Edited version of private ruling

Authorisation Number: 1011839598341

This edited version of your ruling will be published in the public Register of private binding rulings after 28 days from the issue date of the ruling. The attached private rulings fact sheet has more information.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.

Ruling

Subject: GST and supply of care services

Questions

Are all or part of the following services supplied by your employees GST-free under either subsection 38-30(3), 38-30(4), 38-25(2) or 38-25(3) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

1) Services supplied to your clients who live in their own private homes?

2) Services supplied to your clients in accommodation provided by you?

3) Services supplied to the clients of your competitors who live in their own private homes or live in accommodation provided by the competitor?

4) Services supplied to your clients who live in residential facilities owned by a government entity?

5) Services supplied to the clients of your competitors in the residential facilities owned by a government entity and managed by that competitor?

Answers

1) Yes. The services listed in this ruling that you supply to your clients who live in their own private homes are GST-free under subsection 38-30(4) of the GST Act except the nursing care and support services, which is a taxable supply.

2) Yes. The services listed in this ruling that you supply to your clients in accommodation provided by you are GST-free under subsection 38-30(4) of the GST Act except the nursing care and support services, which is a taxable supply.

3) No. The services you supply to the clients of your competitors who live in their own private homes or live in accommodation provided by the competitor are not GST-free. They are taxable supplies.

4) Yes. The services you supply to your clients who live in residential facilities owned by a government entity are GST-free under subsection 38-25(3) of the GST Act except the nursing care and support services, which is a taxable supply.

5) No. The services you supply to the clients of your competitors in the residential facilities owned by a government entity and managed by that competitor are not GST-free. They are taxable supplies.

Relevant facts and circumstances

You are registered for goods and services tax (GST). You carry on an enterprise of providing community care and support services.

You also provide emergency services on behalf of other community service providers and manage a portfolio of residential facilities.

Your care services

You provide a range of services to people with special requirements arising from their mental or physical disabilities, which vary depending on their particular circumstances and needs. Those services typically include the following activities:

· preparing meals and feeding;

· bathing and showering;

· dressing;

· shopping;

· nursing care and support;

· respite care (for clients living with their family);

· disability services;

· outdoor activities such as exercise or family visits;

· emergency support;

The nursing care and support services described in point 5 are not performed by registered nurses.

The services may be provided in one of the three locations, depending on the client's circumstances:

(a) in or around the client's own home;

(b) in or around accommodation which is owned by you; or

(c) in or around residential facilities which are owned by a government entity but managed by you.

Occasionally, you also provide the services to your competitor's client in locations that are similar to those stated at the previous paragraph.

All your clients have significant disabilities. They live in their own homes and would require hospital care or residential care if not for your services.

Payment arrangement with individual clients

Your clients receive payment from the government entity. Each individual client in need of assistance is allocated a facilitator who determines the level of care and service required by the client.

The facilitator is appointed by a government agency or an external private agency. You do not provide facilitators. Depending on the client's care needs, they are granted an appropriate support package by the facilitator.

The facilitator assists the client in finding and appointing an appropriate service provider (such as you or your competitor). The appointment generally lasts for a number of years, but can be changed at any time by the client.

You charge the client for the care services provided. Payment for the care services may be made by the client, by the government entity directly or by a financial intermediary on behalf of the client. If the client or a financial intermediary provides the payment, they will be reimbursed by the government entity.

Where the care services are provided in the client's own home, the care provider will leave their timesheet with that client for endorsement. That timesheet includes the terms and conditions of your labour hire services. A GST inclusive invoice will be sent to the client for endorsement and then forwarded on to the government entity for processing and payment. The government entity pays you for the services provided to the client.

Where the care services are provided in your premises a residential statement is prepared for the client setting out the services to be provided by you. The client is billed accordingly for your services and GST is included in the invoice. The client's invoices are paid by the government entity in the same way as those who receive your care services at their own home. You charge the client rent for the accommodation. They receive rental assistance from the government entity and you also subsidise their rent. The rent is treated as an input taxed supply and no GST is charged.

