Edited version of your written advice

Authorisation Number: 1012784388018

Ruling

Subject: Goods and services tax: GST free care services and accommodation in a retirement village

Question

Are you, Entity A, as Receiver of Entity B and Controller of the assets of Entity C, liable to pay GST on the supplies of the specified services, the general services and the accommodation supplied to residents in the Retirement Village pursuant to section 58-10 of the GST Act?

Answer

No. Where a resident has been assessed as requiring the item 2.1 or 3.8 services as documented in the Care Plan, your supplies of the specified services, the general services and the accommodation will be GST free.

The scheme commences on:

On or after 25 September 2014

Relevant facts and circumstances

On ddmmyyyy, Entity D registered for GST.

On ddmmyyyy, Entity D acquired vacant land in Australia, for $X. A portion of the property was developed as a retirement village.

The financier of the project was entity B who advanced funds to a borrower associated with Entity C. The associate of Entity C holds a first registered mortgage over the Entity C's property through Entity E which acts as custodian of the mortgage on behalf of Entity B.

On ddmmyyyy Entity D became part of a GST group. There were 3 consecutive Group representatives. Each of these entities became incapacitated in some form and had Representatives appointed over them. Entity D then exited the GST group and began reporting its GST obligations on its own BAS.

On ddmmyyyy, the name of Entity D changed its name to the current name of Entity C.

Retirement Village (RV)

The development of the retirement village commenced in 200X and was to continue over several stages with a proposal to construct X units.

The first stage of development has been completed with X accommodation units constructed. These units are spread across X buildings. The units in each building are set either side of a central internal corridor and accessed through this corridor.

The communal facilities are located in separate buildings and are connected by covered walkways The communal facilities comprise a commercial kitchen, dining area, library, reception area, hairdresser, transition room, lifestyle co-ordinators office, bathroom and storeroom together with the nurses office.

As at mmyyyy, X of the apartments were occupied with a total of Y residents. The rest of the units were vacant. While residents must be over 65, given the average age of residents is XX, the village environment is not suited to 'young' totally independent residents. They are not attracted to the village & are discouraged from taking up residence. Marketing of the village emphasises "supported living" and is directed to residents who require some level of care."

The apartments have the following features:

• A kitchen with lowered bench tops with an emergency buzzer, dining area and living room.

• A patio

• Either 1 or 2 bedrooms

• Shower, toilet and laundry all in one room.

• This room contains a washing machine and dryer with a laundry sink next to the washing machine.

• There are hand rails in the toilet and shower recess and some have shower seats.

• The sinks are set lower than in normal residential premises.

• There is an emergency buzzer next to the toilet and an emergency cord in the shower

• Doors are wide enough to allow wheelchair access.

• The floors of the apartments are flat throughout with no sunken areas or hobs in the shower recess

• The power buttons and light switches are larger than standard switches

• There are ramps at the entrance to the buildings to assist in mobility

• There is a specialised fire system.

RV operations

Entity C initially appointed, Entity F as its agent, to provide management services in respect of the retirement village.

At the same time Entity F, entered into an agreement with Entity G to operate and manage the retirement village.

The agreement states that the relationship between Entity F and Entity G was one of principal and agent. A management fee of $XX was to be invoiced monthly by Entity G to Entity F who was to then invoice Entity C for its services. The GST registration of Entity F was terminated on ddmmyyyy and it ceased to be involved in the running of the RV.

Entity G has continued to manage the operations of the RV up until the current time on behalf of Entity C under the same terms as Entity F had contracted with Entity C. Entity B have continued to fund the operations of the retirement village through the different controllers up until the current time.

A registered nurse is on call 24 hours a day to render emergency assistance to residents and an Enrolled Nurse (EN) is available on all shifts.

Residents are assessed before entering the village by entity G staff to establish their need for services. Further ongoing and regular reviews are performed by a nurse on site to assess and monitor their care needs. The assessments are kept by Entity G on behalf of Entity C. The initial assessment form is called 'Initial Health & Service Assessment'. The ongoing Assessment form is titled Care Plan and sets out the services the resident requires.

All residents require services that are listed at either item 2.1 (daily living activities assistance) of Part 2, or item 3.8 (nursing services) of Part 3 of Schedule 1 to the Quality of Care Principles 2014.

