Edited version of private ruling

Authorisation Number: 1011806253773

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Ruling

Subject: GST and respite care services provided to disabled persons

Question

Are you making a GST-free supply of respite care services (with or without accommodation) under Division 38 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when you provide the care to persons with a disability in circumstances where you receive no funding in each of the following arrangements:

Arrangement 1: pursuant to an agreement with a disabled person or that person's representative/carer, you provide respite care and other services (with or without accommodation) and those persons agree to pay you for the services

Arrangement 2: pursuant to an agreement with entity B, you provide respite care and other services (with or without accommodation) and entity B has agreed to pay you for the services

Arrangement 3: pursuant to an agreement with entity D, you provide respite care and other services (with or without accommodation) and entity D has agreed to pay you

Arrangement 4: pursuant to an agreement with a disabled person or that person's representative/carer, you provide respite care and other services (with or without accommodation) and entity M, as a Financial Intermediary Service, pays you on behalf of the disabled person.

Answer for Arrangement 1

Yes, the respite care services (day stay without accommodation) and other services that are provided to a disabled person pursuant to an agreement with that disabled person or that person's representative/carer where the disabled person or that person's representative/carer is the recipient of the supplies, the supplies will be GST-free under subsection 38-30(3) of the GST Act if they are of a kind covered by item 2.1 (daily living activities assistance of Part 2 of Schedule 1 of the Quality of Care Principles (Item 2.1).

For supplies of overnight or longer respite care services (with accommodation) provided pursuant to an agreement in writing, the supplies of respite care services will be GST-free under subsection 38-25(3) of the GST Act and the accommodation provided in the course of making those GST-free supplies will be GST-free under subsection 38-25(4) of the GST Act.

Answer for Arrangement 2

No, the respite care and other services (with or without accommodation) provided to a disabled person pursuant to an agreement between you and entity B where entity B is the recipient of the supply of the services, are not GST-free supplies. The supply of the respite care and other services (with or without accommodation) in this case satisfy the requirements of section 9-5 of the GST Act and as such, are taxable supplies on which GST is payable.

Answer for Arrangement 3

No, the respite care and other services (with or without accommodation) provided to a disabled person pursuant to an agreement between you and entity D, where, on the facts provided, it would appear that entity D is the recipient of the supply of the services, the supplies are not GST-free. The supply of the respite care and other services (with or without accommodation) in this case satisfy the requirements of section 9-5 of the GST Act and as such, are taxable supplies on which GST is payable.

Answer for Arrangement 4

Yes, in circumstances where entity M, as Financial Intermediary Service, pays for the respite care and other services (day stay without accommodation) provided to a disabled person pursuant to an agreement in which the disabled person or that person's representative/carer is the recipient of the supplies, the supplies will be GST-free under subsection 38-30(3) of the GST Act if they are of a kind covered by Item 2.1. For supplies of overnight or longer respite care services (with accommodation) provided pursuant to an agreement in writing, the supplies of respite care services will be GST-free under subsection 38-25(3) of the GST Act and the accommodation provided in the course of making those GST-free supplies is GST-free under subsection 38-25(4) of the GST Act.

Where entity M is more than a third party payer or intermediary and is the recipient of the supply, the GST treatment would be as described under arrangement 2 above.

Relevant facts and circumstances

You are registered for goods and services tax (GST).

You have been registered under of the Disability Act 2006 (Victoria) (DA 2006) as a 'disability service provider' by the Secretary who was satisfied that:

· you can provide a service for persons with a disability, and

· the service can be provided in compliance with the requirements of the DA 2006 (section 41 of the DA 2006).

Section 3 of the DA 2006 includes the following definitions:

'Department' means the Department of Human Services.

'Disability service' means a service specifically for the support of persons with a disability which is provided by a disability service provider.

'Disability service provider' means

a. the Secretary

b. a person or body registered on the register of disability service providers.

'premises' means a structure that is designed to be used for human habitation and the area outside that structure which is part of the property on which the premises is located and includes:

(a) the room occupied or to be occupied by a resident

(b) any common area

(c) any facilities.

