Edited version of private advice

Authorisation Number: 1052082069976

Date of advice: 3 February 2023

Ruling

Subject: GST - supply of leased accommodation

Question 1

Is the supply by Entity X to Entity Y under the lease (Headlease) a GST-free supply under section 38-38 of the A New Tax System (Goods and Services tax) Act 1999 (GST Act)?

Answer

No, the supply is not a GST-free supply under section 38-38 of the GST Act.

This ruling applies for the following period:

1 January 20XX till quarter ending 31 December 20XX

The scheme commenced on:

1 December 20XX

Relevant facts and circumstances

Entity X is a trust which is registered for GST.

Entity X acquired a property (the Property) on which it constructed special disability accommodation.

Following construction of the special disability accommodation, Entity X enters into a lease agreement (the Headlease) with another entity (Entity Y). Under the Headlease Entity X will supply the Property to Entity Y for a specified consideration.

Pursuant to the terms of the Headlease, Entity Y is entitled to sublease the Property to a Subtenant.

Entity Y is:

(a)  registered to provide community housing in accordance with the National Regulatory System Community Housing;

(b)  registered as a charity with the Australian Charities and Not-for-profits Commission (ACNC); and

(c)  endorsed by the Commissioner of Taxation (Commissioner) to access GST concession, income tax exemption and fringe benefits tax (FBT) exemption.

Entity Y enters into a sublease with a tenant (the Subtenant) who is an NDIS participant.

The Subtenant has an NDIS plan in effect and a written agreement with Entity Y. However, there is no written agreement between Entity X and the Subtenant.

Relevant legislative provisions

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

Reasons for decision

Section 38-38 of the GST Act provides that a supply is GST-free if it is a supply of a disability support provided to an NDIS participant. In particular section 38-38 states:

38-38 Disability support provided to NDIS participants

A supply is GST-free if the supply:

(a)  is a supply to a participant (within the meaning of the National Disability Insurance Scheme Act 2013) for whom a participant's plan is in effect under section 37 of that Act; and

(b)  is a supply of one or more of the reasonable and necessary supports specified in the statement included, under subsection 33(2) of that Act, in the participant's plan; and

(c)   is made under a written agreement, between the supplier and the participant or another person, that:

(i)    identifies the participant; and

(ii)   states that the supply is a supply of one or more of the reasonable and necessary supports specified in the statement included, under subsection 33(2) of that Act, in the participant's plan; and

(d)  is of a kind that the *Disability Services Minister has determined in writing.

An * denotes a term defined in section 195-1 of the GST Act.

Entity X submits that the requirements listed above are satisfied on the basis that the Subtenant has a written agreement in place, the Accommodation is leased only to Subtenants that have an NDIS Plan, and the supply is covered by the Disability Services Minister determination. Amongst other things Entity X also submits that the Headlease between Entity X and Entity Y contains terms which confers the same effect as the sublease between Entity Y and the NDIS participants. Therefore, Entity X should therefore be considered by the Commissioner as the same as Entity X directly supplying the Accommodation to the NDIS participants.

In this case the Commissioner does not agree with the above submissions.

Goods and Services Tax Ruling, GSTR 2006/9: Supplies (GSTR 2006/9) provides the Commissioners view regarding the treatment of health services under Subdivision 38-B of the GST Act and as paragraph 155 states:

Certain supplies of health services

155. Under the GST health provisions in Subdivision 38-B, subject to certain exceptions^51A, 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. Where this requirement is imposed, a GST-free supply of a health service cannot be made to a business entity or a non-profit body.

^51A See sections 38-45, 38-47, 38-55 and 38-60.

In this case the supply of the Property by Entity X is made under the Headlease to Entity Y. As Entity X does not supply the Subtenant the Property (i.e. the Accommodation) it does not satisfy the requirements of section 38-38 of the GST Act and consequently is not a GST-free supply.