The payments in all circumstances are from the funding provided by the government entity to the clients.

You may receive a payment as each service is provided. Alternatively, you may receive a one-off payment from the funding to provide the care services over a set period of time. You include GST for your services.

The care services are provided under a contractual arrangement between you and the client. You are not contracted by the government entity to provide care services to the client.

Government entity's residential facilities

You also provide the services to clients in special residential facilities owned by the government entity but managed by you.

When a new residential facility is constructed, the government entity will seek tenders for the management of that facility. You, along with your competitor, will provide a quote for managing that facility for one year. Provided the level of service is good, the management contract can be extended indefinitely at the government entity's discretion.

You include GST in the costs. The costs are not prepared with reference to any particular client(s). This is because the client is unknown at that time. The government entity only provides funding and infrastructure to you to facilitate the provision of your service to their clients.

You will enter into a service agreement with the government entity for the provision of care services to disabled persons in the residential facility if your tender is accepted. The government entity will pay a fixed monthly amount to you for managing the relevant facility. You will not provide further invoices to the government entity. You account for GST in your activity statements in the relevant tax period concerned for payment received from the services provided.

Care services supplied to competitors' clients

You also supply care services to clients of competitor organisation when requested. On occasion a competitor organisation is unable to provide care services to one of its own clients, usually due to staff shortages. The competitor may request you to supply the required personal care services to its clients.

These services may be supplied in the competitor's client's home or in accommodation provided by the competitor. The services supplied are the same as or similar to those you provide to your own clients as described in the previous paragraphs. You and the competitor will enter into a service agreement for the provision of care staff. You will bill the competitor organisation for the care services provided, plus an amount of GST. The competitor passes on this cost to the client/ the government entity.

You also provide staff for the residential facilities owned by the government entity and managed by a competitor when required.

The work carried out by your staff in these circumstances is the same as or similar to the work which would be done for your own clients at their homes.

Service agreements you enter into with competitors

The provision of your services on behalf of the competitor is governed by at most a single service agreement with that competitor. However, on most occasions where you are engaged to provide care services on behalf of a competitor, no written agreement is signed. Arrangements tend to be kept informal, with the only formal documentation being the terms and conditions of your labour hire services included on your timesheets which would be endorsed by the clients.

You have provided sample service agreements for your provision of care services on behalf of the competitors (service agreements). The service agreements provide, amongst other things, that you will provide contracted services to the competitor and its clients. The contracted services include the provision by you of agency and/or contracted personnel who will work within the competitor's services to meet the needs of its clients. The competitor will develop a service plan that authorises the type, in consultation with relevant stakeholders the level and duration of services required and tasks to be undertaken. The service agreements have also specified the personnel to be provided such as disability support workers-accommodation services or in-home support and outreach services, case managers/service planners.

The service agreements also state that the competitor agrees to pay you, according to the fee schedule or agreed rates. You are required to submit an invoice within the specified days of delivering the contracted service direct to the competitor. The competitor will pay such amounts shown on the invoice accordingly.

Reasons for decisions

Section 9-40 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides that you must pay the GST payable on any taxable supply that you make.

Section 9-5 of the GST Act states:

You make a taxable supply if:

a. you make the supply for *consideration; and

b. the supply is made in the course or furtherance of an *enterprise that you *carry on; and

c. the supply is *connected with Australia; and

d. you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

(* denotes a defined term in section 195-1 of the GST Act).

For the supply of your care services to be a taxable supply, all of the requirements listed in section 9-5 of the GST Act must be satisfied.

Based on the information provided, you have satisfied the requirements in paragraphs 9-5(a) to

9-5(d) of the GST Act as follows:

· the supply of the care services is for consideration

· the supply of the care services is made in the course of the business that you carry on

· the supply is connected with Australia as you provide the services in Australia, and

· you are registered for GST.

