Edited version of private advice

Authorisation Number: 1051683154102

Date of advice: 8 July 2020

Ruling

Subject: GST and rental accommodation

Question

Are your supplies of rental accommodation, to clients of a state government entity (government entity), GST-free under section 38-40 of the A New Tax System Goods and Services Tax) Act 1999 (GST Act)?

Answer

Yes, your supplies of rental accommodation, to clients of a government entity, are GST-free under section 38-40 of the GST Act.

This ruling applies from 8 July 2020

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are registered for goods and services tax (GST).

Relevant legislative provisions

A New Tax System Goods and Services Tax) Act 1999 section 38-40

Reasons for decision

Section 38-40 of the GST Act provides:

38-40 Specialist disability services

A supply of services is GST-free if the supplier receives funding under the Disability Services Act 1986 or under a complementary *State law or *Territory law in respect of the services.

Specialist disability services

It firstly needs to be determined if you are providing supplies of specialist disability services by providing accommodation to clients of the government entity. Specialist disability services are not defined in the GST Act. Although not mentioned in the text of section 38-40, the term is referenced in the section heading and therefore is to be read as part of the GST Act. Further, the provision requires that services are provided.

The relevant legislation referred to in the section is The Disability Services Act 1986 (DSA) and that legislation sets out that 'specialist disability services' include (but are not limited to) 'accommodation support services'. Such services are described in the DSA as 'services to assist persons with a disability to maintain or develop suitable residential living arrangements in the community.'

On that basis, specialist disability services include supported accommodation services when referring to the DSA and State Act for the purposes of section 38-40 of the GST Act.

Does the supplier receive funding?

The term funding is not defined in the GST Act. Therefore, we would need to look at the ordinary and natural meaning of the word having regard to the context and purposes, unless the context or subject suggests a specialised meaning.

The government entity invests in units issued by you as a way of providing funding to you for your supply of specialist disability services.

According to Cambridge English Dictionary, the ordinary meaning of 'funding' includes 'money given by a government or organisation for a particular purpose'. Further, it defines the use of 'fund' as a noun as 'an amount saved, collected or provided for a particular purpose'. Similar meanings are found in the Oxford English Dictionary, defining 'fund' used as a noun as a 'sum of money saved or made available for a particular purpose'. We can also look to the definition of the use of 'fund' as a verb, which is 'to provide money for a particular purpose'.

In cases where the word appears before a court, it seems to be prima facie accepted that funding involves some sort of provision of funds for a particular purpose in accordance with the dictionary definition.

The textual consideration suggests that the definition of 'funding' is to be construed generally as any provision of a fund (money) which has the function (in this context) of enabling the recipient (you) to provide accommodation services, with the focus on a particular purpose as required by the DSA and the complementary State law. This may seem to point to a finding that 'funding' should be 'money' and what we have in this case is a purchase of equity by the government entity. However, the government entity is purchasing equity by providing a sum of money on application for trust units in you, and the fact that it is receiving something in return as consideration (the units in you) does not preclude this money from being 'funding received by a supplier' particularly where it has been provided for a particular purpose.

Therefore, 'funding' as used in section 38-40 of the GST Act is sufficiently broad to encompass the provision of funds by the government entity giving a sum of money to you in return for an allocation of trust units, and in particular where the purpose is to finance specialist accommodation services as in this case.

Note: the government entity has a right of pre-emption - it must be offered the right to subscribe for additional units in you prior to the units being offered on the open market to third parties. If circumstances arise that a third party purchases units and provides money to you in return, this would not be 'funding' for a particular purpose which is how the term is to be interpreted for section 38-40 of the GST Act. This is because it is still funding per se, it is not received under the DSA or a complementary State or Territory law in respect of the services and therefore section 38-40 of the GST Act would not be relevant to consider.

Is the State Act a complementary State Law to the DSA?