'rent component' means an amount for the use by a resident of the room, any common area and the premises.

'resident' means a person who receives disability services in a residential service.

'residential charge' means a charge comprising the rent component or both the rent component and the services component.

'residential service' means residential accommodation with rostered staff provided by, or on behalf of, a disability service provider for the purpose of providing disability services to

(a) one or more residents in a community residential unit, or

(b) one or more residents in a residential service other than a community residential unit.

'secretary' means the Secretary of the Department.

You explained that you provide support services to persons with a disability or their carers which you have described under the following headings:

· Accommodation Support - personal support and alternative family placement provided in your premises

· Community Support - which includes therapy services, early intervention, behaviour/specialist intervention and regional support

· Community access which includes recreational/holiday programs, day option programs, and learning and life skills development programs

· Respite support which includes delivering respite to people with a disability and their carers.

You describe yourself as a private community respite service provider, who delivers respite to people with disabilities and their carers. This may entail supported overnight accommodation, short term day support, one to one support (where people may have challenging behaviours), respite for carers by having disabled people attending day programmes and emergency accommodation when a crisis occurs.

The care you provide to a disabled person in the course of providing respite support can include some or all personal assistance with:

· bathing, showering, personal hygiene and grooming

· maintaining continence or managing incontinence, and using aids and appliances designed to assist continence management

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

· dressing, undressing, and using dressing aids, and

· moving, walking, wheelchair use, and using devices and appliances designed to aid mobility.

Other services may include providing training programs in independent living and recreational programs.

Premises

Premises from which you provide services including respite care are located in Australia.

You have described those premises as consisting of a residential dwelling with a number of rooms which has been modified to enable the provision of disability services to disabled persons.

Modifications made to the dwelling include ramps installed on all entries and exits from the building, laminated glass, widened corridors and doorways to allow wheel chair access, disabled toilets and bathing facilities with hoists and lowered kitchen benches.

You confirmed that the premises comply with the requirements under the DA 2006 for a residential service in that you provide residential accommodation with rostered staff (trained staff in attendance 24 hours a day) for the purpose of providing disability services to one or more residents in a residential service. Meals, cleaning and other accommodation related services are also provided in addition to trained staff to meet the care needs of aged/disabled persons being accommodated at the premises.

Funding for services

You advise that you currently do not receive funding from the Commonwealth or State or any other organisation in relation to the services you provide.

Persons with a disability or their carers may be allocated funding in the form of an 'Individual Support Package' (IPS) to purchase supports (services) that will meet their ongoing disability support needs and achieve their goals. The Department of Human Services publication entitled 'Disability Services Individual Support Package Guidelines (ISP Guidelines) states on page 3 that:

'an Individual Support Package is 'attached' to the person. This means that there is flexibility for the person to change the nature of supports or service provider in response to a change in their needs and goals.'

Part 4 of the ISP Guidelines explains that the disabled person and their supporters may choose how their funding is administered. The funding can be administered through one of the following arrangements or a combination of arrangements including:

· Direct payment which involves the transfer of ISP funding to a person with a disability or nominated person to purchase supports to meet the goals of the person's funding plan.

· Financial Intermediary Service under which a state-wide intermediary service holds the Individual Support Package funds allocated to a person and makes payments at the direction of the person in accordance with their funding plan and keeps records of the person's expenditure.

· Registered disability service providers through a service agreement with the DHS administer the funding.

Section 49 of the DA 2006 provides that a person with a disability or a person on behalf of a person with a disability may request disability services from a disability service provider.

Disabled persons or their carers are generally referred to you by entity D and other organisations such as entity B and entity M. Alternatively a disabled person or their carer may approach you directly to procure your services.

You have described your arrangements with individual persons, entity D and others as follows:

(1) Arrangement with individual receiving no funding (private client)

You currently provide your services to a disabled person where that person's representative/carer has contracted with you directly. This disabled person receives no funding and pays for the services themselves from their own funds. The respite care is delivered in your premises. You have a written agreement with this individual or his/her carer in which you have set out the nature of the services provided as well as a reference to the accommodation (if any) and the expected charges for both. Your arrangement is one where you provide your services to the disabled person and issue an invoice for payment for those services including accommodation (if any) directly to the disabled person or their carer.

