Edited version of private ruling

Authorisation Number: 1011637970054

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Ruling

Subject: GST and child care service

Questions

1. Are you supplying GST-free child care to the family when your employee performs the service?

2. Are you supplying GST-free child care when you subcontract the services of a nanny to provide the service?

3. What portion of the service is subject to GST?

Answers

1. Yes, you are supplying GST-free child care to the family when your employee performs the service.

2. Yes, you are supplying GST-free child care when you subcontract the services of a nanny to provide the service.

3. GST is payable on any amount that is not directly related to the supply of GST-free childcare.

Relevant facts

You are setting up a nanny share arrangement service.

You are registered for GST.

You organise the child care share arrangement between two or more families. You match families in a local area and then supply a qualified nanny for them to share.

You supply the following to the families:

§ matching service including arrangement negotiations

§ child care service including playgroup and learning and development program and

§ use of equipment to facilitate nanny share arrangement.

Families pay you for the nanny service on a daily rate as they would for long day care. You charge a small fee for the matching service and the provision of additional equipment.

You are classified under the A New Tax System (Family Assistance) (Administration) Act 1999 (FAA Act) as a supplier of in-home care as care is provided in children's own homes (or in their share family's homes), not in the home of the carer (as with family day care). Even though you may meet the requirements to be an approved in-home care service, you cannot be approved as there are currently no available places for approved in-home care.

As an organisation, you cannot be a 'registered carer' as defined in the FAA Act as this only applies to individuals approved as a registered carer under Division 2 of Part 8. Organisations may not be registered, although individual employees of an organisation may.

You are considering two options for supplying nannies to families:

§ Option 1 - Nannies you employ

As your employees, registered nannies receive a salary. You contract with families to supply child care delivered by registered nannies. You also provide the extra services to families as outlined above.

§ Option 2 - Nannies contracted by you

You contract with families to supply childcare delivered by registered nannies. You contract with registered nannies to provide childcare services to families in accordance with your contract with the families. You also provide the extra services to families as outlined above.

You intend to use only registered carers as defined in the FAA Act to provide child care services. For the purposes of this ruling all nannies, whether they are your employees or your contractors, are registered carers under FAA Act.

Reasons for decision

Question 1

Summary

You are supplying GST-free child care to the family when your employee performs the service.

Detailed reasoning

Section 38-140 of the GST Act provides that a supply is GST-free if it is a supply of child care by a registered carer (within the meaning of section 3 of the FAA Act).

Section 3 of the FAA Act defines the term 'registered carer' to mean an individual approved as a registered carer under Division 2 of Part 8 of that Act.

Section 209 of Division 2 of Part 8 of the FAA Act states that an individual who provides care, or proposes to provide care, for a child or children may apply to be registered, provided that he or she does not operate a child care service or provide family day care.

The term 'child care' is not defined in the GST legislation, nor is it defined in section 3 of the FAA Act. Section 27 of the Childcare Rebate Act 1993 defines childcare to include care of a child provided at the child's home.

You are contracted by families to supply child care service delivered by registered nannies. You organise the child care share arrangement between two or more families. You match families in a local area and then supply a qualified nanny for them to share.

You advised that as an organisation, you cannot be a 'registered carer' as defined in the FAA Act. However, you employ nannies, who are 'registered carers', to provide the child care services to the families.

Therefore, as the child care service is actually performed by a nanny who is a 'registered carer', you satisfy the requirements of section 38-140 of the GST Act. Hence, you are supplying GST-free child care to the family when your employee performs the service.

The GST-free child care service that you provide would include the actual caring of the child, the playgroup activities and the learning and development program.

Question 2

Summary

You are supplying GST-free child care when you subcontract the services of a nanny to provide the service.

Detailed reasoning

Under option 2, you are contracted by families to supply child care services delivered by registered nannies. You then contract registered nannies to provide childcare services to families in accordance with your contract with the families.