Residents

When residents enter and occupy the Retirement Village (RV) they are supplied with a number of agreements which include a:

• Public Information Document (PID)

• Lease Document

• Care Plan; and

• An initial Health and Service Assessment

They or their representative are required to read the PID, be assessed for the services they need under the Initial Health and service Assessment form and then sign the lease agreement.

Public Information document (PID) (Dated ddmmyyyy)

The PID includes the advice that it:

This public information document (PID) about residence in this retirement village forms part of the written contract(s) that you sign or someone else signs on your behalf, (the residence contract). Includes important information on this village, and forms an integral part of any residence contract you might enter. The PID makes it easy to compare different retirement village schemes … The PID must be provided to you before you enter into a residence contract with the village scheme operator. If you sign a residence contract, you have a 14 day cooling-off period, after both parties have signed the contract, should you change your mind.

When signing a residence contract this PID must be accompanied by the following document which must be listed in Part 3

• A copy of the residence contract including all related contracts however named

• A copy of any service agreement(s) or other ancillary Contract(s)

In your correspondence, you referred to various parts of the PID.

Clause x of the PID states:

"General services provided with your accommodation unit include:

• management and administration;

• gardening and minor maintenance;

• recreation or entertainment facilities;

• other services - specify;

(a) emergency call system;

(b) chaplain to attend to emotional needs of the resident (service in development);

(c) upkeep of gardens forming part of the Common Property;

(d) minor maintenance of Common Property;

(e) heavy laundry services (fortnightly) (bed linen and towels); and

(f) daily meals (breakfast, morning tea and supper) (additional meals and delivery require cash contribution).

Personal Services charge

Clause X of the PID states:

"Upon entry into the village all residents will be required to enter into a Support Services and Care Services Agreement. …..

Prior to the resident entering the village the resident and the scheme operator will together determine, by doing an initial assessment under the Application for Residence, which of the Available Personal Services (a full list of which is set out in Attachment 4) are initially required by the resident as a resident of the village. The resident is able to select any additional support and care services as they may wish to receive.

All residents will be required to undergo quarterly assessments by the Care Coordinator or the Trained Nurse.

If, following the assessment, the Care Coordinator or Trained Nurse determines that a resident requires additional support or care services to maintain their health and safety the resident is required to take those services on a user pays basis.

If the resident does not elect to be provided with these recommended services the resident will undergo a further assessment by the Care Coordinator or the Trained Nurse in liaison with a general practitioner.

If, as a result of the assessment, with the general practitioner it is determined that a resident requires additional support services or care services to maintain their health and safety the resident will be required to take these services on a user pays basis.

X Support/Care services

Clause X state:

X.1 ... The Resident will receive such of any of those Support/Care Services as specified in the Care Plan.

Lease arrangements

Residents of the units have exclusive occupancy rights under a loan/lease tenure.

The units are designed to be occupied as a residence and provided to occupants under the following conditions:

• An incoming resident will make an ingoing contribution in the form of an interest-free loan for the right to reside in the accommodation unit. Once the resident pays all the money required under the loan agreement, the lease of the accommodation unit will commence and continue for a period of 99 years

• Residents pay periodic general services charges to cover the operating costs and general services in and to the retirement village.

• Residents pay regular contributions to the maintenance reserve fund to be used for the maintenance of the retirement village

• Residents pay charges from time to time for personal, care and support services. Personal services include telephone, internet access, additional meals, laundry, etc.

• An exit fee will be paid by the resident when the occupancy ceases in accordance with a prescribed formula. The minimum exit fee is X% of the ingoing contribution and the maximum fee is XY%

• All fees and contributions under the loan lease agreement are paid to the scheme Operator.

Neither you, Entity B or Entity E are registered care providers, nor do you receive funding from the Commonwealth, State or Territory.

Relevant legislative provisions

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

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

A New Tax System (Goods and Services Tax) Act 1999 195.

Reasons for decision

Division 58

Under section 58-10 of the (A New Tax System (Goods and Services Tax) Act 1999) GST Act, a representative is liable to pay any GST that an incapacitated entity would, but for this section, be liable to pay on a taxable supply.

The term representative is defined in section 195-1 to include:

• A liquidator

• A receiver

• A controller(within the meaning of section 9 of the Corporations Act)

• An administrator appointed to an entity under Division 2 of Part 5.3A of the Corporations Act 2001

On ddmmyyyy, you were appointed as a Receiver over a number of assets including those of Entity C. On dmmyyyy you were also appointed as agent of Entity E, who held the mortgages over Entity C's assets. Accordingly, you are a representative.

