Edited version of your written advice

Authorisation Number: 1012804998425

Ruling

Subject: GST and supply of accommodation and services in a retirement village

Question

Are you liable to pay GST on the supplies of care and personal services, accommodation and general services supplied to residents in the Retirement Village pursuant to section 58-10 of the GST Act?

Answer

No

The supplies of care and personal services, accommodation and general services to residents will be GST free where:

• the resident has been assessed as requiring the 2.1 or 3.8 services, and

• there is in place 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 particular apartment.

Where these requirements are not met, the supplies will be input taxed.

Relevant facts and circumstances

Entity A is the owner and operator of the Retirement Village. Entity A is registered for GST.

The financier holds a first registered mortgage over the Retirement Village.

On ddmmyyyy, the mortgagee took possession of the Retirement Village as mortgagee in possession.

On ddmmyyyy, you were appointed as Managing Controllers and agents for the Mortgagee in Possession.

You supplied a copy of the deed of appointment to the ATO on the ddmmyyyy.

The Retirement Village

The Retirement Village consists of xx separate apartments plus one apartment used for respite, administration and communal facilities. The RV was completed in two stages.

Stage 1, is made up of XX units, completed in yyyy. The units are accessed via covered verandahs and stairs. The buildings have lift access and stairs, and also feature a wheelchair lift.

Stage 2 was completed in early yyyy and incorporates XX apartments. The apartments are accessed via a common corridor.

Each unit has one or two bedrooms, a kitchen, bathroom and laundry.

The basic facilities outlined above have been specially modified to assist aged people, in particular units include:

• 24 hour emergency call;

• 24 hour emergency button in bathrooms, toilets and kitchens;

• Lowered kitchen benches;

• Lowered bathroom sinks;

• Safety / grab rails in the bathrooms and toilets;

• Larger doorways for wheelchair access;

• Larger shower areas, including a seat (where it is required); and

• Larger light switches.

The communal facilities consist of the following:

• Covered community balconies;

• Dining room;

• Commercial kitchen;

• Large communal laundry and linen rooms;

• Gymnasium;

• Heated indoor pool;

• Library;

• Activity / lounge room;

• Media room / chapel;

• Hair salon;

• Reception and administrative office;

• Nurse station;

• Communal showers and toilets;

• Landscaped gardens and BBQ facilities; and

• Two storey communal car park.

The current average age of residents is X years old. The two youngest residents are Y and Z years old.

When residents enter the retirement village they complete a number of contracts and forms. These include:

1. Village Contract

2. 99 year lease

3. Initial health and service assessment

4. Support Services & Care Services Contract

Village contract

The arrangement with residents is governed by the Village Contract and attachments.

The Financial Terms of the Village Contract provide for the payment of Recurrent Charges (a fixed amount payable on a monthly basis) Recurrent Fees is not defined in the Village Contract. However, the Village Contract indicates that it is for the provision of optional services and general services.

Item X provides that recurrent charges do not include optional services for example meals, laundry services and home cleaning.

Item X of the Financial Terms of the Village Contract provides for the payment of a Departure Fee (based on the length of time a resident remains in the Retirement Village).

Attachment X to the Village Contract sets out the care packages available and their prices. These range from Low Care which provides for xx mins of personal care per week, to High Care Platinum, which provides xx hours and xx minutes of personal care per week.

Support Services & Care Services Agreement

Prior to entering into the agreement, the resident provides the operator with all relevant information concerning their medical and care needs. Based on this information, the operator and the resident determine which of the available personal care services are initially required by the resident. Pursuant to clause 2.1, the resident's needs are reassessed at least every 6 months. You provided a copy of the Initial assessment and ongoing assessments for one of the residents. Further, you have advised that all residents require one or more of the services listed in items 2.1 or 3.8 of the Quality of Care Principles.

The type of services and the extent of the care required to be provided is outlined in schedule 1 of the Support Services & Care Service Agreement and item 13 of Schedule 1 of the Lease Agreement (attachment 4 of the Village Contract). You provided a care plan for one of the residents.

The care services available include:

• Personal care (e.g. showering and dressing);

• Continence management;

• Nutrition and hydration assistance (e.g. assistance with eating and drinking);

• Communication assistance; and

• Mobility assistance.

The support services available include:

• Restaurant service (in addition to the compulsory meals);

• House cleaning; and

• Maintenance services (an additional administration fee applies).

At a minimum, residents will be provided with Basic Level Care, which includes the following care and support services:

• Monitoring personal hygiene, nutrition, mobility, continence and cognitive capability;

• Conducting assessments, and in consultation with resident and family develop individualised care plans by a registered nurse;

• Maintenance of the mobility and falls prevention program, daily exercise program, emergency responses and first aid, and social participation and activities programs;

• Management of medical and allied health professional referrals; and

• Up to thirty (30) minutes of carer provided services.

General Services

The general services provided include:

• Laundry services

The requirement for the Operator to provide heavy laundry services is not expressly stated in the Village Contract.

However, list of care services available (item 13 of Schedule 1 to the Village Contract) includes 'Housekeeping duties including washing and ironing'.

The Care Plan provided for one of the residents allocates 10 minutes per week for 'Weekly washing and ironing'.

