Private ruling: GST and residential care
Date of advice: 9 April 2018
Published: June 2018

Ruling: Q1: Will your supplies of accommodation in the newly constructed aged care facility be GST-free under section 38-25(4) of the A New Tax System (Goods and Service Tax) Act 1999 (GST Act)? | A1: Yes. Your supplies of accommodation will be GST-free under subsection 38-25(4) of the GST Act or GST-free under section 38-250 of the GST Act where your supplies of accommodation are less than 75% of the GST inclusive market value. | Q2: Are you entitled to claim input tax credits on costs incurred in the construction of the new aged care facility? | A2: Yes.

Relevant facts and circumstances: You are registered for GST. You are a public benevolent institution, a Deductible Gift Recipient, a charity and exempt from income tax. You are an ‘Approved Provider’ of aged care under the Aged Care Act 1997 . You operate a residential care facility which houses X residents. You are proposing to redevelop to a X bed facility (the facility) and have received approval from the Australian Government for an additional X bed licences. The facility is a new facility not the extension of the existing facility. You have received a Rural, Regional and Other Special Needs Building Fund Grant ( the Grant) of $X from the Australian Government to contribute towards to capital works costs of residential care services under section 73-1(3) of the Aged Care Act 1997 . You have provided a copy of the grant. The services provided will all fit within sections 38-25(1), (2) and (3) of the A New Tax System (Goods and Services Tax Act) 1999 and fit within services set out in Schedule 1 of the Quality Care Principles 2014 . The facility is to provide aged care to homeless and disadvantaged individuals. You will receive Government funding from the following sources: ● Aged Care Subsidy (Aged Care Funding Instrument (ACFI)) ● Viability Supplement ● Homelessness Supplement ● Accommodation Supplement Where Government funding is not received for the accommodation component for any residents, the accommodation will be supplied to these residents at less than 75% of the GST inclusive market value.

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 38-25 | A New Tax System (Goods and Services Tax) Act 1999 Section 38-250

Reasons for decision: Summary: Division 38 sets out those supplies which are GST-free. Where a supply is GST-free, no GST is payable on the supply and you are entitled to an input tax credit for anything acquired to make the supply. You have provided details of the arrangement under which you will provide residential care services in your new facility. Of relevance, are the following provisions in Subdivision 38-B. Section 38-25, in part, provides: | Detailed Reasoning - 38-25 Residential care etc.: (1) A supply of services is GST-free if: (a) it is a supply of services covered by Schedule 1 to the *Quality of Care Principles; and (b) it is provided through a residential care service (within the meaning of the Aged Care Act 1997 ); and (c) the supplier is an approved provider (within the meaning of that Act). (2) A supply of services is GST-free if: (a) the services are provided to one or more aged or disabled people; 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 supplier receives funding from the Commonwealth, a State or a Territory in connection with the supply. (3) 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 activities assistance) of Part 2 of that Schedule; or (ii) item 3.8 (nursing services) of Part 3 of that Schedule. … (4) A supply of accommodation is GST-free if it is made to a person in the course of making a supply to that person that is GST-free under subsection (1), (2) or (3). Section 38-25 addresses the GST treatment of services and accommodation provided to aged or disabled persons in residential care. Residential care is defined in the Aged Care Act 1997 to include personal care and/or nursing care provided to a person in a residential facility, and specifically excludes care provided to a person in their private home, and care provided in a hospital or a psychiatric facility. (Paragraph 118 of GSTR 2012/3 Goods and services tax: GST treatment of care services and accommodation in retirement villages and privately funded nursing homes and hostels ) Subsections 38-25(1), (2) and (3) all refer to services listed in Schedule 1 to the Quality of Care Principles, or to services of a kind covered by Schedule 1 to the Quality of Care Principles. Schedule 1 to the Quality of Care Principles specifies the services and care required to be provided to residents of residential care facilities that qualify for Commonwealth funding under the Aged Care Act 1997 . (Paragraph 108 of GSTR 2012/3) Subsections 38-25(1) and (2) apply to situations where the supplier qualifies for or is in receipt of government funding. Subsection 38-25(3) Act allows equivalent care services to be supplied GST-free to aged or disabled people who are living in privately funded residential care facilities. (Paragraphs 109-111 of GSTR 2012/3) Subsection 38-25(4) only applies if services and accommodation are supplied at the same time and the services are GST-free under subsections 38-25(1), (2) or (3). The services supplied to a resident must be of a sufficient level that it can be said that the accommodation facilitates the supply of the care services and therefore, the accommodation is being supplied in the course of supplying those care services. As your supply of services will all fit within subsections 38-25(1), (2) and (3), your supplies of accommodation will be made in the course of providing these services, your supplies of accommodation will be GST-free under subsection 38-25(4). We also note that where Government funding is not received for the accommodation component for any residents, the accommodation will be supplied to these residents at less than 75% of the GST inclusive market value. These supplies of accommodation will also be GST-free under section 38-250 as a supply of accommodation by a charity is GST-free if the supply is for consideration that is less than 75% of the market value. | Detailed Reasoning - Question 2: You are entitled to an input tax credit for any creditable acquisition that you make. Section 11-5 provides that you make a creditable acquisition if: (a) you acquire anything solely or partly for a creditable purpose (b) the supply of the thing to you is a taxable supply (c) you provide, or are liable to provide, consideration for the supply, and (d) you are registered, or required to be registered. Section 11-15 provides that you acquire a thing for a creditable purpose to the extent that you acquire it in carrying on your enterprise but not acquire the thing for a creditable purpose to the extent that the acquisition relates to making supplies that would be input tax. In your case you will be making acquisitions in relation to the construction of the new aged care facility through which you will make GST-free supplies, as established in question 1 and you are registered for GST. Therefore, where you provide consideration for those acquisitions and those acquisitions are taxable supplies to you, you will satisfy all the requirements of section 11-5 and will be entitled to claim input tax credits.

Reasons for decision: In this reasoning, please note: | ● all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) | ● all reference materials referred to are available on the Australian Taxation Office (ATO) website ato.gov.au | ● all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act