Edited version of your written advice

Authorisation Number: 1012893000094

Date of advice: 29 January 2016

Ruling

Subject: GST and Home Care

Question 1

(a) Does the Commissioner of Taxation (Commissioner) accept that the home care subsidy payable under Part 3.2 of the Aged Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 is paid to Entity Z, as the supplier of home care services?

(b) Does the Commissioner accept that the government funding in respect of home and community care services (HACC) is paid to Entity Z as the supplier of the care services?

Answer

(a) Yes, the Commissioner accepts that the home care subsidy is paid to Entity Z, as the supplier of the home care services to the consumer.

(b) Yes, the Commissioner accepts that the government funding is received by Entity Z as the supplier of the HACC services to the consumer.

The greater flexibility and choice given to the care recipient under the Consumer Directed Care approach does not change this.

Question 2

(a) Is the supply of home care services by Entity Z to consumers GST-free where Entity A receives a home care subsidy under Part 3.2 of the Aged Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 for the care?

(b) Is the supply of the home care services by Entity A to consumers GST-free where Entity Z receives government funding in connection with the supply?

Answer

(a) Yes, the supply of the home care service will be GST-free under subsection 38-30(1) of the GST Act.

(b) Yes, the supply of the home care service will be GST-free under subsections 38-30(2) or (4) of the GST Act.

Question 3

Where Entity Z supplies home care services of a kind covered by Item 2.1 of Part 2 of Schedule 1 to the Quality of Care Principles (item 2.1 daily living activities assistance) to a consumer and the services are not government funded to any extent, are the services GST-free?

Answer

Yes. Non-government funded services supplied by Entity Z to consumers, that are of a kind covered by item 2.1 (daily living activities assistance) are GST-free under subsection 38-30(3) of the GST Act.

Question 4

Where Entity Z is engaged by another Home Care Service Provider to deliver home care services of a kind covered by Item 2.1 (daily living activities assistance) to a consumer, will Entity Z's supply to that other entity be a GST-free supply?

Answer

No, the supply by Entity Z to another Home Care Provider (Entity A) is not a supply of home care services that is GST-free under subsection 38-30(3) of the GST Act. Rather, it is a supply of contracted services that is taxable, if the further requirements of section 9-5 of the GST Act are met.

Relevant facts and circumstances

Entity Z (You) is registered for GST.

Entity Z is a not-for-profit entity dedicated to delivering high quality aged and community care services to the community.

Entity Z is registered as a charity with the Australian Charities and Not-for-Profits Commission (ACNC).

Entity Z is registered as a 'home care provider' pursuant to the Aged Care Act 1997 and the Home and Community Care Act 1985 and supplies home and community care services to aged and disabled people.

Home care services

The Commonwealth Government has responsibility for the Home Care Packages Program (HCPP):

• To assist people to remain living in their home.

• To enable consumers to have a choice and flexibility in the way that the consumer's aged care and support is provided at home.

There are four levels of Home Care Packages:

• Home Care Level 1 - a package to support people with basic care needs.

• Home Care Level 2 - a package to support people with low level care needs.

• Home Care Level 3 - a package to support people with intermediate care needs.

• Home Care Level 4 - a package to support people with high care needs.

In order to access a Home Care Package, a person needs to be assessed and approved as eligible for home care by an Aged Care Assessment Team (ACAT) and then offered a Home Care Package by a home care provider.

Entity Z is paid a subsidy in respect of a HCPP package monthly in advance through the Department of Human Services' aged care payment system and calculated on a daily basis where there is an approved consumer receiving care through a Home Care Package.

In addition to a subsidy a consumer may be required to make a contribution to their care (basic daily care fee) based on their income. The subsidy is reduced according to the basic daily care fee payable. The income testing arrangements and subsidy reduction are administered by the Department of Human Services. These government-endorsed payments payable by a consumer are referred to as a Co-payment.

Consumer Directed Care

Consumer Directed Care (CDC) is an additional framework to assist Home Care Service Providers and consumers to maximise the amount of choice and flexibility in the delivery of Home Care Packages. From 1 July 2015 all Home Care Packages operate on a CDC basis.

Home Care Agreement

For all Home Care Packages, the Home Care Service Provider must execute a Home Care Agreement (Agreement) before the Home Care Package commences.

Home care services as part of a Home Care Package

The services offered to consumers as part of a Home Care Package are intended to be flexible and consistent with consumer needs.

However, in general, the care services provided as a part of a Home Care Package would include:

• ln-home care services such as:

• medication management

• showering and toileting

• assistance with movement around the house

• assistance with chores

• meal preparation

• shopping, and

• transport to and from medical appointments.

