Edited version of your written advice

Authorisation Number: 1013109314382

Date of advice: 4 November 2016

Ruling

Subject: GST and home care

Question 1

Where you supply 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 you 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 2

Where you are engaged by another entity (a home care provider that is not an Australian government agency, an insurer or a compulsory third party scheme operator) to deliver home care services of a kind covered by Item 2.1 daily living activities assistance to a consumer, will your supply to that other entity be a GST-free supply?

Answer

No, the supply by you to another entity is not a supply of home care services that is GST-free under subsection 38-30(3) of the GST Act nor is it GST-free under section 38-60 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.

Question 3

Where you deliver home care services to a consumer for which you receive funding from an Australian government agency (the Department) will your supply to the Department be GST-free?

Answer

No, your supply to the Department is not GST-free to any extent under section 38-60(3) of the GST Act.

Rather, it is a taxable supply pursuant to subsection 38-60(4) of the GST Act as under you arrangement with the Department, the supply is not to be treated as a GST-free supply.

Question 4

Where you are engaged by a compulsory third party scheme operator to deliver home care services to a consumer, will your supply to the operator be GST-free?

Answer

Yes, your supply to the operator is GST-free under sections 38-60(2) and 38-60(3) of the GST Act to the extent the services to the consumer are of a kind covered by:

● Item 2.1 daily living activities assistance and you have not agreed with the operator that the supply is not to be treated as a GST-free supply.

● The GST-free Supply (Care) Determination 2000 and you have not agreed with the operator that the supply is not to be treated as a GST-free supply.

Question 5

Where you are engaged by an insurer to deliver home care services to a consumer, will your supply to the insurer be a GST-free supply?

Answer

Yes, your supply to the insurer is GST-free under section 38-60(1) of the GST Act to the extent the services are of a kind covered by Item 2.1 daily living activities assistance and you have not agreed with the insurer that the supply is not to be treated as a GST-free supply.

Relevant facts and circumstances

You are registered for GST.

You provide home care services to elderly and disabled people in their homes.

You are not an approved home care provider for the purposes of the relevant government Home Care Packages Programme and do not receive any government funding.

You receive a small amount of funding for services from an Australian government agency (the Department). This funding received is client specific. You have provided a copy of the funding agreement, which includes the following information in summary:

● The funding is to provide services to people with disability.

● Payment of the funding is subject to the Australian government agency providing you with a Recipient Created Tax Invoice prior to payment.

● The funding includes an amount on account of your GST liability.

You have provided a sample copy of a Recipient Created Tax Invoice (outlining that GST is included).

You do not charge the client fees on top of the funding received from the Australian government agency. All services need to be provided within the funding provided by Australian government agency.

You provide a small amount of services to a compulsory third party scheme operator and other insurers.

Your clients are mainly private fee paying.

The home care services that you provide are:

● Personal care - showering, bathing, grooming and dressing.

● Attendant care

● Complex care - tube feeding, catheter flushing, and bowel care.

● Respite care - domestic care and meal preparation.

● Domestic assistance - cleaning, tidying and housework.

● Social support

● Transport assistance

● Behavioural support

There is an amount of domestic assistance provided along with the home care as those types of care often require further cleaning up.

You provide the same types of services to all types of clients.

You are subcontracted by other entities (mainly Not For Profits) to deliver services to the other entities clients. You do not subcontract any services. You are not subcontracted by any further government entities.

Clients are billed monthly and are sent an invoice / breakdown of services provided.

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 38-30, and

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

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

Question 1

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 you supply a package of care that is partly GST-free and partly taxable, you 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 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.

Question 2

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, you supply 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 you make 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 you.

You will accordingly make a taxable supply to Entity A. Assuming that Entity A is registered for GST and acquires the services from you in carrying on its enterprise, Entity A makes a creditable acquisition under section 11-5 of the GST Act from you 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 which states that:

Under the GST health provisions in Subdivision 38-B, subject to certain exceptions…, 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.

Further, as Entity A is a home care provider that is not an Australian government agency, an insurer or a compulsory third part scheme operator, the supply will not be GST-free under section 38-60.

Question 3

Subsection 38-30(4) provides that 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).

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), the supply of care of a kind mentioned in Schedule1 to a targeted person is similar to a supply that is GST-free because of subsection 38-30(2). Schedule 1 to the Care Determination states the following items of care provided to targeted persons:

It is administratively accepted that the Department is 'a State' and the payment from the Department is funding for the purposes of this provision. However the supply to the Department is not 'care' as care can only be supplied to an individual. A business entity cannot be supplied with care.

Therefore your supplies to the Department do not satisfy the requirements of subsection 38-30(4).

Despite this, subsection 38-60(3) and (4) provides:

Government agencies

(3) 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.

Parties may agree for supply not to be GST-free

(4) However, 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 Department is an Australian government agency.