Therefore, the supply of your care services will be taxable to the extent that they are not input taxed or GST-free.

There is no provision in the GST Act for the supply of your care services to be input taxed. What remains to be considered is whether the supply is GST-free.

1) Services supplied to your clients who live in their own homes

Section 38-30 of the GST Act provides that community care is GST-free. It states:

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 Commonwealth 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).

Subsection 38-30(3) of the GST Act

'Community care' is defined in section 195-1 of the GST Act as 'having the meaning given by section 45-3 of the Aged Care Act 1997. Community care can include respite care.'

Section 45-3 of the Aged Care Act 1997 provides that community care is care consisting of a package of personal care services and other personal assistance provided to a person who is not being provided with residential care.

Under subsection 38-30(3) of the GST Act, a supply of community care is GST-free if it is provided to one or more aged or disabled people and the services provided are a type specified in item 2.1 of Part 2 of Schedule 1 to the Quality of Care Principles (Item 2.1).

Based on the information provided, you enter into agreements with your individual clients to provide the care services to them. You do not enter into any service agreement with the government entity to provide your service to the clients in their own homes. Therefore, the services are provided to the clients, not to the government entity.

The payment that you receive is provided by the government entity, is not consideration for a supply to the government entity. Where you enter into agreements with the individual clients for the supply of your care services, the government entity is merely a third party payer..

You also advised that your care services are provided to the clients who have mental or physical disabilities in their own homes. As such, the first requirement is met.

Item 2.1 provides a list of eligible types of personal assistance as follows.

Examples of services that are not GST-free under subsection 38-30(3) of the GST Act, because they are not similar in nature to those listed in Item 2.1, include:

· monitoring and applying medication

· nursing care

· provision of rehabilitation services

· home help, such as domestic chores, gardening or home maintenance, including bed making and general tidying of living quarters

· meal preparation services

· provision of social and community activities, such as providing companionship or security for clients feeling lonely or vulnerable, or initiating and taking part in craft, reading etc

· provision of travel services

· grocery shopping, and

· assessment and referral.

Based on the information provided, we consider that all of the services listed in your submission, are services of a kind covered by Item 2.1 and thus GST-free, except for:

· preparing meals

· shopping

· nursing care and support

· respite care

· outdoor activities such as exercise or family visits, and

· emergency support.

As some of the services supplied to your clients are not covered by subsection 38-30(3) of the GST Act, we have to consider those services under subsection 38-30(4) of the GST Act.

Subsection 38-30(4) of the GST Act

Paragraph 38-30(4)(a) - the supplier must receive funding from the Commonwealth, a State or a Territory in connection with the supply

For the purposes of paragraph 38-30(4)(a) of the GST Act, it is considered that a payment constitutes 'funding from the Commonwealth, a State or a Territory' if the funds are sourced from

Commonwealth, State or Territory budgets under a government funded care program.

In relation to 'funding', it is only necessary to determine whether the supply is under a funded arrangement. It does not matter if an entity that receives funding from the Commonwealth, a State or a Territory then on funds a supplier to supply that care.

You receive payments for your services from a funding arrangement between your clients and the government entity. The Commonwealth, a State or a Territory includes a department, agency or organisation of the type referred to in the definition of 'government entity' in section 195-1 of the GST Act.

Section 195-1 of the GST Act defines 'government entity' to include a Department of State of the Commonwealth'. The government entity is a state department and therefore is a government entity. As such, the requirement in paragraph 38-30(4)(a) of the GST Act is met.

Paragraph 38-30(4)(b) - the supply of care is of a kind determined by the Aged Care Minister to be similar to a GST-free supply because of subsection (2)

Subsection 38-30(2) of the GST Act provides that a supply of care that is funded under the Home and Community Care Act 1985 is GST-free.