• Meal services to either assist in preparing meals or the provision and delivery of meals (where the client has contributed to the cost of the meal).

• Social activities such as organised movie sessions, picnics, friendship groups and theatre outings.

• Respite services to find an in-home or centre respite service solution to suit the consumer's needs.

• In-home nursing services either as part of packaged care or on-call when assistance is required.

• Pastoral care to assist with grief counselling, prayers and other religious needs (e.g. transport to / from church).

• Allied Health Services such as exercise sessions, physiotherapy, podiatry, occupational therapy and hydrotherapy.

• Home and garden services such as the arrangement of professional house cleaners and gardeners.

• Other services linked to the delivery of care such as travel companionship, pet care support and cultural activities.

Entity Z also offers a wide range of supplies, equipment and aids to assist with care. These supplies may include medical aids, mobility devices, slings and lifts, emergency devices and bathroom bedding aids.

Notwithstanding that Entity Z, as a Home Care Service Provider, is encouraged to be flexible, the following provides a non-exhaustive list as to when Entity Z might reasonably decline a request from a consumer:

• The proposed service may cause harm or pose a threat to the health and / or safety of the consumer or Entity Z staff.

• Situations in which a consumer may want to go without necessary clinical services (resulting in a possible compromise of their health and or wellbeing) in order to save for a more expensive non-clinical service.

• The cost of the service / item is beyond the scope of the available funds for the package.

• Entity Z would not be able to comply with its responsibilities under aged care legislation or other Commonwealth or state / territory laws.

• Entity Z does not offer the particular service and has been unable to broker an acceptable sub-contracting arrangement.

• The service is an 'excluded item' and cannot be included in a Package at any level:

• use of the package funds as a source of general income for the consumer

• purchase of food except as part of enteral feeding requirements or where the consumer has contributed towards the cost of the meal

• payment for permanent accommodation, including assistance with home purchase mortgage payments or rent

• payment of home care fees

• payment of fees or charges for other types of care funded or jointly funded by the Commonwealth Government

• home modifications or capital items that are not related to the consumer's care needs

• travel and accommodation for holidays

• cost of entertainment activities such as club memberships and tickets to sporting events

• payment for services and items covered by the Medicare Benefits Schedule or the Pharmaceutical Benefits Scheme

• gambling activities, and

• illegal activities.

All Home Care Packages delivered on a Consumer Directed Care (CDC) basis must have an individualised budget and the consumer must be provided with a monthly statement of income and expenditure, including the balance of funds. The Commonwealth Government subsidy for a Home Care Package under the Home Care Packages Program (HCPP) is paid to Entity Z and not directly to the consumer. Entity Z is the fund holder and will administer the budget in a transparent manner, meeting quality and accountability requirements.

The budget should clearly identify the total funds available under the package, which would comprise:

• The government subsidy for the package level as indicated on the Department of Social Services' website including relevant supplements such as Dementia and Cognition, Veterans', Oxygen, Enteral Feeding and Top-up Supplements.

• Any consumer contribution / basic fee.

• Any unexpended funds carried over from the prior periods.

The Department of Human Services advises the maximum fees payable, however, Entity Z and the consumer are able to negotiate lower fees should they choose.

Entity Z cannot use the government subsidy to meet the consumer's income tested care fee. That is, the Home Care Service Provider and consumer cannot select a lower level of care and services to match the value of the government subsidy paid.

Entity Z is required to clearly demonstrate the balance between the government subsidy and actual expenditure, as unutilised funds will need to be carried over to a new period.

Individualised budget - Home Care Agreement

Government funding provided to Entity Z for CDC delivered under the home care package programme is delivered on a package-level (pooled) basis. Any fees paid by a consumer go towards their home care package as a whole and not specifically to any one service.

Entity Z calculates the Total Package Funding using a care plan tool for a four week care plan as follows:

• Government Funding received:

• Government Subsidy (Home Care Level)

• Any Government Supplements

• Client Agreed Additional Contribution:

• Client Income Tested Fee

• Client Co-payment / Basic Fee

• Client Agreed Additional Contribution

Entity Z enables the consumer to apply the government funding and any additional payments to the package as a whole.