You have confirmed that you have to date treated the provision of respite care and other services made to an individual disabled person or that person's carer or representative as GST-free supplies.

(2) Arrangement with entity B

You have provided a copy of a written agreement (Contract) between entity B and you as the service provider which recites that this agreement records the terms and conditions pursuant, to which the Service Provider will supply services to entity B.

Under one of the clauses to the Contract, you warrant that you have the facilities and expertise necessary to deliver the relevant services.

Under another clause to the Contract, entity B undertakes to make prompt payment of accounts to you on presentation of a numbered invoice where the service has been rendered, and where services for which payment is required match services requested on the purchase requisition as presented to you by entity B prior to services being rendered.

The Contract provides that the price set out in the Schedule represents the GST exclusive supply price. If GST is payable in relation to any services supplied under this Agreement, an amount of not more than 10% shall be added to the GST exclusive supply price, to reflect the net cost of the GST payable to you in respect of the services.

A Schedule to the Contract sets out the specification for personal care for facility based respite involving day and planned respite care.

The day respite care includes a day respite program which incorporates an ongoing service into a client's general care plan which is able to provide carers and care recipients with the opportunity to be gradually introduced to the concept of residential respite or long term care.

Planned respite is defined as a temporary stay in an aged care facility to support people in a caring relationship so that they can have a break.

The services are provided at the agreed rate with entity B. You have provided a document entitled 'Tax Invoice' issued by you to entity B. That document states that 'this invoice is in relation to the provision of respite services to date which are as yet unspecified'. The invoice refers to a purchase order number and indicates that 'the invoice is GST-free'.

You have confirmed that you have to date treated the provision of respite care and other services made pursuant to the Contract with entity B as GST-free supplies.

(3) Arrangement with entity D

There are no written agreements with entity D in the form you have with entity B. The only

documents provided by you in support of the nature of your relationship with entity D are:

· a one page letter from entity D to your managing director, in which entity D confirms that your application for registration as a disability service provider under the DA 2006 was approved and that you will be listed on the Register.

· A one page document entitled 'Tax Invoice' issued by you to entity D. That document states that 'this invoice is in relation to the provision of respite services (to a particular individual not disclosed) from a specified date to another date. The respite services are described under the heading 'Description' as 'overnight respite (including sleepover)' and 'additional support hours'. A unit price and total price are set out as well as payment options which include direct deposit details. No reference is made to the supply or the invoice being GST-free.

· A one page document entitled 'Quotation' issued by you to entity D regarding the provision of respite services and the general price. The respite services are described as 'overnight stay (a specified time, including inactive sleepover)' and 'additional support hours' and 'travel costs'. No reference is made to the supply being GST-free.

You have explained that under your arrangement with entity D, entity D refers persons requiring care including respite care to you. You quote a price to entity D for providing services to the person in question and the rate is agreed to between you and entity D. If the quote is accepted, entity D signs it and an arrangement is in place for a period of time where, for example, you provide services to a disabled person twice a month for one year. Entity D agrees to pay you on being issued with a tax invoice by you for the services provided to a specified individual disabled person.

You have confirmed that you have to date treated the provision of respite care and other services made pursuant to your arrangement with entity D as GST-free supplies.

(4) Arrangement with entity M

You have advised that entity M is a Financial Intermediary Service as described in Part 4 of the ISP Guidelines above in relation to ISP funds. That is, entity M holds the IPS funds allocated to a person and makes payments at the direction of the person in accordance with their funding plan and keeps records of the person's expenditure. You have advised that under this arrangement, you issue a tax invoice to the disabled person or carer being provided with services. The tax invoice is then passed on to entity M and a payment is made for the services by entity M from funds held by it.

You have provided a document entitled 'Tax Invoice' issued to entity M care of a disabled person or their carer. That document states that the invoice is in relation to the provision of respite care to a named person for a specified time:

The invoice states that 'This invoice is GST free'.