As 'complementary' is not defined, we should look at the ordinary and natural meaning of the word, regarding context and purpose, and where relevant, use of extrinsic materials to assist in determining how the context influences this meaning.

In approaching the interpretation, we have considered the text of section 38-40 of the GST Act in the context of the Funding Agreement between the government entity and you, the Trust Deed, the DSA, the State Act and the Disability Agreement 2003 and the purposes for which the arrangements are designed to meet, as expressed in the disability legislation.

On this basis, there are strong indicators that support the view the State Act is complementary to the DSA based on the ordinary meaning of 'complementary' as relating to things that together combine to enhance the aim of each scheme under both pieces of legislation. The federal legislation and State law do not have to be identical and they do not have to 'supplement' each other to achieve an objective. They can be different but taken together make a good combination. The context to this is that together, the two pieces of legislation create a common objective that encompasses types of disability services and rehabilitation support that provides full and comprehensive cover for the persons disabled as a result of traffic accidents.

There are factors weighing against this, but our considered view is that read together, the DSA and the relevant State law (State Act) have similar and complementary objectives and there is an apparent intention that the two bodies of legislation can work in conjunction to achieve the complementary objectives.

This view is based on the following factors:

·                    The funding provided fulfils objectives that complement each other. For example, section 31 of the DSA provides for comprehensive rehabilitation services and an obligation to assist persons with disabilities or reduced mobility to integrate into the community. This includes providing adapted and specialised accommodation support services.

·                    This is complemented by section 12 of the State Act and Recital C of the Funding Agreement which provide that rehabilitation services or disability services (which include accommodation assistance services) for clients of the government entity are designed to promote early and effective medical rehabilitation. In particular, the wording the government entity 'has determined that such programs may include the provision of...disability services for clients requiring long-term specialised domestic accommodation' underlines the complementary objective.

·                    The government entity nominates clients or persons with significant injuries or disabilities resulting from accidents to benefit from the specialist disability services. This is similar to (and therefore complements) the 'target groups' envisaged under the DSA. The government entity clients are therefore a subset of a larger group intended to be covered by the federal legislative provisions. Practically, it is irrelevant how the disability or reduced mobility has occurred - traffic accident or otherwise - it just means that the State Act is designed to give similar and complementary assistance to those whose disabilities result from a traffic accident.

·                    It is clear that the DSA and the State Act have the objective of increased independence for the target groups -the functions and objectives of the two schemes run in parallel - it does not matter that the government entity scheme also provides compensation - the key is that both aim to provide rehabilitation and specialist care in supported accommodation and the government entity has outsourced this by funding you to carry out the services on its behalf.

·                    The Trust Deed and Funding Agreement enable the government entity nominated clients to maintain suitable living arrangements in the community where they would otherwise be unable to do so (or it would require additional compensation to be paid to the government entity clients). This complements the DSA stated objectives to assist the target group to 'work towards full participation' in the community and 'assist persons with disabilities to integrate in the community' and gain 'increased independence.'

·                    Both the DSA and the State Act allow for funding to be provided to other bodies (such as you) to provide the disability services (subsection 10(1) and paragraph 12(1)(h) respectively). Further, the clear intention that the legislative systems are envisaged as complementary is contained in clause 8(1) of the Disability Agreement that provides 'the Commonwealth and the States and Territories agree to make funds available for the provision of specialist disability services' - showing a joint and complementary objective. This provides context for both pieces of legislation in the widest sense, in which we interpret the text of section 38-40 of the GST Act.

·                    The context of this complementary regime is enhanced by the existence of the Disability Agreement 2003 between the Federal Government and the States and Territories which indicates that the provision of specialist disability services (which include accommodation support services) is a shared objective between the Federal Government and the States/Territories, and there is a shared responsibility to fund these specialist disability services.

Therefore, it is considered the State Act is a complementary State law to the DSA.

As your supplies of rental accommodation, to clients of the government entity, meet all the requirements of section 38-40 of the GST Act those supplies are GST free.