Home care services not part of a Package

Entity Z also provides basic maintenance and support services to people who are frail or aged and to younger people living with a disability who do not yet need higher levels of care at home to continue living in their communities under the Home and Community Care (HACC) program. HACC services may include:

• social activities in a community-based setting

• transport to shopping or appointments

• domestic assistance with household tasks such as cleaning, clothes washing and ironing

• personal care such as assistance with bathing or showering, dressing, hair care and toileting

• minor general repair and care of the consumer's house or yard (e.g. changing light bulbs and replacing tap washers or lawn mowing)

• installing safety aids in homes, such as alarms, ramps and support rails

• the attendance of a qualified nurse at the consumer's home for simple tasks (e.g. dress a wound or provide continence advice), and

• delivery of allied health services in individual or group settings.

In relation to a HACC program, the consumer will enter into an agreement with Entity Z, with the agreement (HACC program agreement) detailing the home care services to be provided.

Where consumers access additional services through the HACC program, the consumer would be expected to pay any consumer fees charged for the HACC services. A consumer cannot use a subsidy received in respect of a HCPP Package to pay consumer fees charged for HACC services.

Private Funding Arrangements

Separately to the provision of home care services under the auspices of the HCPP, Entity Z also provides home care services by private arrangement. Services provided by private arrangement are not government-funded and do not require an ACAT assessment. The types of services offered to consumers by Entity Z under a private package are negotiated between the parties, but are generally consistent with the types of services under a Home Care Package.

Where a consumer is part of either the HCPP or HACC program, but their program does not extend to a particular item due mainly to the budget being exhausted, the consumer and Entity Z may agree that Entity Z will provide the item in return for a fee (Private Amount). All private payments in respect of these arrangements are paid for directly by the consumer (or their carer).

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 Section 38-30.

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 terms marked by an asterisk are defined terms in the GST Act

• all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on ato.gov.au

Where we use the following terms:

• 'Home Care Service Provider' who 'makes', 'made' or 'is making' a supply: we mean an entity that has the contractual obligation to make the relevant supply.

• 'Home Care Service Provider' who 'provides', is 'providing', or has 'provided' care services: we mean the entity that is delivering the services to the consumer, but does not have a contractual agreement with the consumer.

Introduction

For a supply to be GST-free under section 38-30 it must satisfy one of the following subsections:

(1) A supply of *home care is GST-free if home care subsidy is payable under Part 3.2 of the Aged Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 to the supplier for the care.

(2) A supply of care is GST-free if the supplier receives funding under the Home and Community Care Act 1985 in connection with the supply.

(3) A supply of *home 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).

'Home care' has the meaning given by section 45-3 of the Aged Care Act 1997 which provides:

Home 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.

Is the government subsidy or funding received by Entity Z?

One of the requirements for GST-free home care under subsection 38-30(1) is that the supplier receives a subsidy under Part 3.2 of the Aged Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 in relation to the respective supply. Similarly, it is also a requirement under subsections 38-30(2) and 38-30(4) that the supplier receives government funding in relation to the respective supply of home and community care (HACC) services.

Entity Z receives a subsidy under Part 3.2 of the Age Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 or government funding for a HACC service and supplies services:

• directly to consumers, or

• contracts another Care Provider to deliver the services to the consumer.

In these circumstances, it is Entity Z that receives the subsidy for the supply of the home care services.

CDC is not a type of home care package by itself, but is the approach used to provide home care services to give greater flexibility and choice to the care recipient. Home care packages are paid by the Australian Government to the Care Service Provider that supplies care and services. The Consumer Directed Care approach does not impact on 'who' receives the funding.

Government subsidised/funded services

Subsections 38-30(1), (2) and (4) state:

(1) A supply of *home care is GST-free if home care subsidy is payable under Part 3.2 of the Aged Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 to the supplier for the care.

(2) A supply of care is GST-free if the supplier receives funding under the Home and Community Care Act 1985 in connection with the supply.

(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).

'Home care' has the meaning given by section 45-3 of the Aged Care Act 1997 which provides:

Home 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.

We will consider the various scenarios below.

Scenario 1 - Subsection 38-30(1): Entity Z receives a government subsidy for the care (fully subsidised services)

Entity Z supplies home care services as part of a Home Care Package to a consumer pursuant to a Home Care Agreement between Entity Z and the consumer. The consumer makes no co-payment or private payment to Entity Z for the care.

Where Entity Z receives a home care subsidy under Part 3.2 of the Aged Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 for a Home Care Package (package of personal care services and other personal assistance) under which Entity Z makes supplies to a consumer pursuant to a Home Care Agreement, the supply is GST-free under subsection 38-30(1).

Scenario 2 - Subsections 38-30(2) and (4): Home and Community Care Act Program (fully government funded services)

Entity Z supplies home care services for which it receives HACC program funding from the government pursuant to a HACC agreement between Entity Z and the consumer.

