Edited version of your written advice

Authorisation Number: 1051353659678

Date of advice: 11 April 2018

Ruling

Subject: Goods and services tax (GST) and child care

Question 1

Are you, an unapproved child care service, supplying GST-free child care when your employee, a registered carer, performs the service?

Answer

No, you as an unapproved child care service are not supplying GST-free child care when your employee, a registered carer, performs the service.

Relevant facts and circumstances

You supply child care services.

You are registered for GST.

You employ carers, who are registered carers under the A New Tax System (Family Assistance) (Administration) Act 1999 (FAA Act), to provide child care services.

Families that need child care services can register their needs with you via your website. You then arrange for your best-suited registered carers to be interviewed and selected by the families.

You are not an approved child care service under the FAA Act.

Relevant legislative provisions

A New Tax System (Family Assistance) (Administration) Act 1999 section 3

A New Tax System (Family Assistance) (Administration) Act 1999 section 194

A New Tax System (Family Assistance) (Administration) Act 1999 section 209

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

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

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-140

A New Tax System (Goods and Services Tax) Act 1999 section 38-145

A New Tax System (Goods and Services Tax) Act 1999 section 38-150

Reasons for decision

Under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) 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.

Child care services

Subdivision 38-D of the GST Act outlines conditions in which a supply of child care and related services can be GST-free. This subdivision comprises 4 categories of child care services:

● Child care provided by a registered carer (section 38-140)

● Child care provided by an approved child care service (section 38-145)

● Other child care services (section 38-150)

● Supplies directly related to GST-free child care service (section 38-155).

The term ‘child care’ is not defined in the GST Act or the FAA Act. The ordinary meaning of ‘child care’ as defined by The Macquarie Dictionary is 'professional superintendence of children'. Similarly, The Oxford Dictionary defines ‘child care’ as ‘[t]he care of children, especially by a crèche, nursery, or childminder while parents are working.'

A supply of child care by a registered carer

Section 38-140 of the GST Act provides that a supply is GST-free if it is a supply of child care by a registered carer (within the meaning of section 3 of the FAA Act).

The wordings of this section require that the supply of child care must be made by a registered carer in order for that supply to be GST-free.

The term ‘registered carer’ is defined in section 3 of the FAA Act to mean an individual approved as a registered carer under Division 2 of Part 8 of that Act.

Section 209 (Division 2 of Part 8) of the FAA Act states that an individual who provides care, or proposes to provide care, for a child or children may apply to be registered, provided that he or she does not:

● operate an approved child care service or a child care service that is receiving financial assistance from the Commonwealth; or

● provide child care under a contract with an approved family day care service or with an approved in-home care service.

A supply of child care by an approved child care service

Section 38-145 of the GST Act provides that a supply is GST-free if it is a supply of child care by an approved child care service (within the meaning of section 3 of the FAA Act) including a supply of an excursion directly related to the supply of the child care by that approved child care service.

Again the wordings of this section require that the supply of child care must be made by the approved child care service in order for the supply to be GST-free.

Section 194 of the FAA Act states that a person who operates, or proposes to operate, the following may apply to have the service approved for the purposes of the family assistance law:

● a centre based long day care service;

● a family day care service;

● an in-home care service;

● an occasional care service; or

● an outside school hours care service.

However, the person cannot apply if they are a registered carer.

The exclusions highlighted in section 209 and section 194 of the FAA Act effectively means that a registered carer (an individual) cannot operate an approved child care service and an approved child care service cannot be a registered carer.

The purposes of excluding one from being the other is discussed in the Explanatory Memorandum to the A New Tax System (Family Assistance) (Administration) Bill 1999. This provision prevents child care rebates being issued twice if a ‘registered carer’ was able to provide child care under contract in an approved child care service. In other words, child care rebates can only be issued once, either to a ‘registered carer’ or to an ‘approved child care service’.

A supply of child care by a supplier eligible for funding

Section 38-150 provides that a supply is GST-free if it is a supply of child care by a supplier that is eligible for funding from the Commonwealth under guidelines made by the Child Care Minister.

This provision creates a third tier for supplies of child care that fall outside those supplied by a ‘registered carer’ in section 38-140 or an ‘approved child care service’ in section 38-145 and delegates powers to the Child Care Minister to determine whether certain supplies of child care may be GST-free.

Similarly, the text in this provision requires that the supplier who is eligible for funding from the Child Care Minister must be the one making the supply of child care in order for the supply to be GST-free.

This brings a consistency between all the three provisions (section 38-140, section 38-145 and section 38-150) and supports the legislative intention that in order for a supply of child care to be GST-free under subdivision 38-D of the GST Act, it must be supplied by either a registered carer, an approved child care service or a supplier eligible for funding from the Child Care Minister.

In this case, you are contracted by families to supply child care services to them. The child care services are provided by your employees whom are registered carers. Although it is your employees that are performing the child care services to the families, they are doing so based on the employment contracts between them and you. Thus, there is a supply between you and an employee of yours as governed by the employment contract; that is they agree to provide child care service to your customers. However for the GS T purposes, the child care service that your customers received is a supply made by you (as a supplier) to your customers (as recipients).

In order for this supply of child care service to be GST-free, section 38-145 of the GST Act must be satisfied.

Section 38-145 requires the supplier to be an ‘approved child care service’. As you are not an approved child care service this section is not met. Thus, your supply of child care service is not GST-free.

Taxable supply

As your supply of child care service is not GST-free, it would be taxable if all the requirements of section 9-5 are met.

In this case, you are registered for GST so paragraph 9-5(d) is satisfied. You receive monetary payments for your child care service so your supply is for consideration. Hence, paragraph 9-5(a) is satisfied. Your supply is made as part of the child care enterprise you carry on and takes place in Australia (indirect tax zone). Thus, paragraphs 9-5(b) and (c) are satisfied. As a result, your supply of child care is taxable as all the requirements of section 9-5 are met.