Your understanding is that your arrangement is with the disabled person or their representative/carer and entity M is merely a facilitator or intermediary. You have advised that you send the invoice to the disabled person's carer and that the disabled person's carer then sends the invoice to entity M to make a payment. The disabled person or their representative/carer is liable for your services.

To date you have treated the services and accommodation you have provided to disabled persons under this arrangement as GST-free.

Detailed reasoning

Statutory Provisions

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.

Input taxed supply

Division 40 of the GST sets out those supplies that are input taxed. Where a supply is input taxed, no GST is payable on the supply and you are not entitled to an input tax credit for anything you acquire to make the supply.

In particular, subsection 40-35 (1) of the GST Act provides that the supply of residential premises by way of lease, hire or licence (including a renewal or extension of a lease, hire or licence) is input taxed if:

· the supply is of residential premises (other than a supply of commercial residential premises or a supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises), or

· the supply is of commercial accommodation and Division 87 (which is about long-term accommodation in commercial premises) would apply to the supply but for a choice made by the supplier under section 87-25.

The expression 'residential premises' is defined in section 195-1 of the GST Act as follows:

residential premises means land or a building that:

(a) is occupied as a residence or for residential accommodation; or

(b) is intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation;

(regardless of the term of the occupation or intended occupation) and includes a *floating home."

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 you are entitled to an input tax credit for anything acquired to make the supply. You have confirmed that you provide respite care (with or without accommodation) to persons with a disability and that you receive no funding or subsidy in relation to that care.

Subdivision 38-B of the GST Act relevantly states:

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 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 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 that person that is GST-free under subsection (1), (2) or (3).

(5) However, a supply of services that is covered by an extra services fee within the meaning of Division 35 of the Aged Care Act 1997 is only GST-free under this section to the extent that the services are covered by Schedule 1 to the *Quality of Care Principles.

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).

(Asterisked terms are defined in section 195-1 of the GST Act)

'Community care' is defined in section 195-1 of the GST Act to have the meaning given by section 45-3 of the Aged Care Act 1997 which states that it is care consisting of a package of personal care assistance provided to a person who is not being provided with residential care.

38-35 Flexible care

A supply of flexible care (within the meaning of section 49-3 of the Aged Care Act 1997) is GST-free if flexible care subsidy is payable under Part 3.3 of that Act to the

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 complimentary State law or Territory law in respect of the services.

The terms 'State law' are 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.

Subsection 9-30(3) of the GST Act provides that to the extent that a supply would, apart from this subsection, be both GST-free and input taxed:

· the supply is GST-free and not input taxed, unless the provision under which it is input taxed requires the supplier to have chosen for its supplies of that: kind to be input taxed, or

· the supply is input taxed and not GST-free if that provision requires the supplier to have chosen.

On the facts provided, you are registered for GST and you make the supply of your services including respite care (with or without accommodation) for consideration in the course or furtherance of the enterprise you carry on as a registered service provider pursuant to the DA 2006. Further, the supplies of your services and accommodation are connected with Australia. You have confirmed that you receive no funding in relation to the supplies you make.

It follows that the question that arises under section 9-5 of the GST Act is whether the supply of respite care (with or without accommodation) under each of the various arrangements are supplies that are GST-free supplies to any extent under subsection 38-25(3) or subsection 38-30(3) of the GST Act which deal with supplies of care where the supplier receives no funding.

Two or three party transactions

The arrangements under which you provide your services (other than when you contract directly with the disabled person or their representative) involve more than two parties (sometimes referred to as tripartite transaction or arrangements) consisting of:

· entity D, entity B, entity M and possibly others through which the supply of services are administered to some extent

· the disabled person or their representative whose service and accommodation costs may be funded under the ISP scheme, and

· you, the registered service supplier of respite care services (with or without accommodation).

This is the setting in which section 9-5 or subsection 38-25(3) and subsection 38-30(3) of the GST Act are to be applied. In a two party transaction, such as when you contract 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 Service Tax Ruling GSTR 2006/9.

Under a tripartite arrangement, it is possible that a supply is 'made' to one entity under the terms of an 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 in 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) (paragraphs 130 to 133 of GSTR 2009/6).