Where Entity Z receives government funding for a home care service that it supplies to a consumer pursuant to a HCAA agreement, the supply will be GST-free under subsection 38-30(2) or 38-30(4).

Scenario 3 - Subsections 38-30(1), (2) and (4): Partly Government funded care services - consumer co-payment has not been exhausted

Entity Z supplies home care services as part of a Home Care Package to a consumer pursuant to a Home Care Agreement between Entity Z and the consumer. The consumer is required to make a co-payment to Entity Z in relation to those services and the funding for those services has not been exhausted.

ATO Interpretative Decision ATO ID 2003/13 Goods and Services Tax GST and supply of community care for a fee (ATO ID 2003/13) provides that an entity makes a GST-free supply under subsection 38-30(1) when it supplies care services, in respect of which the entity receives a community care subsidy, to an aged person in their own home and charges the aged person a fee for those services.

If pursuant to the Home Care Agreement with a consumer, Entity Z receives a co-payment from the consumer in relation to government funded services supplied under a Home Care Package, that payment will form part of the consideration for the GST-free home care services supplied under subsection 38-30(1).

This would also be the case where pursuant to the Home Care Agreement with a consumer, Entity Z receives a private payment (Client Agreed Additional Contribution) from the consumer in relation to the pooled package of government funded services supplied under a Home Care Package.

Subsection 38-30(1) only requires that the supplier receives a home care subsidy under Part 3.2 of the Aged Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 in relation to the supply. Therefore, where the supply is GST-free, any co-payment or private payment (Client Agreed Additional Contribution) made by the consumer for that supply will also be for the GST-free supply.

Similarly, where Entity Z receives a co-payment from the consumer in relation to government funded HACC services that it supplies, that payment will also form part of the consideration for the GST-free supply of home care services supplied under subsection 38-30(2) or (4).

[note: This will not be the case if it is a private payment for services under a HACC agreement for which the government funding has been exhausted. See scenario 4 below.]

Scenario 4 - Government subsidy or individual funding is exhausted - consumer private payments (private amount)

If pursuant to the Home Care Agreement with a consumer, Entity Z receives a private payment from the consumer in relation to home care services, that payment may be GST-free if the supply of home care services is provided to one or more aged or disabled people and the services 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:

Alternatively, the supply may be GST-free under subsection 38-10(1) which states:

A supply is GST-free if:

(a) it is a service of a kind specified in the table in this subsection, or of a kind specified in the regulations; and

(b) the supplier is a *recognised professional in relation to the supply of services of that kind; and

(c) the supply would generally be accepted, in the profession associated with supplying services of that kind, as being necessary for the appropriate treatment of the * recipient of the supply.

Health services
Item	Service
1	Aboriginal or Torres Strait Islander health
2	Acupuncture
3	Audiology, audiometry
4	Chiropody
5	Chiropractic
6	Dental
7	Dietary
8	Herbal medicine (including traditional Chinese herbal medicine)
9	Naturopathy
10	Nursing
11	Occupational therapy
12	Optometry
13	Osteopathy
14	Paramedical
15	Pharmacy
16	Psychology
17	Physiotherapy
18	Podiatry
19	Speech pathology
20	Speech therapy
21	Social work

The supply will not be for a GST-free supply under subsections 38-30(1), (2) or (4) where the payment is for services for which the allocated funding (home care subsidy) or individual funding has been exhausted.

This is because the requirement under subsections 38-30(1), (2) and (4) that the supplier receives a government subsidy or funding in relation to the supply is not satisfied. Where the funding subsidy or individual funding has been exhausted and the consumer pays for additional services on a private basis, then there is no funding or subsidy or funding received in relation to those 'additional' services. However, whether the situation is an exhaustion of funding or subsidy or in fact results in a co-payment depends on the contracts and arrangements entered into.

Non-government subsidised/funded services

Scenario 5 - Subsection 38-30(3): Non-government funded services - Item 2.1 daily living activities assistance

Subsection 38-30(3) states:

A supply of *home 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.

Part 2 of Schedule 1 of the Quality of Care Principles 2014 states the following items of daily living activities assistance (Item 2.1):

The Charities consultative committee resolved issues document (search for 'QC 27139' on the ATO website) lists the following services that are not covered by Item 2.1:

• assistance with housework

• assistance with gardening

• meal preparation services

• grocery shopping for individuals

• monitoring medication

• rehabilitation services

• assistance with writing cheques, letters, etc

• advocacy services

• provision of social and community activities, such as providing companionship, craft and reading activities to individuals, and

• driving individuals to and from appointments.

