Edited version of private advice

Authorisation Number: 1051603995038

Date of advice: 11 November 2019

Ruling

Subject: GST and Residential Care Services and Accommodation, and a refund of GST

Question 1

Are the residential care services and accommodation supplied to residents of the care facility GST-free supplies under section 38-25 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Answer:

Yes, the residential care services and accommodation are GST-free under section 38-25.

Question 2

Are the residential care services and accommodation supplied to residents of the care facility GST-free supplies under section 38-25 of the GST Act?

Answer:

Yes, the residential care services and accommodation are GST-free under section 38-25.

Question 3

Are the residential care services and accommodation supplied to residents of the care facility GST-free supplies under section 38-25 of the GST Act?

Answer

Yes, the residential care services and accommodation are GST-free under section 38-25.

Question 4

Are the residential care services and accommodation supplied to residents of the care facility GST-free supplies under section 38-25 of the GST Act?

Answer

Yes, the residential care services and accommodation are GST-free under section 38-25.

Question 5

If the residential care services and accommodation are GST-free, does section 142-10 of the GST Act apply to deny a refund of GST on those GST-free supplies?

Answer

No, section 142-10 does not apply to deny a refund for the excess GST.

Question 6

For any period in which the entities are eligible to treat services as GST-free does the four year period of review apply to allow amendments of any applicable business activity statements?

Answer

Under section 155-50 of Schedule 1 to the Taxation Administration Act 1953 provided that you have lodged a private ruling application during the period of review for a particular assessment, the Commissioner can amend the assessment at any time to give effect to the private ruling decision.

Relevant facts and circumstances

The entities are not approved providers under the Aged Care Act 1997.

Care and accommodation services are provided at care facilities operated by the entities.

The entities are supported residential facilities (SRF) under the Supported Residential Facilities Act 1992 (SRF Act).

Copies of relevant documents were provided.

Residents' fees are capped as a percentage of their income.

A "Resident Agreement" is entered into by residents.

Entry requirements for the care facilities are not restricted to those aged 55 and over.

The fee is a packaged amount paid for by the resident.

You provided the figures for the total GST refund claim.

Relevant legislative provisions

A New Tax System (GST) Act 1999 subsection 38-25(1)

A New Tax System (GST) Act 1999 subsection 38-25(2)

A New Tax System (GST) Act 1999 subsection 38-25(3)

A New Tax System (GST) Act 1999 subsection 38-25(4)

A New Tax System (GST) Act 1999 section 142-10

A New Tax System (GST) Act 1999 Division 142

Reasons for decision

Unless otherwise specified, all references are to the GST Act.

Under section 38-25, certain supplies of residential care services are GST-free.

Under subsection 38-25(1) a supply of services is GST-free if, among other things, the supplier is an approved provider within the meaning of the Aged Care Act 1997.

As none of the entities are approved providers under the Aged Care Act 1997, subsection 38-25(1) does not apply to their supplies of residential care.

Where an entity receives government funding in connection with the supply of residential care services, subsection 38-25(2) may apply. Subsection 38-25(2) provides that a supply of services is GST-free if:

(d) the services are provided to one or more aged or disabled people, and

(e) 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

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

The entities operate provide accommodation and care services to people who are aged and/or disabled.

The Aged Care Minister has made a determination for the purposes of paragraph 38-25(2)(b) of the GST Act, being the A New Tax System (Goods and Services Tax) (GST-free Supply - Residential Care - Government Funded Supplier) Determination 2015 (the 38-25(2) Determination).

We consider that on the information provided, the residential care services supplied are covered by the 38-25(2) Determination.

From the information provided, the entity receives government funding in respect of the care services for some residents. For this reason the supply of care services by the entity to these residents are GST-free under subsection 38-25(2).

The accommodation supplied to these residents is also GST-free under subsection 38-25(4).

With regard to the supplies of residential care services and accommodation to the other residents of the entities, subsection 38-25(2) will apply where the entity receives government funding in connection with supplies to those residents. Where this is the case, the accommodation supplied to these residents is also GST-free under subsection 38-25(4). Where no government funding is received, subsection 38-25(3) may apply.

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 assistance) of Part 2 of that Schedule, or

(ii) item 3.8 (nursing services of Part 3 of that Schedule).

The entities provide accommodation and care services to people who are aged and/or disabled.