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 and section 38-55 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 your circumstances, in tripartite transactions is how to identify to whom a supply is made.

Paragraph 117 of GSTR 2006/9 sets out the following propositions which are helpful in an analysis of transactions:

· Proposition 11 - The Agreement is the logical starting point when working out the entity making the supply and the recipient of that supply.

· Proposition 12 …

· Proposition 13 - When A has an agreement with B for B to provide a supply to C, there is a supply by B to A that B provides to C (paragraphs 130 to 176 of GSTR 2006/9).

· Proposition 14 - A third party may pay for a supply but not be the recipient of the supply (paragraphs 177 to 216 of GSTR 2006/9).

· Proposition 15 - One set of activities may constitute the making of two or more supplies (paragraphs 217 to 221).

· Proposition 16 - The total fact situation will determine the nature of a transaction, the entity that makes a supply and the recipient of the supply (paragraphs 222 to 246 of GSTR 2006/9).

Examining the agreement or other reciprocal legal relationships is the starting point in analysing the arrangements you have with various entities in providing respite care and other services.

Arrangement 1 with individual receiving no funding

On the facts of this arrangement, there are only two parties involved in the transaction, you and the disabled person or their carer/representative who have engaged you to provide respite care and other services (with or without accommodation). In these circumstances, an invoice is issued to the disabled person or their representative/carer who engaged you and it is they who agree to pay you for the services provided. You have advised you receive no funding. This means that the GST-free provisions that may come into operation are:

· subsection 38-30(3) of the GST Act where the respite care or other care services do not entail accommodation in the premises (overnight stays), and

· subsection 38-25(3) and subsection 38-25(4) of the GST Act where a supply of accommodation is made in the course of making a supply that is GST-free under subsection 38-25(3) of the GST Act.

Under subsection 38-30(3) of the GST Act, 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 kind covered by Item 2.1.

Item 2.1 provides a list of eligible types of personal assistance:

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 you provide any of the services listed above, directly to one or more aged or 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.

The eligible types of personal care assistance in Item 2.1 are set out in GST-free Supply (Residential Care - Non Government Funded Supplier) Determination 2000 (the Determination), a copy of which has been enclosed for your assistance. The Determination also sets out the kinds of services encompassed by Schedule 1 to the Quality of Care Principles (Schedule 1).

Respite care with no accommodation (ie day respite care)

In the present circumstances, you have advised that you provide respite care and other services without accommodation during day respite to your private client. To the extent that the services you supply are of the kind listed in Item 2.1, they will be GST-free. Where the services provided are not of the kind listed in Item 2.1 they will be taxable as they satisfy the requirements in section 9-5 of the GST Act. The supply will be a mixed supply comprising a GST-free and taxable component. Where a supply is a mixed supply, you will need to apportion the consideration between the component that is taxable and the component that is GST-free.

Goods and Services Tax Ruling GSTR 2001/8 provides some guidance on how to apportion the supply between the GST-free and taxable parts of such a supply.

Respite care with accommodation

Where you provide respite care to your private client that involves overnight stays, the supply needs to be considered under subsection 38-25(3) and subsection 38-25(4) of the GST Act.

Issue 10 of the Retirement Villages Industry Partnership Issues Register (Issue 10) sets out the circumstances in which residential care services will be GST-free under subsection 38-25(3) of the GST Act.

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

The ATO considers the term 'residential setting' for the purposes of paragraph 38-25(3)(a) of the GST Act in Issue 10 to mean:

· a residential care facility complying with state or territory legislation regulating the supply of residential care services, and

· in those states or territories that do not regulate residential care facilities, a congregate care facility conducted by the supplier of residential care services.

Consequently, the facility must provide:

· sufficient appropriately trained staff to meet the nursing and personal care needs of residents

· sufficient support staff

· meals and cleaning services

· furnishings, furniture and equipment for the provision of that care, and

· any other requirements specified in the Quality of Care Principles.

