Edited version of your private ruling

Authorisation Number: 1012577014972

Ruling

Subject: GST and Specialist Disability Services

Question

Are you entitled to input tax credits for costs incurred in constructing residential premises that are:

(a) Leased to community housing organisations for the purposes of providing accommodation to persons with a disability?

(b) Leased directly to persons with a disability?

Answer

(a) No

(b) No

Relevant facts and circumstances

· You are a State Government Agency and are registered for GST.

· You were formed pursuant to a State Act and are responsible for the provision of housing across the State.

· The relevant disability commission (the commission) was formed pursuant to an Act.

· The commission has issued a policy in relation to the particular housing program. Some key points of the policy are as follows:

o The aim of the policy is to provide long term rental housing for people with disability who require ongoing support to live in the community.

o You lease almost all of your residential premises to not for profit organisations.

o Your preference is that the Housing Provider is either a CHO registered with you, or a local government authority.

o The approved budget for the Program is inclusive of all housing costs. Neither you nor the commission will provide any additional funding for the Program.

· The State receives funding under the National Disability Act for the provision of disability services in the State. The State then subsequently funds you under the Appropriation Bills legislated by the State Government.

· In the xxx budget paper, the following was provided in relation to disability housing

$xxx million over three years provided in the last year's budget, which will see the commencement or delivery of homes to the Commission.

The policy for board and lodging charges for individuals residing in Commission accommodation facilities provides as follows:

:

· The provision of accommodation support services often coincides with the supply of services or goods that are the personal responsibility of the individual. As with all citizens, people with disabilities are responsible to meet their own costs of everyday living (i.e. rent, food, clothing, medication, personal hygiene products, travel and recreational expenses) comparable with other members of the community.

· The Commonwealth Government has the responsibility for providing income support to disadvantaged adults to meet the costs of everyday living. This income support is in the form of pensions and allowances. If these allowances and subsidies prove to be insufficient, then this needs to be taken up with the respective Commonwealth authority.

· Under the relevant Policy, the Commission does not pay for the costs of everyday living of an individual. A schematic representation of the funding sources of accommodation and living costs is provided in the policy.

Relevant legislative provisions

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

Section 11-5

Section 11-15

Section 40-35

Section 38-40

Reasons for decision

Question

Summary

The provision of residential premises by you does not meet the requirements under section 38-40 of the GST Act and therefore, you are not entitled to any input tax credit for costs incurred in constructing residential premises regardless of whether the residential premises are leased to community housing organisations for the purposes of providing accommodation to persons with a disability deemed eligible by the Commission or leased directly to persons with a disability deemed eligible by the Commission.

Detailed reasoning

Under subsection 7-1(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), entitlements to input tax credits arise on creditable acquisitions. Under section 11-5 of the GST Act, an entity makes a creditable acquisition if:

· it makes an acquisition solely or partly for a creditable purpose,

· the supply of the thing to the entity is a taxable supply,

· the entity provides or is liable to provide the consideration for the acquisition, and

· the entity is registered or required to be registered for GST.

In your circumstances:

· the supply of the building construction to you is a taxable supply made by the builder,

· you are liable to provide consideration for the supply (building costs), and

· you are registered for GST.

Therefore, you are entitled to an input tax credit arising from the construction of the building(s) if it makes the acquisition solely or partly for a creditable purpose.

The term 'creditable purpose' is defined in section 11-15 to mean:

(1) You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your *enterprise.

(2) However, you do not acquire the thing for a creditable purpose to the extent that:

(a) the acquisition relates to making supplies that would be *input taxed; or

(b)the acquisition is of a private or domestic nature.

* an asterisk denotes a defined term in the GST Act

The meaning of the term 'enterprise' is defined in section 9-20 of the GST Act to include an activity, or series of activities done by the Commonwealth, a State or a Territory.

Miscellaneous Taxation Ruling MT 2006/1 considers the meaning of the terms 'entity' and 'enterprise' for the purposes of the A New Tax System (Australian Business Number) Act 1999 (ABN Act). The ABN Act uses the definitions of these terms that are contained in the A New Tax System (Goods and Services Tax) Act 1999 (GST Act). The principles in that Ruling apply equally to the terms 'entity' and 'enterprise' and can be relied upon for GST purposes.

Under section 5 of the ABN Act, a government entity is treated as if it is an entity carrying on an enterprise in Australia. As a government entity responsible for provision of housing, the acquisition of the building constructions is made in carrying on your enterprise.

Therefore, your entitlement to an input tax credit depends on whether the acquisition of building construction relates to making supplies that would be input taxed.

Under subsection 9-30(2) of the GST Act, a supply is input taxed if it is input taxed under Division 40 of the GST Act or under a provision of another Act. Under section 40-35 of the GST Act the supply of premises by way of lease is input taxed.