The Minister has made a determination GST-free supply (Care) Determination 2000 (Care Determination) for the purpose of paragraph 38-30(4)(b) of the GST Act. Schedule 1 to the Care Determination (Schedule 1) lists the supplies of care to be similar to supplies that are GST-free because of subsection 38-30(2) of the GST Act. It provides that those services will be GST-free where they are provided to a 'targeted person'.

The term 'targeted person' is defined in the Care Determination to mean a frail, older person or a younger person who:

has a moderate, severe or profound disability (including addiction to a drug) lives at home, and would, in the absence of services of the kind mentioned in Schedule 1 to the Care Determination, be at risk of prematurely or inappropriately needing:

i. long term care in a hospital or other institution, or

ii. residential care within the meaning of the Aged Care Act.

You advised that the clients that your services are provided to all suffer from significant disabilities and live in their own homes. They require hospital care or residential care if not for your services. As such, your clients meet the definition of a 'targeted person' as provided in the Care Determination.

Schedule 1 lists the following care services for targeted persons:

Item Service

1. Home help

2. Personal care

3. Home maintenance

4. Home modification

5. Provision of food

6. Provision and delivery of meals at home or at a day care or similar centre

7. Respite care

8. Transport to and from day care or similar centres and for shopping trips, social outings and for health-related purposes

9. Community paramedical services

10. Community nursing

11. Assessment of the person's care needs

12. Referral to other community care services

13. Training in the use of aids and appliances and in how to get the most out of the other services mentioned in this Schedule

14. Individual care planning or case management

15. Provision of basic equipment for social support excluding the provision of aids and appliances under paragraph 7(3)(b) of the Schedule to the Home and Community Care Act 1985

16. Day care

17. Linen services

18. Counselling

19. Community advocacy for a purpose mentioned in section 81-1 of the Aged Care Act 1997

20. Medication management

21. Provision and monitoring of personal alert systems

22. Provision of therapeutic supplies and services under the program known as the Psychogeriatric Unit Program administered by the Commonwealth

23. Continence management

All your services are covered by Schedule 1 apart from nursing care and support.

Item 10 of Schedule 1 lists community nursing. Community nursing is not defined in the Care Determination or in any relevant legislation. However, according to the document Explaining Home & Community Care, A consumers' guide to the HACC program issued by the Queensland Department of Health, community nursing is a type of service provided in the home by a qualified nurse, either on a regular or occasional basis. You advised that the staff members who perform the nursing care and support services are not registered nurses. As such, the service is not covered by Item 10 of Schedule 1.

Under subsection 38-10(3) of the GST Act, a supply of nursing service is GST-free if the supplier is a recognised professional. We consider a recognised professional for the supply of nursing service is a qualified nurse, accredited and registered with the State Nursing Board. As the staff members who perform the nursing care and support services are not registered nurses, the service is not a GST-free supply.

Accordingly, all of the services that you provide to the clients apart from nursing care and support that are provided to your clients in their own homes are GST-free under subsection 38-30(4) of the GST Act. The portion of your care service that is related to nursing care and support is a taxable supply.

2) Services supplied to your clients in accommodation provided by you

You advised that, although you provide accommodation to you clients, you do not provide residential care as defined in the Aged Care Act 1997. Therefore, the services you provide under these circumstances are still considered as community care.

As discussed above, all the services you provide are GST-free under subsections 38-30(3) and

38-30(4) of the GST Act except for the nursing care and support services.

3) Services supplied to the clients of your competitors who live in their own private homes or live in accommodation provided by the competitor

It is implicit in the concept of community care that these supplies can only be made to a person requiring this care service. Community care cannot be supplied to a business entity.

Accordingly, where supplies are made to a third party that is a business entity, such that the business entity is the recipient of the supply under the GST Act, the supply is not of community care.

Where there are only two parties to the supply (the supplier of the care services and the disabled person), there is a single supply to which the GST Act applies and the recipient of that supply is the disabled people. That supply may be a GST-free supply of community care where the requirements in section 38-30 of the GST Act are met.