You confirmed that the premises comply with the requirements under the DA 2006 for a residential service and that the premises have been modified for the purpose of providing disability services to one or more residents in a residential service. You provide meals, cleaning and other accommodation related services as well as 24 hour trained staff to meet the care needs of disabled persons being accommodated at the premises. The premises include furnishings, furniture and equipment for the provision of the care to disabled persons. On that basis, the premises will come within the meaning of a 'residential setting' and as the services are being provided to one or more disabled persons, the first requirement for a GST-free supply under paragraph 38-25(a) of the GST Act will be satisfied.

With regard to the second requirement for a GST-free supply under subsection 38-25(3) of the GST Act, the Aged Care Minister has issued the Determination which essentially lists services which mirror those laid down in the Quality of Care Principles. The Determination specifies that to

be GST-free, the services must be provided in the following circumstances:

· the care recipient has a continuing need for the daily living activities assistance or nursing services

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

· the services mentioned in Items 2.1 or 3.8

· (ii) other services mentioned in Schedule 1 that are needed by the care recipient

· (iii) accommodation, and

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

The written agreement must:

· specify the type of care services agreed to be provided to the resident which must include at least one of the services listed in Items 2.1 or 3.8 and the charges applicable to those services, and

· if the resident needs any of the other services listed in Schedule 1, set out the type of services agreed to be provided and the charges applicable to those services.

You have advised that you have an agreement in writing with the private client in which you specified the type of care services agreed to be provided to the disabled person during his or her stay and the charges applicable to those services. The services provided by you include at least one of the services listed in Item 2.1 (e.g. daily living activities assistance such as assistance with dressing or bathing) and other services mentioned in Schedule 1 that are needed by the care recipient (e.g. meals and refreshments) as well as a separate reference to accommodation. The charges for the care and the accommodation are paid to you. On that basis, the supply of respite care (which includes accommodation) satisfies the requirements of paragraph 38-25(3)(b) of the GST Act.

With regard to the third requirement under subsection 38-25(3) of the GST Act, you have confirmed that the services provided by you in providing respite care and other services in overnight stays is to disabled persons and that the services include daily living activity assistance services such as assistance with bathing and mobility etc. On that basis, paragraph 38-25(3)(c) of the GST Act will be satisfied.

It follows that as the supply of overnight respite care you provide in your premises to disabled persons satisfy the requirements under subsection 38-25(3) of the GST Act, those supplies will be GST-free. Furthermore, the supply of the accommodation provided in the course of supplying any of these GST-free services is also GST-free under subsection 38-25(4) of the GST Act.

Arrangement (2) with entity B

You have entered into a Contract with entity B to provide respite care and other services to entity B's disabled clients. The Contract sets out in writing the terms and conditions pursuant to which you will supply services to entity B. Entity B issues you with a purchase requisition setting out the goods and/or services that they require you to provide to their disabled clients. Under the Contract, entity B has undertaken to make prompt payment of accounts to you on presentation of a numbered invoice. Entity B has entered into an agreement with you which imposes binding obligations.

Under the Contract, you have made a supply of services to entity B who is the recipient of the supply notwithstanding that you have provided the services to a disabled person. As previously noted in GSTR 2006/9 at paragraph 155, a GST-free service cannot be made to a business entity or non-profit body. This means that a supply of services that would have otherwise been GST-free under subsection 38-30(3) of the GST Act or subsection 38-25(3) of the GST Act had it been made and provided to the disabled person, will not be GST-free when the supply is made to entity B.

The supply of services includes a supply of accommodation which, for the reasons discussed above, are not GST-free because the supply is made to entity B. The supply of services you make to entity B pursuant to the Contract will be a taxable supply as the requirements under section 9-5 of the GST Act will be satisfied.

Where the supply of the services are not GST-free, the issue arises as to whether the supply of the accommodation is input taxed under subsection 40-35(1) of the GST Act or a taxable supply under section 9-5 of the GST Act. This will depend on whether the premises in which the accommodation is provided comes within the definition of residential premises.

Paragraphs 20 and 26 of Goods and Services Tax Ruling GSTR 2000/20 indicate that the physical characteristics common to residential premises that provide accommodation are:

· the premises provide sleeping accommodation and the basic facilities for daily living, even for a short term

· the premises may be in any form including detached or semidetached buildings, strata title apartments, single rooms or suites within larger premises.

