Edited version of your written advice

Authorisation Number: 1012920018859

Date of advice: 22 December 2015

Ruling

Subject: GST

Question

Is the supply of the specified home care services under your arrangement with a specified government body GST-free if the home care services are paid for out of funds received from a specified government funded programme?

Answer

Yes, the supply to the government body is GST-free.

Relevant facts and circumstances

You provide home care services directly to the homes of consumers who are frail or a person who has a disability, lives at home and would, in the absence of the provision of the home care services directly to their residence, be at risk of prematurely or in appropriately needing long term care in hospital or other institution or residential care.

The cost of the provision of home care services is paid for by the government body from a government funded programme.

The government body enters into a specified agreement with the consumer, which sets out care and services that the consumer can access under the programme. Once the government body and the consumer have an agreement in place, the government body is able to commence claiming the government subsidy for the package. This 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.

You are advised by the government body which clients are to receive the home care services. The government body pays you a service fee.

You do not receive a subsidy under the Aged Care Act 1997 or the Home and Community Care Act 1985.

You provided a copy of the agreement between you and the government body.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 Section 9-40

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

A New Tax System (Goods and Services Tax) Act 1999 Section 38-60

A New Tax System (Goods and Services Tax) Act 1999 Section 195-1

Income Tax Assessment Act 1997 Section 995-1

Summary

The supply of the home care services under your arrangement with the government body is GST-free if the home care services are paid for out of funds received from the specified government funded programme.

Reasons for decision

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

Section 9-5 of the GST Act states:

You make a taxable supply if:

(a) you make the supply for *consideration, and

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

(c) the supply is *connected with the indirect tax zone; and

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

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

(* denotes a defined term in the GST Act.)

The supply of home care services under your arrangement with the government body satisfies the requirements of paragraphs 9-5(a), 9-5(b), 9-5(c) and 9-5(d) of the GST Act as follows:

• the supply is for consideration

• the supply is made in the course of your enterprise

• the supply is connected with Australia, and

• you are registered for GST.

Therefore, the supply of the home care services is taxable to the extent that the supply is not input taxed or GST-free.

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

Section 38-30 of the GST Act deals with the GST-free supply of home care services and it states:

(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' is defined in section 195-1 of the GST Act to have the meaning given by section 45-3 of the Aged Care Act 1997 which provides that 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.

The supply of the home care services to an aged or disabled person by a government funded supplier is GST-free where the requirements of subsections 38-30(1), 38-30(2) or 38-30(4) of the GST Act are met.

In this case, you have a service agreement with the government body under which you are to supply home care services to the government body's clients. The government body will notify you which consumers are to receive the home care services. For providing this service to the government body, the government body pays you a service fee.

The government body enters into a specified agreement with the consumer, which sets out care and services that the consumer can access under the programme. Once the government body and the consumer have an agreement in place, the government body is able to commence claiming the government subsidy for the package. This 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.

On the information provided, you do not receive a subsidy under the Aged Care Act 1997 or the Aged Care (Transitional Provisions) Act 1997 for your provision of the home care services. Therefore, you do not satisfy the requirements of subsection 38-30(1) of the GST Act.

Furthermore, you do not receive funding under the Home and Community Care Act 1985. Therefore, you do not satisfy the requirements of subsection 38-30(2) of the GST Act.

As stated earlier, under subsection 38-30(4) of the GST Act, the supply of care is GST-free if the following requirements are met:

a) the supplier receives funding from the Commonwealth, a State or a Territory in connection with the supply, and

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

The Aged Care Minister has made the GST-free Supply (Care) Determination 2000 (Care Determination). The Care Determination provides that for the purposes of paragraph 38-30(4)(b) of the GST Act, the supply of care mentioned in Schedule 1 to a targeted person is similar to a supply that is GST-free because of subsection 38-30(2) of the GST Act. Included in Schedule 1 to the Care Determination is the provision of home care services that you provide.

It is accepted that the government body meets the requirements of paragraph 38-30(4)(a) of the GST Act and that the payment received from the government body is 'funding' for the purposes of the provision of the home care services.

However, the supply to the government body is not 'care' as care can only be supplied to an individual - a business entity cannot be supplied with 'care'.

Despite this, subsection 38-60(3) of the GST Act provides:

If:

(a) a supply is a supply of a service to an *Australian government agency; and

(b) the service is the supplier making one or more other supplies of goods or services to an individual; and

(c) at least one of the other supplies is wholly or partly *GST-free under this Subdivision;

the first-mentioned supply is GST-free to the extent that the other supplies mentioned in paragraph (b) are GST-free under this Subdivision.

However, subsection 38-60(4) of the GST Act provides a supply is not GST-free (to any extent) under this section if the supplier and the recipient have agreed that the supply, or supplies of a kind that include that supply, not be treated as GST-free supplies.

An Australian government agency is defined pursuant to section 195-1 of the GST Act and section 995-1 of the Income Tax Assessment Act 1997 as:

(a) the Commonwealth, a State or a Territory; or

(b) an authority of the Commonwealth, a State or a Territory.

It is accepted that the government body is an Australian government agency.

Under your agreement with the government body, you are making the supply of the service to the government body of making a supply of home care services to an individual, noting that you are advised by the government body which clients are to receive the services.

The same reasoning as stated previously in respect of subsection 38-30(4) of the GST Act applies with the exception that the underlying supply you make to the individual is a supply of 'care' for the purposes of that provision.

Accordingly, the supply to the government body is GST-free to the extent that the supply to the individual is GST-free.

Provided you and the government body have not agreed for the supply not to be treated as GST-free, the supply of the services under your arrangement with the government body is

GST-free under section 38-60 of the GST Act.