• Daily meals (breakfast, morning tea and dinner)

The requirement for the Operator to provide daily meals is not expressly stated in the Village Contract.

However, you provided a separate document (Retirement Village Meals Provision) for one of the residents, whereby the Operator provides the meals (breakfast, morning tea and light dinner) to the resident and the resident acknowledges that the meals are available from the Operator.

• Access to a registered nurse and / or enrolled nurse 24 hours a day;

• 24 hours a day emergency call system access;

• Assistance with arranging medical and nursing services;

• Access to the various communal facilities; and

• Administration and maintenance of the Aged Care Facility.

Relevant legislative provisions

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

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

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

Reasons for decision

In this reasoning, unless otherwise stated,

• all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

• all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act

Under section 58-10 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 managing controller over a number of assets including those of Entity A. Accordingly, as a controller 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 A (Controller appointed) is an incapacitated entity.

To the extent that you are exclusively responsible for the supplies made by Entity A (Controller Appointed), you will have exclusive responsibility for the GST consequences of the supplies and acquisitions from ddmmyyy.

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.

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 a retirement village.

Serviced apartments

A serviced apartment is defined in section 195-1 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.

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

Requirement (a) - 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; (item 2.1 Services)

(ii) the services set out in item 3.8 (nursing services) of Part 3 of that Schedule; and (item 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 195-1.9

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 items 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. 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) - One responsible person within proximity of the apartment.

Paragraphs 37 and 38 state:

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 residents have access to both a registered nurse (RN) and or an enrolled nurse (EN).

Requirement (c) - common corridor.

Paragraph 40 of GSTR 2012/3 states:

40. A common corridor required by paragraph (c) of the definition of serviced apartment in section 195-1 includes internal passageways that connect all of the apartments in a single complex of apartments. A common corridor does not include covered or uncovered passageways that connect an apartment to another apartment that is outside of the building. It also does not include pathways and roads, including pathways and roads connecting groups of apartments with other groups of apartments, within the retirement village…

A 'common corridor' for the purposes of paragraph (c) of the 'serviced apartment' definition, read purposively in context, includes a covered walkway that provides an access link between apartments in a complex that (A) may be external to the building where that is necessary, (B) has a functional purpose of facilitating provision of item 2.1 or 3.8 services to residents, and (C) is substantial in the sense of providing adequate protection from weather, darkness and usual hazards.

Stage 1, is made up of XX units. The units are accessed via covered external verandahs. The buildings have lift access and stairs, and also feature a wheelchair lift. From the plans and photos provided, the external verandahs are 'common corridors' for the purposes of paragraph (c) of the definition of 'serviced apartment'. The verandahs on both levels have a functional purpose of facilitating provision of item 2.1 or 3.8 services to residents and providing adequate protection from weather, darkness and usual hazards.

Accordingly, the apartments in Stage 1 meet requirement (c) as they are part of a single complex with a common corridor.

From the plans provided, the apartments in Stage 2 meet requirement (c) as they are part of a single complex with a common corridor.

Requirement (d) - communal dining facility.

From the plans provided, the apartments in Stage 2 meet requirement (d) as there is in the retirement village a communal dining facility that is available for use by the residents of apartments in the retirement village.

As the Stage 1 and Stage 2 apartments meet requirements (a) to (d), they are serviced apartments.

Residential Setting

Under section 38-25(3A) services provided to a resident of a retirement village are taken, for the purposes of paragraph (3)(a), to be provided in a residential setting 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.

Services to residents of Stage 1 and Stage 2 apartments will be provided in a residential setting if 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.

Written agreement in force

Meals

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.

'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. '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.

The requirement for the Operator to provide daily meals is not expressly stated in the Village Contract.

However, you provided a separate document (Retirement Village Meals Provision) for one of the residents, whereby the Operator provides the meals (breakfast, morning tea and light dinner) to the resident and the resident acknowledges that the meals are available from the Operator.

Laundry services

The requirement for the Operator to provide heavy laundry services is not expressly stated in the Village Contract.

However, the list of care services available (in the Schedule to the Village Contract) includes 'Housekeeping duties including washing and ironing'.

The Care Plan provided for one of the residents allocates xx minutes per week for 'Weekly washing and ironing'.

Where 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 a particular apartment, services supplied to the residents of the particular apartment will be supplied in a residential setting.

Paragraph 38-25(3)(b)

The care and personal 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 )

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, all residents are assessed for care needs prior to entering the Retirement Village and are reassessed on a regular ongoing basis. The assessments are completed by an 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 2.1 or 3.8 services.

Therefore, your supply of care and personal services to a resident will be GST free where:

• the resident has been assessed as requiring the 2.1 or 3.8 services, and

• there is in place 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 particular apartment.

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.

Therefore, your supply of accommodation to a resident will be GST free where:

• the resident has been assessed as requiring the 2.1 or 3.8 services, and

• there is in place 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 particular apartment.

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, the supply of general services to residents will be GST free where:

• the resident has been assessed as requiring the 2.1 or 3.8 services, and

• there is in place 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 particular apartment.

Input taxed supplies

The supply of care and personal services, accommodation and general services to residents will not be GST free where:

• the resident has not been assessed as requiring the 2.1 or 3.8 services, or

• there is not in place 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 particular apartment.

In these circumstances, the supplies will be input taxed.