In part, the physical characteristics of your premises are consistent with residential premises that provide accommodation. That is, there are single rooms within the premises which are suitable for accommodation and it has the basic facilities for daily living in the form of separate meal, living and bathing facilities.

Although the premises have, in part, physical characteristics common to premises that provide residential accommodation, it also has physical characteristics which reflect suitability for the purpose of providing care to persons with a disability.

Overall, the physical characteristics that reflect suitability for the provision of care prevail over those which reflect suitability for the provision of residential accommodation. The physical characteristics are such that its suitability for the provision of accommodation as an end in itself is ancillary to the suitability for the provision of care.

Further, the nature of the regulatory regime of the State/Commonwealth is such that the premises would not be approved for use as a residential service, with its consequent requirement for disability care services, unless the premises had, overall, the design characteristics which made it suitable for that purpose.

In particular, the modifications made to the premises were driven by the care needs of the disabled persons to be accommodated in the premises. Accordingly, the premises are not designed for independent living due to the care needs of residents, many of whom have restrictions on personal mobility.

On that basis, the premises are not residential premises to be used predominantly for residential accommodation. The supply of the accommodation in the premises by way of licence is not an input taxed supply under section 40-35 of the GST Act.

This means that where the supply of accommodation is made in the course of making a taxable supply to entity B, as it is in this case, the supply of accommodation will also be a taxable supply.

Arrangement (3) with entity D

The difficulty with your arrangement with entity D is that the terms are not set out in the same form as those in the Contract with entity B. Further, the arrangement involves the provision of care to a disabled person who may be receiving an ISP.

You have described the arrangement as involving you providing a quote to entity D setting out the nature of the services being provided, who the services are being provided to, the cost of those services and how those costs may vary. Entity D accepts the quote by signing the document and entity D agrees to pay for the provision of the services. On that basis, it would appear that your arrangement with entity D is similar to that with entity B. Entity D is more than a mere paying agent for the disabled person or their carer. Entity D and not the disabled person or their carer, appears to have entered into an agreement with you which imposes binding obligations. That is, you make the supply of the respite care and other services (with or without accommodation) to entity D who is the recipient of the supply notwithstanding that those services are provided to the disabled person.

If that is the case, then as outlined above in the arrangement with entity B, the supply of those services including respite care (with or without accommodation) will, where they otherwise satisfy the requirements of section 9-5 of the GST Act, be taxable supplies.

Alternatively, if the nature of your arrangement with entity D is such that the disabled person or their carer is the recipient of the supply (for example, entity D is a mere paying agent), then the GST treatment of the services including the respite care services (with or without accommodation) will be as described in arrangement 1 above.

Arrangement (4) involving entity M

You have advised that entity M is an intermediary for the disabled person or their carer. Although entity M pays you for the services provided to the disabled person, it does so on behalf of the disabled person or carer from funds that have been allocated to that respective disabled person. It could be argued that in such circumstance, entity M pays for the supply of the services but the recipient of the supply is the disabled person or their carer.

If that is the case, then the GST treatment of the services is as described under arrangement 1. Where all of the requirements for the operation of subsections 38-25(3) and 38-25(4) of the GST Act have been satisfied (including the requirement for a written agreement), the supply of the respite care (including accommodation) and other services will be GST-free.

Where the supply of the respite care (without accommodation) and other services satisfy the requirements of subsection 38-30(3) of the GST Act, they will be GST-free. To the extent the supplies of the respite care and other services do not satisfy the requirements of subsection 38-30(3) of the GST Act, they will be a taxable.

If, on the hand, the arrangement is such that entity M is the recipient of the supply and binding obligations arise, then the GST treatment will be as described under the arrangement (arrangement 2) with entity B.

All of the publications listed above including the public ruling GSTR 2006/9 and the Part 11 of the Charities Consultative Committee Resolved Issues document (Nat 5156) can be accessed from the ATO website at www.ato.gov.au.