility aids and grab- rails will also be installed (including the shower).

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

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

Paragraphs 37 and 38 of GSTR2012/3 provide that:

37. Paragraph (b) of the definition of serviced apartment in section 195-1 requires someone who is capable of assisting a person who requires item 2.1 or item 3.8 services to be available to provide immediate assistance to residents when necessary. The provision of a personal medical emergency call device that alerts an off-site external service provider of a potential medical emergency when activated by the resident is not sufficient to satisfy the requirement in paragraph (b) of the definition of serviced apartment in section 195-1, which requires a responsible person be on call continuously to render emergency assistance to residents.

38. However, an emergency call device which alerts at least one responsible person who is on-site within the precincts of the retirement village, and who may be an external service provider, is sufficient to satisfy paragraph (b) of the definition of serviced apartment in section 195-1. The requirement is also met where at least one responsible person is shared between two adjacent retirement villages and that person is on-site at one of those retirement villages at any time.

There will be a nurse-call system providing residents with 24-hour access to nursing staff located on premises within the Complex in the event that assistance is required. You therefore 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.

Written agreement in force - Subparagraph 38-25(3A)(b)

Paragraphs 52 and 53 of GSTR 2012/3 provide:

52. A supply of services to a resident of a serviced apartment in a retirement village is only taken to be provided in a residential setting for the purposes of paragraph 38-25(3)(a) if the operator of the retirement village, under a written agreement, provides daily meals and heavy laundry services to all of the residents of the serviced apartment^.[11]

53. The requirement in paragraph 38-25(3A)(b) about the provision of daily meals will be satisfied if the operator provides meals to all residents of the serviced apartments consistent with the requirements of item 1.10 of Schedule 1 to the Quality of Care principles^[12] referred to in paragraph 38-25(3)(b). That is, the operator provides 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, and which will generally consist of three meals per day plus morning tea, afternoon tea and supper. Item 1.10 of Schedule 1 to the Quality of Care Principles also takes into account variances in a resident's meal requirements as a result of medical needs or religious or cultural observance.

'Generally'

The 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:

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.

Paragraphs 57 to 59 of GSTR considers the written agreement requirement under subparagraph 38-25 (3A)(b) and provides:

57. A separate written agreement or a specific provision in an accommodation agreement or residence contract that obligates the operator to provide daily meals and heavy laundry services to all the residents of a serviced apartment satisfies the requirement in paragraph 38-25(3A)(b) for there to be a written agreement.

58. An accommodation agreement or a residence contract that does not obligate the operator to provide meals or heavy laundry services will not satisfy the written agreement requirement in paragraph 38-25(3A)(b). In these circumstances, services supplied to a resident of a serviced apartment in a retirement village are not taken to be provided in a residential setting and cannot be GST-free under subsection 38-25(3).

59. In some cases the terms of the accommodation agreement or residence contract may mean that the operator's obligation to provide daily meals or heavy laundry services is conditional upon the resident electing to have their meals and heavy laundry services provided by the operator of the retirement village. In these circumstances, the requirements of paragraph 38-25(3A)(b) are only satisfied if the obligation of the operator to provide meals and heavy laundry services has actually been triggered by an election of the resident to have their daily meals and heavy laundry services provided by the operator of the retirement village.

Whilst all the ALA's will have kitchen and laundry facilities, residents of ALA's will also be provided with meals and laundry services. In this regard, the base-level contract entered into with residents (representing the minimum level of services that will be provided to apartment residents) will include the provision of:

·  Daily continental breakfast, as well as cooked lunch and cooked dinner, with all three meals to be enjoyed in the communal dining room or in the resident's own apartment;

·  Daily fresh towels; and

·  Laundering of bed linen on a weekly basis.

We consider that when you prepare a written agreement that meets the criteria set out above and it is in force for each of the residents of an ALA in the retirement village and you provide daily meals and heavy laundry services to all residents of an apartment then, we consider that you would 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)

The specified services are listed in Schedule 1 to the Quality of Care Principles pursuant to the Aged Care 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 services and who have a continuing need for those services.

Paragraphs 74 and 75 of GSTR 2012/3 provide:

74. It is not necessary for the resident to require and to have a continuing need for all of the item 2.1 and item 3.8 services set out in Schedule 1 of the Quality of Care Principles. However, a resident must have a current existing need for one or more of those services that is ongoing rather than isolated or sporadic.

75. In determining whether this 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. This objective evidence may include one or more of the following factors:

·         a report of an assessment of a resident's care requirements by a registered medical practitioner;

·         a report of an assessment of a resident's care requirements by a registered nurse, a registered physiotherapist, or a registered occupational therapist; or

·         a report of an assessment of a resident's care requirements undertaken by more than one person, including at least one registered health professional.

In your case, the exact care services to be provided will be tailored to an individual resident's needs. In this regard, an individual resident's particular requirements will be determined by way of formal evaluation of that resident's requirements, resulting in a comprehensive care plan (for example, by a registered nurse) at the time that the resident moves into one of the ALAs in the Complex. Residents living in the ALAs will be provided with care services including, but not limited to, the following:

·         Bathing and personal hygiene services;

·         Assistance with dressing and undressing;

·         Mobility-related assistance services, for example, checking hearing aid batteries;

·         Nursing services, including:

1.    Initial assessment of residents' requirements when they move into the 114 Complex;

2.    Ongoing supervision, management and evaluation of residents by formally qualified nursing staff;

3.    Provision of assistance in the event of an emergency.

Conclusion

Where a resident is assessed as requiring the item 2.1 or 3.8 services as documented in the Care Plan, your supplies of the specified services will be GST-free pursuant to subsection 38-25(3).

Accommodation and general services

Accommodation

Subsection 38-25 (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 will 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.

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