ATO ID 2009/104: GST and services not related to accommodation in a retirement village operated by an endorsed charitable institution or trustee of a charitable fund
Date of decision: 20 August 2009
Business line: Indirect Tax

Issue
Are laundry, personal care, hairdressing and bus services supplied by a charitable retirement village operator to a resident, related to the supply of the accommodation in a retirement village (and GST-free) under subparagraph 38-260(c)(i) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?

Decision
No, the supply of laundry, personal care, hairdressing and bus services supplied by a charitable retirement village operator to a resident, are not related to the supply of the accommodation in a retirement village (and GST-free) under subparagraph 38-260(c)(i) of the GST Act.

Facts
The retirement village operator is an endorsed charitable institution for GST purposes. The retirement village comprises a number of independent living units together with communal facilities and is located in Australia. Prior to entry into a retirement village, residents sign a Residence Agreement with the operator specifying, among other things, the residential premises and communal facilities provided and the respective obligations of the operator and resident. Pursuant to the Residence Agreement, the entity provides a range of services to the resident, including laundry services, trips in the retirement village bus, assistance with personal care and hairdressing.

Reasons for decision
Summary: Section 38-260 of the GST Act states that: A supply is GST-free if: (a) the supplier is an *endorsed charitable institution, or an *endorsed trustee of a charitable fund, that operates a *retirement village; and (b) the supply is made to a resident of the retirement village; and the supply is: (i) a supply of accommodation in the retirement village, or a supply of a service related to the supply of the accommodation; or (ii) a supply of meals. Section 38-260 of the GST Act applies to supplies made on or after 14 December 2004. To determine whether a supply made by a charitable retirement village operator is related to the supply of accommodation for the purposes of subparagraph 38-260(c)(i) of the GST Act, it is necessary to define the term 'accommodation in a retirement village'. The specific term is not a defined term in the GST Act but a 'retirement village' is defined for the purposes of the GST Act. Melbourne Apartment Project Pty Ltd (as Trustee for Melbourne Apartment Project) v Commissioner of Taxation [2019] FCA 2118 considered the meaning of supply of accommodation in subparagraph 38-250(1)(b)(i) of the GST Act. The ordinary and natural meaning of "accommodation" includes an apartment or any premises that are used by a person as their place of residence, whether their right of residency is conferred by licence, lease or ownership. We consider that as subparagraph 38-260(c)(i) of the GST Act and subparagraph 38-250(1)(b)(i) of the GST Act are both in Subdivision 38-G of the GST Act the same meaning of "accommodation" should be applied to these provisions. The definition of 'retirement village' at section 195-1 of the GST Act provides that premises are a retirement village if: (a) the premises are residential premises; and (b) accommodation in the premises is intended to be for persons who are at least 55 years old, or who are a certain age that is more than 55 years and (c) the premises include communal facilities for use by the residents of the premises but the following are not retirement villages: (d) premises used, or intended to be used, for the provision of residential care (within the meaning of the Aged Care Act 1997) by an approved provider (within the meaning of that Act) (e) *commercial residential premises. In this context, the Commissioner considers that a supply of 'accommodation in a retirement village' is a supply of residential premises and communal facilities to a resident (if at least of 55 years of age) that has the right to occupy such premises. It must then be determined whether the relevant services are related to the supply of the residential premises and communal facilities. The term 'relates to' was discussed in the Federal Court decision of HP Mercantile Pty Ltd v. Commissioner of Taxation (2005) 143 FCR 553; 2005 ATC 4571; (2005) 60 ATR 106, where Hill J (with whom Allsop and Stone JJ agreed) stated that: ... The sufficiency of the connection or association will be a matter for judgment which will depend, among other things, upon the subject matter of the inquiry, the legislative history, and the facts of the case. Put simply, the degree of relationship implied by the necessity to find a relationship will depend upon the context in which the words are found. ... The Explanatory Memorandum to the Tax Laws Amendment (Retirement Villages) Bill 2004 (Explanatory Memorandum) provides further context to the degree of relationship implied by the words 'related to' in subparagraph 38-260(c)(i) of the GST Act. Paragraphs 1.51 and 1.52 of the Explanatory Memorandum provide as follows: 1.51 In order that GST-free treatment applies, it is necessary that the charitable retirement village operator make (sic) the supply to a resident of a retirement village operated by the charity. Accordingly, supplies made by the charitable retirement village to visitors or staff of the retirement village would not qualify for GST-free treatment ... 1.52 The range of supplies to which GST-free treatment applies, includes the supply of accommodation in a charitable retirement village, services related to the supply of the accommodation and meals. This would include, for example, the supply of accommodation in an independent living unit or serviced apartment, property maintenance fees and gardening services and meals and beverages ... Based on these paragraphs of the Explanatory Memorandum, the Commissioner considers that for the purposes of subparagraph 38-260(c)(i) of the GST Act, a service is related to the supply of the accommodation if the service is for the maintenance of the residential premises or communal facilities. Accordingly, since services included in the Residence Agreement such as laundry services, trips in the retirement village bus, assistance with personal care and hairdressing are not for the maintenance of the residential premises or communal facilities, they are not GST-free under subparagraph 38-260(c)(i) of the GST Act.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 Subdivision 38-G section 38-250 38-250(1)(b)(i) section 38-260 subparagraph 38-260(c)(i) section 195-1
Case references: HP Mercantile Pty Ltd v Commissioner of Taxation (2005) 143 FCR 553 2005 ATC 4571 (2005) 60 ATR 106
Related public rulings and determinations: GSTR 2007/1 | GSTR 2000/20
Related ATO interpretative decisions: ATO ID 2009/103
Other references: Explanatory Memorandum to the Tax Laws Amendment (Retirement Villages) Bill 2004
Subject references: Goods and services tax GST retirement villages GST residential premises GST free GST supply