An incapacitated entity (IE) is defined in section 195-1 as an entity which has a representative appointed over it. Therefore, Entity C is an incapacitated entity.

To the extent that you are exclusively responsible for the supplies made by Entity C, you will have exclusive responsibility for the GST consequences of the supplies and acquisitions from ddmmyyyy.

The specified services

You have asked whether the specified services, the general services and accommodation will be GST free when supplied to residents of an apartment in the retirement village. The specified services are:

1. item 2.1 of Part 2 of Schedule 1 of the Quality of Care Principles 2014 (item 2.1 services) and

2. item 3.8 of Part of Schedule 1 of the Quality of Care Principles 2014 (item 3.8 services)

3. laundry services

4. heavy laundry

5. cleaning services, and

6. meals.

The general services are upkeep of gardens, chaplain, maintenance and emergency call system"

The supplies made in the retirement village are:

• made for consideration

• made in the course or furtherance of an enterprise that Entity C (who is registered for GST) carries on and

• the supplies are connected with Australia.

Therefore, the supplies will be taxable supplies unless they are GST free or 'input taxed supplies.

GST free supplies

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

(a) the services are provided to one or more aged or disabled people in a residential setting; and

(b) the Aged Care Minister has determined in writing that the services are of a kind covered by Schedule 1 to the Quality of Care Principles; and

(c) the services include, and are only provided to people who require, the services (care services) set out in:

(i) item 2.1 (daily living activities assistance) of Part 2 of that Schedule; or

(ii) item 3.8 (nursing services) of Part 3 of that Schedule.

The background to section 38-25 of the GST act is set out in Goods and Services Tax Ruling GSTR 2012/3 Goods and services tax: GST treatment of care services and accommodation in retirement villages and privately funded nursing homes and hostels. (GSTR 2012/3). It relevantly provides the following commentary in paragraphs 107 to 112.

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

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

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

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

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

Paragraph 38-25(3)(a)

Are the services supplied to one or more aged or disabled people in a residential setting?

Residential setting

For the purposes of paragraph 38-25(3)(a), the term residential setting is expanded in section 38-25(3A) to include services provided to a resident of a retirement village under certain circumstances. In this instance, the services are provided in a residential setting if, and only if:

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

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

Resident of a serviced apartment in the retirement village.

Retirement Village

The term retirement village is defined to mean:

(a) premises that are residential premises; and

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

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

but the following are not retirement villages:

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

(e)  commercial residential premises.

Your premises meet the definition of retirement village.

Serviced apartments

A serviced apartment is defined in the GST Act to mean an apartment (however described) in relation to a retirement village if:

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

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

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

(b) at least one responsible person is continuously:

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

(ii) in reasonable proximity to the apartment; and

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

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

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

(f) Requirement (a) of the definition of serviced apartment - Designed to be occupied by aged residents who require 2.1 and 3.8 services

GSTR 2012/3 explains what it means when a unit is designed to be occupied by aged residents who require either or both of the following:

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

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

Paragraphs 34 to 36 provide the following information:

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

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

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

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

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

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

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

Therefore, it is necessary for your apartments to have been designed with features that enable them to be physically distinguished from independent living units (ILU's). It is not enough that they are merely able to accommodate those that have a need for item 2.1 and 3.8 services they must have been designed especially for this purpose.

Your apartments have many features that are common to ILUs in that there is a full laundry and kitchen with a lounge and dining room and have one or two bedrooms. Photos you supplied confirmed these details. There are emergency buzzers in the apartments, similar to most ILU's in retirement villages.

However, in addition, the apartments have larger than normal power and light switches, wider doorways through which wheelchairs can be moved and hand rails.

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

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

Paragraphs 37 and 38 provide that:

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

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

You have advised that both a registered nurse (RN) is on call and an Enrolled Nurse (EN) are present on all shifts and so you meet this requirement.

Requirements (c) and (d) of the serviced apartment definition.

Further, you meet requirements (c) and (d) as the apartments are part of a single complex with a central corridor and there is in the retirement village a communal dining facility that is available for use by the residents of apartments in the retirement village.

Therefore, we consider that the residents occupy serviced apartments in a retirement village as defined.

There also need to be in force a written agreement under which the operator of the retirement village provides daily meals and heavy laundry services to all of the residents of the apartment.