However, where there are more than two parties involved in the arrangements, there may be one or more supplies to which the GST Act applies and it is necessary to determine what is being supplied and to whom. For example, the terms of the agreement between the service provider and the third party may result in the service provider making a supply to the third party which is not a GST-free supply of community care. This supply is additional to any supply that is made to the disabled people.

It is considered that a third party payer, such as another business entity, will have obtained a contractual right for a supply or provision to be made and will be the 'recipient of the supply' of personal care services where:

· that third party engages the service provider to provide something to them or to someone else

· that third party, by agreement with the service provider, determines what is to be provided to them or to someone else, and

· there is a binding obligation between that third party and the service provider for the thing to be provided and the third party is liable to provide payment.

You enter into service agreements with your competitors to provide your services to the competitors' clients. The agreement specifies the terms and nature of the services that would be provided by you. You are bound to meet your obligations set out under the terms and conditions in the agreement.

Further, the agreement sets out that you will invoice the competitors directly for your services provided and the competitors are liable to provide payment to you for your services rendered.

Therefore, the agreement creates binding obligations for the provision of care services by you and for payment by the competitors. As such, the competitors are the recipients of the supply of your care services, not their clients to whom you provide the care services.

Accordingly, the care services you provide to clients of your competitors are not GST-free under either subsection 38-30(3) or 38-30(4) of the GST Act.

4) Services supplied to your clients who live in residential facilities owned by the government entity

Subsection 38-25(2) of the GST Act

Subsection 38-25(2) of the GST Act provides that 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.

You supply your care services to people with mental or physical disabilities. Therefore, the requirement in paragraph 38-25(2)(a) is met.

You receive funding from the government entity in accordance with the service agreement that you entered into with them. The purpose of the funding is for the management of the residential facilities and the provision of care services to the residential clients. Therefore, the requirement in paragraph 38-25(2)(c) of the GST Act is met.

In relation to the requirements under paragraph 38-25(2)(b) of the GST Act, the Aged Care Minister has made a written determination: GST-free Supply (Residential Care - Government-Funded Supplier) Determination 2000 (the Determination). Clause 4 of the Determination provides that all services specified in Schedule 1 to the Determination are of a kind covered by Schedule 1 to the Quality of Care Principles.

All your services are covered by Schedule 1 to the Quality of Care Principles except the nursing care and support.

'Nursing services' is listed in Item 3.8 of Part 3 in Schedule 1 to the Determination. The services are required to be carried out by a registered nurse or other professional appropriate to the service (e.g. medical practitioner, stoma therapist, speech physiotherapist or qualified practitioner from a palliative care team). In your case, the staff members who perform nursing care and support are not registered nurses, thus, the service is not covered by Item 3.8 or by any other items in Schedule 1. Therefore, the nursing care and support services are not GST-free and would be taxable supplies.

Accordingly, the care services you supply to your clients who live in residential facilities owned by the government entity are GST-free under subsection 38-25(2) of the GST Act apart from the nursing care and support services.

Subsection 38-25(3) of the GST Act

Subsection 38-25(3) of the GST Act states:

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 the Schedule.

As discussed above, the nursing care and support services that you provide is not covered by

Item 3.8 of Schedule 1 to the Quality of Care Principles. It is also not covered by Item 2.1 of that Schedule. Therefore, the nursing care and support services is not GST-free under subsection

38-25(3) of the GST Act.

5) Services supplied to the clients of your competitors in the residential facilities owned by the government entity and managed by that competitor

You enter into service agreements with the competitors to supply your services to their clients in the residential facilities owned by the government entity and managed by that competitor. The terms and conditions in the agreement are similar to those discussed in question 3. Under these circumstances, the competitors are the recipient of the supply of your care services, not their clients to whom you provide the care services.

Accordingly, the care services you provide to clients of your competitors in the residential facilities owned by the government entity and managed by that competitor are not GST-free under subsection 38-25(2) or 38-25(3) of the GST Act.