Under the contract with the Department, you are making the supply of the service of making a supply of goods and/or services to an individual noting that you are notified by the Department which clients are to receive the services.

The same reasoning as stated previously in respect of subsection 38-30(4) 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 Department is GST-free to the extent that the supply to the individual is GST-free.

The supply under your arrangement with the Department would be GST-free under section 38-60 of the GST Act to the extent the services are of a kind covered by the GST-free Supply (Care) Determination 2000 and if you have not agreed with the Department that the supply is not to be treated as a GST-free supply.

However, your arrangement with the Department requires you to treat the supply as taxable. Accordingly, the supply is not GST-free pursuant to 38-60(4).

Therefore, your supply to the Department will be taxable.

Question 4

Subsections 38-60(2), (3) and (4) state:

Compulsory third party scheme operators

(2) If:

(a) a supply is a supply of a service to an *operator of a *compulsory third party scheme; 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:

(i) wholly or partly *GST-free under this Subdivision; and

(ii) made under the compulsory third party scheme;

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

Government agencies

(3) 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.

Parties may agree for supply not to be GST-free

(4) However, 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.

Paragraphs 75C and 75D of Goods and Services Tax Ruling GSTR 2006/10 Goods and services tax: insurance settlements and entitlement to input tax credits provide:

75C. Where an entity makes a supply to an individual that is either wholly or partly GST-free under Subdivision 38-B (the underlying supply), a supply of the service of making the underlying supply by the entity to an operator of a compulsory third party scheme, is GST-free under subsection 38-60(2) to the same extent as the underlying supply.

75D. However, the supplier and the recipient of the supply may agree for a supply not to be treated as GST-free under section 38-60….

Where an operator of a compulsory third party scheme, contracts you to make a supply to a care recipient that is GST-free under subsection 38-30(3) or 38-30(4), you would make a GST-free supply under subsection 38-60(2) provided that the supply you make to the care recipient is made under the compulsory third party scheme and you have not agreed with the operator for the supply not to be GST-free.

In this situation, the reference to subsection 38-30(4) is relevant as the third party scheme operator is also an Australian government agency and its payment to you would constitute funding by the State. Where the operator of a compulsory third party scheme is not an Australian government agency, the supply to that operator will be only GST-free under subsection 38-60(2) to the extent that you to make a supply to a care recipient that is GST-free under subsection 38-30(3) where it is made under the compulsory third party scheme and provided that you have not agreed with the operator for the supply not to be GST-free.

The same reasoning as stated previously in respect of subsection 38-30(3) under Question 1 and subsection 38-30(4) in Question 3 applies to the service you are making to an individual for the operator.

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

The supply under your arrangement with the operator is GST-free under sections 38-60(2) and 38-60(3) of the GST Act to the extent the services are of a kind covered by:

● Item 2.1 daily living activities assistance and you have not agreed with operator that the supply is not to be treated as a GST-free supply.

● The GST-free Supply (Care) Determination 2000 and you have not agreed with the operator that the supply is not to be treated as a GST-free supply.

Question 5

Subsection 38-60(1) states:

Insurers

(1) If:

(a) a supply is a supply of a service to an insurer; 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:

(i) wholly or partly *GST-free under this Subdivision; and

(ii) for settling one or more claims under an *insurance policy of which the insurer is an insurer;

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

…

Parties may agree for supply not to be GST-free

(4) However, 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.

Paragraph 75B of Goods and Services Tax Ruling GSTR 2006/10 Goods and services tax: insurance settlements and entitlement to input tax credits provides:

75B. Where an entity makes a supply to an insured person that is either wholly or partly GST-free under Subdivision 38-B (the underlying supply), a supply of the service of making the underlying supply by the entity to an insurer, in the course of settling insurance claims under an insurance policy (including private health insurance policies and taxable insurance policies) of which the insurer is an insurer, is GST-free under subsection 38-60(1) to the extent that the underlying supply is GST-free. For the purposes of subsection 38-60(1), an operator of a statutory compensation scheme is treated as an insurer and a claim for compensation under the statutory compensation scheme is treated as a claim under an insurance policy….

Where the insurer contracts you to make a supply to a care recipient that is GST-free under subsection 38-30(3), you would make a GST-free supply to the insurer under subsection 38-60(1) provided that the supply you make to the care recipient is for settling one or more claims under an insurance policy of which the insurance company is an insurer and you have not agreed with the insurer for the supply not to be GST-free.

The same reasoning as stated previously in respect of subsection 38-30(3) under question 1 applies to the service you are making to an individual for the insurer.

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

The supply to the insurer is GST-free under section 38-60(1) to the extent the services are of a kind covered by Item 2.1 daily living activities assistance and you have not agreed with the insurer that the supply is not to be treated as a GST-free supply.