Written agreement in force

Paragraph 53 of GSTR 2012/3 provides that

53. The requirement in paragraph 38-25(3A)(b) about the provision of daily meals will be satisfied if the operator provides meals to all residents of the serviced apartments consistent with the requirements of item 1.10 of Schedule 1 to the Minister's Determination12 referred to in paragraph 38-25(3)(b). That is, the operator provides meals of adequate variety, quality and quantity for each resident of the serviced apartment, served each day at times generally acceptable to both residents and management, and which will generally consist of three meals per day plus morning tea, afternoon tea and supper. Item 1.10 of the Minister's Determination also takes into account variances in a resident's meal requirements as a result of medical needs or religious or cultural observance.

A use of the word 'generally' is an intention to refer to a practice that is common to most/many and can be indefinite.¹

'Meal'

1. A meal is taken to mean a 'regular repast of the day, as breakfast, lunch or dinner'; or 'the food eaten or served for repast.'²

2. 'Repast' from the Macquarie Dictionary means:

1. a quantity of food taken at or provided for one occasion of eating: to eat a light repast.

2. a taking of food; a meal: the evening repast.

3. obsolete food.

3. The meaning of meal is 'one of the regular quantities of food taken at or provided for one occasion of eating' of the day, for example, breakfast, lunch, or dinner.

4. The RV operator is required to provide meals of adequate variety, quality and quantity for each resident of the serviced apartment, served each day at times generally acceptable to both residents and management, which is generally three servings per day.

We consider that the PID meets the definition or a written agreement in force under which the retirement village provides daily meals and heavy laundry services to all residents of an apartment.

Therefore, we consider that you meet the requirements of subsection 38-25(3) (a) in that services are provided to one or more aged or disabled people in a residential setting.

Paragraph 38-25(3)(b) of the GST Act

The specified services are listed in Schedule 1 of the Minister's Determination. Therefore paragraph 38-25(3)(b) is met with respect to the specified services.

Paragraph 38-25 (3)(c )

The services include and are only provided to residents who require (care services) item 2.1 and item 3.8 service and who have a continuing need for those services.

Paragraph 75 of GSTR 2012/3 provides that:

75. In determining whether this requirement is satisfied, the Commissioner will consider objective evidence of a resident's requirement and continuing need for item 2.1 or item 3.8 services. This objective evidence may include one or more of the following factors:

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

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

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

In your case, the assessment is completed by an Enrolled Nurse (EN) with a registered health professional supervising the process.

The services the resident is assessed as needing include item 2.1 or item 3.8 services. You have advised that all residents have been assessed as having a need for some of the item 2.1 or 3.8 services.

Where a resident has been assessed as requiring the item 2.1 or 3.8 services as documented in the Care Plan they meet this criteria.

Therefore, where a resident has been assessed as requiring the item 2.1 or 3.8 services as documented in the Care Plan, your supplies of the specified services are GST free pursuant to subsection 38-25 (3) of the GST Act.

Accommodation and general services

Accommodation

Subsection 28-25 (4A) relevantly provides that a supply is GST-free if it is made to a person who is of a kind referred to in paragraph (3) (c ) and it is a supply by a way of lease of residential premises consisting of a serviced apartment in a retirement village.

You supply, by way of lease, residential premises consisting of a serviced apartment in a retirement village. Therefore, where a resident has been assessed as requiring the item 2.1 or 3.8 services as documented in the Care Plan, your supplies of accommodation will be GST free.

General Services

Goods and Services Tax Ruling GSTR 2012/4 Goods and services tax: GST treatment of fees and charges payable on exit by residents of a retirement village operated on a leasehold or licence basis (GSTR 2012/4) provides the Commissioners view on treatment of amounts which a resident becomes liable to pay to the operator of a retirement village when the resident's interest in the village terminates (exit payments)

Paragraph 12 of GSTR 2012/4 sets out that:.

12. Incidental services are to be regarded as part of an input taxed or composite supply, the dominant part of which comprises the residential premises provided under the lease or licence.

The principle here also applies to GST free supplies of accommodation. We consider that the upkeep of gardens, chaplain, maintenance and emergency call system services are incidental to the supply of accommodation. Therefore, where a resident has been assessed as requiring the item 2.1 or 3.8 services as documented in the Care Plan, your supply of general services will be GST free.

¹ Macquarie Dictionary, online, definition.

² Macquarie Dictionary, online, definition.