Where your home care services are of a kind covered by Item 2.1 (daily living activities assistance) and are supplied to aged or disabled people the supply will be GST-free. There is no requirement in subsection 38-30(3) that the supplier receives a subsidy or funding from the government in respect of the care services you supply.

Where you provide a package of 'non-government funded/subsidised' home care services that includes home care services of a kind not covered by Item 2.1 or that are not otherwise GST-free, then those items will generally be taxable. Where Entity Z supplies a package of care that is partly GST-free and partly taxable, it will be making a mixed supply and it will be necessary to apportion between the GST-free and taxable amounts.

Goods and Services Tax Ruling GSTR 2001/8 Goods and services tax: Apportioning the consideration for a supply that includes taxable and non-taxable parts (GSTR 2001/8) provides methods and examples that you may use to help you work out how to apportion the consideration for a supply that contains separately identifiable taxable and non-taxable parts.

Scenario 6 - Subsection 38-30(3): Entity Z is contracted by another Care Provider to deliver services of a kind covered by item 2.1 (daily living activities assistance) to a consumer

Subsection 38-30(3) of the GST Act states:

38-30(3) A supply of *home 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.

To satisfy the elements of this provision, there must be a supply of 'home care' comprising certain services that are 'provided' to one or more aged/disabled people. In the scenario being considered, Entity Z supplies the service to Entity A of providing the stipulated services to the client of Entity A.

The issue to be resolved is whether the supply Entity Z makes to Entity A is a supply of 'home care'. 'Home care' is defined by reference to the GST Act and the Aged Care Act 1997 as care consisting of a package of personal care services and other personal assistance to be provided to a person who is not being provided with residential care. The term 'care' is defined to mean services, or accommodation and services, provided to a person whose physical, mental or social functioning is affected to such a degree that the person cannot maintain himself or herself independently.

From these definitions, a supply of 'home care' must be made to an individual to support their physical, mental or social functioning. Although the definitions of 'home care' and 'care' referred to above use the term 'provided', we consider that the context of the provisions in the Aged Care Act 1997 shows that the term 'provided' is consistent with the term 'supply' in the GST Act.

On this basis, 'home care' is not supplied to an entity carrying on a business (Entity A) where the supply is a service of providing the home care services to an individual client of that entity (Entity A). In this instance, the entity carrying on the business (Entity A) is not being supplied 'home care' by Entity Z.

Entity Z will accordingly make a taxable supply to Entity A. Assuming that Entity A is registered for GST and acquires the services from Entity Z in carrying on its enterprise, Entity A makes a creditable acquisition under section 11-5 of the GST Act from Entity Z for which it is entitled to an input tax credit.

This view is consistent with paragraph 155 of Goods and Services Tax Ruling GSTR 2006/9 Goods and services tax: supplies (GSTR 2006/9) which states that:

"Under the GST health provisions in Subdivision 38-B, subject to certain exceptions^51A, the supply is only GST-free where an individual receiving that service or specific health treatment is the recipient of that supply. This outcome results from the specific wording in some health provisions, whilst in other provisions it is due to the nature of the services themselves. This means that a GST-free supply of a health service cannot be made to a business entity or a non-profit body."

Business-to-business transactions

Scenario 7 - Entity Z contracts another Care Provider to deliver services to Entity Z's client (consumer)

In contrast to the situation in Scenario 6, Entity Z has the contractual obligation to supply home care services to a consumer and Entity B (other health care provider) will supply a service to Entity Z of providing the stipulated services to the client of Entity Z.

In this situation, Entity B (other health care provider) makes a supply to Entity Z of 'contracted services'. Generally, this supply will be subject to GST under section 9-5 where the other health care provider (Entity B) is carrying on an enterprise and is registered or required to be registered for GST.

Entity Z is entitled to claim input tax credits in relation to the services that it acquires from the other health care provider (Entity B) where the requirements of section 11-5 are met. As Entity Z has the contractual obligation to supply the home care services to the consumer, the supply made by Entity Z to the consumer will be characterised as follows for GST purposes:

Other information:

Further information on other supplies that may be GST-free is available on the ATO website.

Section 38-10 Other health services

For further information search for quick code 'QC 16330' on the ATO website.

Section 38-45 Medical aids and appliances

For further information search for quick code 'QC 16333' on the ATO website.

Section 38-250 Nominal Consideration

For further information search for quick code 'QC 27139' on the ATO website.