However, where a supply that would be both input taxed and GST-free, the supply is GST-free under paragraph 9-30(3))(a) of the GST Act.

Of relevance to your circumstances is section 38-40 of the GST Act where a supply that meets the requirements of the section is treated as GST-free.

Section 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 complementary *State law or *Territory law in respect of the services.

For your supply of the residential premises to disabled persons to come within section

38-40 of the GST Act both of the following requirements must be satisfied:

· the supply of the premises by you is a supply of services for the purposes of that section, and

· you as the supplier receives funding under the Disability Act 1986 (Commonwealth) (DSAC) or under a complimentary State law in respect of the services.

Whether you receive funding under the DSAC or under a complimentary State law in respect of the services.

The kinds of services that can be GST-free under section 38-40 of the GST Act are limited to those for which the supplier, in this case you receive funding under the DSAC or under a complimentary State or Territory law.

The funding you receive to construct and purchase the houses for the Program is via appropriation from the State Government. Whilst it could then be said that the funding coming to you from the appropriation process for the purpose of undertaking the functions set out in the State Housing Act are received under the State Housing Act, it is considered that this is not a complimentary Act to the Disability Services Act 1986. There is no specific mention of housing for the disabled under the State Housing Act and its objects are not similar to the Disability Services Act 1986.

The MOU states that the approved budget (which matches closely the appropriation amounts) is inclusive of all housing costs and that the Commission will not provide any additional funding for the Program. That is, no funding from the Commission is being provided for the Program.

On this basis, it is considered that you do not receive funding under the Disability Services Act 1986 or the complimentary State Disability Act for any services that it supplies. Therefore, section 38-40 does not apply to any services supplied by you.

As such, it is not necessary to consider whether the supply of residential premises by way of lease by you is a supply of services for the purposes of that section. For completeness, however, the following is noted.

An information sheet regarding the Commission provides that the provision of accommodation support services often coincides with the supply of services or goods that are the personal responsibility of the individual. As with all citizens, people with disabilities are responsible to meet their own costs of everyday living (e.g. rent, food) comparable with other members of the community.

Under the relevant accommodation policy, the Commission does not pay for the costs of everyday living of an individual. The Commonwealth Government has the responsibility for providing income support to disadvantaged adults to meet the costs of everyday living. This income support is in the form of pensions and allowances. If these allowances and subsidies prove to be insufficient, then this needs to be taken up with the respective Commonwealth authority.

Service providers should seek individual contributions on a full cost recovery basis.'

The Policy indicates that the commission does not fund the provision of residential premises by way of lease. It is the responsibility of the people with disabilities to meet their own rental costs for the occupation of residential premises.

For this reason, the provision of residential premises by way of lease is not a service for the purposes of the State Disability Act.

As the requirements of section 38-40 of the GST Act are not met, the provision of housing by you to disabled persons by way of lease is not GST free. It is input taxed supply under section 40-35 of the GST Act. You are not making creditable acquisition in relation to the construction of the residential premises as required under paragraph 11-5(a) of the GST Act.

It follows that you are not entitled to any input tax credit for costs incurred in constructing residential premises regardless of whether the residential premises are leased to community housing organisations for the purposes of providing accommodation to persons with a disability deemed eligible by the Commission or leased directly to persons with a disability deemed eligible by the Commission.

You have referred to another edited version of Private Ruling for a government entity published in the Register of Private Binding Rulings.

However, please note that:

The Register of Private Binding Rulings is a historical public record of written binding advice the Tax Office has issued to specific entities. It exists to enhance the integrity and transparency of the Tax Office's decision making processes. In essence, it enables the recipient of written binding advice to confirm that what they have is official Tax Office advice.

Each record is based on the facts of a specific situation as advised to the Tax Office and reflects our view of the law in force at the time the advice was issued. Before we place a record on the Register, we edit it to protect the applicant's privacy.

Records on the Register cannot be relied upon as precedent or used for determining howthe Tax Office will apply the law in other cases because:

the advice is binding on the Commissioner only in relation to the specific entity named in the written binding advice

some material facts that formed the arrangement on which our advice was given may have been removed or altered for privacy, secrecy or confidentiality reasons

we do not update records to reflect:

· changes in legislation

· changes in the Tax Office's application of the law resulting from tribunal or court decisions

· changes to the Tax Office view on how the law applies, and

· changes to decisions resulting from review processes after entities have disputed the Tax Office's decision.

Given the above, a record in the Register is not a publication approved in writing by the Commissioner. It is not intended to provide you with advice, nor does it set out the Tax Office's general administrative practice. Therefore a record on this Register is non-binding and provides you with no protection (including from any penalty or interest). In addition, a record on the Register is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances.