Edited version of private advice

Authorisation Number: 1052000673281

Date of advice: 1 July 2022

Ruling

Subject: GST and creditable acquisitions

Question

Does Trust make creditable acquisitions under section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) in respect of acquisitions from third-party suppliers in connection with the delivery of home care services under the HCP Program governed by the Aged Care Act 1997 (Aged Care Act)?

Answer

Yes. Trust's acquisitions from third-party suppliers in connection with the delivery of home care services under the HCP Program governed by the Aged care Act, are creditable acquisitions under section 11-5 of the GST Act on the basis that the acquisitions will be acquired for a creditable purpose within the meaning of section 11-15 of the GST Act; the supplies by the third-party suppliers are taxable supplies to Trust; Trust is registered for GST and Trust is liable to provide the consideration for the acquisitions.

Note: This ruling has not considered nor ruled whether invoices issued under the arrangement complies with the requirements of a tax invoice for GST purposes.

This ruling applies for the following periods:

21 March 20XX to 30 June 20XX

The scheme commences on:

21 March 20XX

Relevant facts and circumstances

The Trust is registered for GST and has been since XX XX XXXX.

Trust has supplied home care services to care recipients and received home care subsidies under the Home Care Package Program (HCP Program) governed by the Aged Care Act 1997 (Aged Care Act). Trust's home care supplies are GST-free under section 38-30 of the GST Act.

Trust has sub-contracted the delivery of home care services to third-party suppliers. The supplies made by the third-party suppliers give rise to taxable supplies.

Trust has paid, on its own account, the GST- inclusive price of the sub-contracted services. Trust subsequently recovers the GST- exclusive price through the home care subsidies. Trust does not recover the GST component of the price of the sub-contracted services from the home care subsidies - this cost is borne by Trust.

HCP framework - general

The HCP Program is an Australian Government initiative with the aim of providing long-term support for elderly individuals who want to continue living independently at home. The HCP Program is governed by the Aged Care Act.

Approved providers of home care services under an HCP Program are entitled to subsidies in accordance with Part 3.2 of the Aged Care Act. Specifically, section 46-1 of the Aged Care Act provides as follows:

46-1 Eligibility for home care subsidy

(1) An approved provider is eligible for *home care subsidy in respect of a day if the Secretary is satisfied that:

(a) the approved provider is approved under Part 2.1 as a provider of home care; and

(b) on that day there is in force a *home care agreement under which a care

recipient approved under Part 2.3 in respect of home care is to be provided with home care by the approved provider through a home care service; and

(c) the home care service is a notified home care service; and

(d) the care recipient is a *prioritised home care recipient; and

(e) on that day the approved provider provides the care recipient with such home care (if any) as is required under the home care agreement; and

(f) the approved provider has agreed in the claim relating to the day to deal with the care recipient's *unspent home care amount in accordance with the User Rights Principles

Under section 46-1 of the Aged Care Act, it is the "approved provider" that is required to provide the agreed home care to the recipient.

All HCPs are delivered under a 'consumer directed care' (CDC) model. This gives care recipients choice and flexibility in the support they access, based on need, and how they are delivered.

Under the CDC model, HCP providers can deliver home care directly, or they can engage other organisations or individuals to deliver care and services under sub-contracted arrangements. The ability to sub-contract, is made clear by section 96-4 of the Aged Care Act which states:

96-4 Care provided on behalf of an approved provider

A reference in this Act to an approved provider providing care includes a reference to the provision of that care by another person, on the approved provider's behalf,under a contract or arrangement entered into between the approved provider and the other person.

Note: The approved provider will still be subject to the responsibilities under Chapter 4 in respect of care provided by the other person.

The Department of Health's Home Care Packages Program Operational Manual A guide for home care providers Version 1.1 - February 2021 (Manual) states under section 7.5 that:

"Approved providers should, where possible, facilitate services being delivered by the person chosen by the care recipient. With CDC, if someone prefers a particular care worker to deliver their services, they can ask the provider to engage that care worker. Providers must indicate in their home care pricing schedule whether they charge an additional amount for any services they sub-contract from another service provider. Providers must also discuss this cost with the care recipient before the care plan is agreed. It is good practice to document this conversation for records."

Under the HCP framework, HCP providers are responsible for the delivery of quality and appropriate care in accordance with the Aged Care Act. Further to this, HCP providers can sub-contract the provision of care from third-party suppliers to achieve the outcome of the CDC model.

HCP Programs - Trust

Trust, as an approved provider, pioneered the delivery of home care services in connection with the HCP Program.

Under the CDC model, care recipients are more involved in the hiring and scheduling of care services from third-party suppliers; however, Trust does not "step away" from the arrangements. In accordance with the Aged Care Act, Trust remains responsible for ensuring the delivery of quality and appropriate care, albeit that the services are sub-contracted to third-party suppliers.

Trust delivers home care services under a contractual framework which is depicted and described below. These arrangements are reflective of how Trust has engaged with care recipients and third-party suppliers.

HCP Contract

Trust and care recipients enter into a Home Care Package Contract (Contract). By signing the Contract, the care recipient confirms that they agree to the terms and conditions of the Home Care Package Agreement, Budget, Care Plan and Welcome Kit which forms part of the Contract.

The Home Care Package Agreement between Trust and the care recipient provides the following:

a) Section 1 provides that Trust enables a care recipient to self-manage their package at a fixed fee of XX of government package funding. This fee covers government compliance, financial reconciliation, initial set up and ongoing reviews.

b) Section 2 provides that the care recipient will discuss and develop with Trust the Individual Care Plan and Budget. This covers the care services selected, planned costs, subsidies received from the government, and any top up contributions.

c) Section 3 contains the pricing for common services accessed through the HCP and deducted from the overall package Budget. These include personal care, nursing, cleaning gardening, and respite. Importantly, it states that services delivered as part of the Care Plan are GST-free. The pricing schedule also makes it clear that Trust does not charge a mark-up on the services delivered by third-party suppliers.

The Care Plan is documented by Trust (care manager) and the care recipient. The Care Plan is an important component of the contractual framework as it establishes the care recipient's goals, and the services to be delivered by the care manager and support staff in relation to personal care, home living, medication support, allied health, equipment, social support, continence, transport, respite, mobility, nutrition.

The Welcome Kit provides information in relation to the operation of the home care services. The salient points are summarised as follows:

a)    Page 3 notes that, with self-management, the cared recipient is responsible for, among other things, finding, hiring and scheduling care service workers and services, and submitting all tax invoices for payment by Trust. The care recipient is also responsible for staying within agreed upon budgets and to not spend funds on services or items not permitted by Home Care Package funding. The care recipient is required to reimburse Trust for any overspend.

b)    Page 4 notes that, with self-management, Trust is responsible for developing the Care Plan, liaising with external providers and suppliers, setting up contractor arrangements, and processing payments.

c)    Page 5 provides that Trust places a restriction on the types of services that can be accessed by a care recipient.

d)    Trust fully supports care recipients to use care workers and service suppliers of their choice. Whilst Trust allows the care recipient additional choice in the matter, it is clear in the Welcome Kit that Trust will need to engage with the third-party supplier in order for the third-party supplier to provide any services to the care recipient. Evidence of this within the Welcome Kit is at page 11 as follows:

To use service providers and care workers of your choice we need to set up a Service Provider Agreement with them if we don't already have one in place. It's 100% free for these types of agreements to be set up on your behalf. However, we have many agreements in place across Australia so there's a good chance it's already done.

Furthermore, Trust must have entered into an agreement with the third-party supplier before any work has commenced - this is clearly stated as follows:

Let's Get Care must have entered into an Agreement with the service provider BEFORE any work has commenced.

e)    In relation to services supplied by third-party supplier, Trust pays invoices directly, or will reimburse the care recipient. Importantly, all services must be supported by an agreement between Trust and the third-party supplier (page 18).

f)     Every month Trust issues care recipients with Monthly Activity Statements which detail how much funds have been spent and how much are available. All subcontractor payments are shown as deductions to a care recipients HCP on a GST-exclusive basis. As such, Trust bears the economic cost of the GST as is the case in a sub-contracting model.

g)    Trust acts in a principal capacity in paying the GST on services supplied by third-party supplier and as noted in the point above, only deducts the GST-exclusive amount from the care recipients HCP. This is on the basis that the subsequent on-supply to the care recipient is GST-free.

External Service Provider Agreements

In accordance with the HCP framework, Trust has entered into External Service Provider Agreements with third-party suppliers. Trust has entered into these agreements prior to any services being provided to the care recipient. The External Service Provider Agreement provides:

a)    The agreement is between Trust and relevant third-party supplier. In that regard, the care recipient is not party to the contractual arrangements.

b)    Item 3 specifies the services to be provided (example support, cleaning, maintenance, gardening, allied health and nursing).

c)    Schedule A sets out the Agreement Details which includes obtaining the supplier's bank details, the commencement date, the nature of services, insurance coverage and professional referees.

d)    Schedule B sets out the service requirements. The requirements define the way in which the third-party supplier will provide services to the care recipients, including to only provide the care services they are contracted to provide, to only work the agreed hours, and to maintain relevant insurance not less than $10 million.

e)    Listed as "assumptions" under Schedule C, invoices need to be made out to the consumer and sent to Trust. Trust has advised that the reason invoices are made out to the consumer is in order to facilitate a reconciliation of payments to each care recipient's account, as the service supplier may provide services to a number of care recipients. If invoices were made out to Trust only, it would be practically difficult to reconcile payments to each recipient's account.

The External Service Provider Agreements are blanket agreements in that they cover the provision of service by the relevant third-party suppliers to different care recipients. This approach is adopted from a practical perspective such that Trust does not need to enter into individual supplier agreements in respect of each care recipient.

XX Platform arrangements

In addition to the External Service Provider Agreements, Trust has engaged third-party suppliers through the XX Platform, a marketplace that facilitates the hiring of workers within a care recipients' local community.

The use of the XX Platform provides further flexibility to the care recipient in relation to the finding, hiring and scheduling care service workers and services. This is consistent with the key features of the CDC model and self-management.

Trust and XX Platform have entered into a User Agreement which provides:

a)    The User Agreement covers the use of the XX Platform by Trust and care recipients.

b)    XX Platform does not provide home care services, but acts only as a venue connecting care workers with customers.

c)    Clause 2.2 provides that Trust and / or care recipients can engage directly with care workers through the site.

d)    Clause 8.1 provides that XX Platform will generate invoices on behalf of care workers for the care workers fee. In addition, XX Platform will issue a separate invoice for its own fee. In practice, XX Platform issued an invoice on per client basis which included the cost of the worker plus XX Platform's fee.

e)    Clause 8.2 provides that, in consideration for the care worker providing home care services to Trust's client, Trust will, as an approved provider, pay from the client's package to XX Platform the invoice amounts for the care workers fee and the XX Platform fee.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 11-5

A New Tax System (Goods and Services Tax) Act 1999 Section 11-15