The term "residential setting" is not defined in the GST Act, however the Commissioner's view on the meaning of the term is set out in GSTR 2012/3. We consider that the care facilities are providing the care services in a residential setting as per the Commissioner's view.

The Aged Care Minister has made a written determination for the purposes of paragraph 38-25(3)(b), being the A New Tax System (Goods and Services Tax) (GST-free Supply - Residential Care - Non-government-Funded Supplier) Determination 2015 (the 38-25(3) Determination).

Section 6 of the 38-25(3) Determination provides that for the purposes of paragraph 38-25(3)(b), the care and services specified in Part 2 of Schedule 1 to the Quality of Care (QOC) Principles, that are supplied in the circumstances set out in subsection 4, are services of a kind covered by Schedule 1 to the QOC Principles.

The 38-25(3) Determination states that the following requirements must be met for the services to be covered by Schedule 1 to the QOC Principles:

·        the resident has a continuing need for the services mentioned in item 2.1 or 3.8 of Schedule 1 to the QOC, and

·        the services are supplied, under a written agreement with the supplier, as a package made up of:

·        the services mentioned in item 2.1 or 3.8, and

·        the other services mentioned in Schedule 1 that are needed by the resident, and

·        accommodation; and

·        the charges for services and for accommodation are payable to the same entity.

Based on the information provided, most of the care facility residents would likely have a continuing need for the services mentioned in item 2.1 (item 3.8 lists nursing service which is not applicable in this case). Further, for each care facility, the relevant entity enters into a written Resident Contract with each resident that outlines the services that they will receive consisting of a package made up of the requisite services, together with the residential accommodation. The charges for services and for accommodation are payable to the same entity.

Therefore, the care services will satisfy the requirements of paragraph 38-25(3)(b) on the basis that the residents do have a continuing need for the services mentioned in item 2.1.

Since the care services supplied to those residents include item 2.1 services, paragraph 38-25(3)(c) is met.

Therefore, where no government funding is received the supply of residential care services are GST-free under subsection 38-25(3) provided the resident has a continuing need for, and is provided with at least one of the services mentioned in item 2.1.

The accommodation supplied to these residents is also GST-free under subsection 38-25(4).

Division 142

Division 142 applies to tax periods starting on or after 31 May 2014, and therefore may apply to your claim for a refund of excess GST.

Under Division 142 an entity can self-assess its entitlement to a refund of excess GST by reference to objective criteria, rather than relying on the Commissioner exercising a discretionary power.

Subdivision 142-A will apply where a net amount for a tax period includes 'excess GST'. Subsection 142-5(1) provides that 'excess GST' is an amount of GST that has been taken into account in an assessed net amount, but is not actually payable.

In relation to refunding the excess GST, section 142-10 provides that the excess GST that has been passed on to a recipient is taken to have always been payable, and payable on a taxable supply, until the recipient has been reimbursed for the passed-on GST.

GSTR 2015/1 discusses the meaning of the terms 'passed on' and 'reimburse' for the purposes of determining whether section 142-10 applies to an amount of excess GST. Paragraph 9 of GSTR 2015/1 advises that the object of Division 142 is to ensure that excess GST is not refunded if this would give an entity a windfall gain. Refunding excess GST to a supplier will give it a windfall gain if it has already passed on the excess GST in the price of the supply and not reimbursed the recipient.

When determining whether or not the excess GST has been passed, the following matters should be considered, including whether or not the supplier's circumstances are out of the ordinary:

(v) the manner in which the excess GST arose

(vi) the supplier's pricing policy and practice

(vii) the documentary evidence surrounding the transaction, and

(viii) any other relevant circumstances.

Paragraph 45 of GSTR 2015/1 is relevant to your circumstances. A supplier may seek to demonstrate that GST was not considered when setting the price it charged its customers. Paragraph 46 advises that where a supplier sets its prices to a market that primarily makes non- taxable supplies, this may tend to support a conclusion that the supplier has not passed on the excess GST.

The residents of the care facilities pay a percentage of their income.

As we consider that the excess GST has not been passed on in respect of the residential care and accommodation services, section 142-10 does not apply.

Four year period of review

Under section 155-50 of Schedule 1 to the Taxation Administration Act 1953 provided that you have lodged a private ruling application during the period of review for a particular assessment, the Commissioner can amend the assessment at any time to give effect to the private ruling decision.