Goods and Services Tax Ruling 2006/9 provides the Commissioners view on multi-party transactions, commonly known as tripartite arrangements.

Paragraph 115 of GSTR 2006/9 provides that in more complex arrangements involving more than two entities, analysis may reveal:

§ a supply made to one entity but provided to another entity;

§ two or more supplies made; or

§ a supply made and provided to one entity and consideration paid by a third party.

Furthermore, paragraph 116 of GSTR 2006/9 states:

As with two party transactions, the GST consequences of tripartite arrangements turn on identifying:

§ one or more supplies;

§ consideration (a payment, act or forbearance);

§ a nexus between the supply and the consideration; and

§ to whom the supply is made.

GSTR 2006/9 lists a number of propositions to analyse transactions. Of relevance is proposition 13 which is described as a situation whereby A has an agreement with B for B to provide a supply to C. In this instance, there is a supply made by B to A (contractual flow) that B provides to C (actual flow).

Example 6: teaching services

165. A, a supplier of teaching services, enters into a contract with B, a course provider, to provide teaching services to B's students.

166. B conducts professional or trade courses that are GST-free under section 38-85. Students enrol with, and pay fees directly to, B. When a student completes the course, B is authorised by the relevant State or Territory authority to conduct a test. If a student passes the test, B facilitates the issuing of the qualification/licence by the relevant State or Territory authority.

167. A has no contractual relationship with the students.

168. A makes a supply of the teaching services to B and A provides this supply to the students. A's supply is not a GST-free supply of a professional or trade course.



169. However, B does make a GST-free supply of a professional or trade course to the students. The students enter into contractual arrangements with B for the supply of the professional or trade course. B makes a supply of the course to the students. It does not matter whether B's employees do the actual teaching or B subcontracts the teaching to another entity (in this case A).

170. Based upon these contractual arrangements, the students are the recipients of the supply of the professional or trade course made by B, and B is the recipient of the supply of teaching services made by A.

In accordance with the above example, we consider that you are the supplier of child care services to the families. However, these services are provided to the families by your contractor.

You advised that these contractors are 'registered carers' as defined in the FAA Act.

Therefore, as the child care service is actually performed by a nanny who is a 'registered carer', you satisfy the requirements of section 38-140 of the GST Act. Hence, you are supplying GST-free child care when you contract the services of a registered carer to provide the service.

Question 3

Summary

Only the amount that is directly related to the supply of GST-free child care is GST-free. GST is payable on any amount that is not directly related to the supply of GST-free childcare.

Detailed reasoning

GST is payable on any taxable supply that you make.

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

§ you make a 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.

Section 38-155 of the GST Act provides that a supply is GST-free if it is a supply that is directly related to child care that is GST-free because of section 38-140 of the GST Act.

Your agreement with the families is for the supply of your child care services. The fees you charge the families include those related to matching families including arrangement negotiations and the use of equipment.

Matching service

The provision of the matching service is a supply. The families acquire the matching service before there is a contract for the child care service. Hence, we do not consider that the matching service is directly related to the supply of the child care service. As such the supply of the matching service is not GST-free under section 38-155 of the GST Act.

The supply of the matching service is not GST-free under any other provisions of the GST Act or another Act. Therefore, as the supply of the matching service will satisfy all the requirements of section 9-5 of the GST Act, GST is payable on the fee charged for the matching service.

Use of equipment

The provision of the equipment is a supply. However, we consider that the supply of the equipment is directly related to the supply of the child care service. The provision of the equipment contributes to the proper performance of the principal service of child care.

It is considered that as the families acquire the use of the equipment along with a related contract for the child care service which is GST-free, the fees relating to the use of the equipment is GST-free under section 38-155 of the GST Act.

You should note that undertaking domestic tasks is not related to the supply of child care and is subject to GST. It will be necessary to apportion the fees charged between those relating to the periods in which the supply is of child care, which will be GST-free, and those to periods when functions not related to child care are undertaken.