Private ruling: GST and home care
Date of advice: 21 December 2017
Published: June 2018

Ruling: Q1: Are there any GST consequences for you in relation to the payment you make to a care or service provider for the care or services they provide to a care recipient where that care recipient has a Home Care Package in place under the Aged Care Act 1997 ? | A1: No. There are no GST consequences for you where you are acting as agent for the care recipient in acquiring care services from a third party Service Provider. However, there are GST consequences for the third party Service Providers and care recipients. Under your arrangements there are the following GST consequences: ● Third party Service Providers: ● Will make GST-free supplies to care recipients under subsection 38-30(3) of the GST Act to the extent those services are of a kind covered by item 2.1 (daily living activities assistance) of Part 2 of Schedule 1 to the Quality of Care Principles 2014 (Item 2.1). ● Will not make GST-free supplies to care recipients under subsections 38-30(1) of the GST Act and subsections 38-30(2) or 38-30(4) of the GST Act respectively because a home care subsidy is not payable to the Service Provider under Part 3.2 of the Aged Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 and the Service Provider does not receive any other government funding in respect of the care. ● Your care recipient clients: ● Will not receive a GST-free supply of home care or care from the Service Provider under subsections 38-30(1), 38-30(2) or 38-30(4) of the GST Act respectively because a home care subsidy is not payable under Part 3.2 of the Aged Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 to the Service Provider and the Service Provider does not receive any other government funding in respect of the care. ● Will receive a GST-free supply of home care under subsection 38-30(3) of the GST Act to the extent those services are of a kind covered by item 2.1 (daily living activities assistance) of Part 2 of Schedule 1 to the Quality of Care Principles 2014 (Item 2.1). ● Are not making a creditable acquisition under section 11-5 of the GST Act in relation to the services provided to them by the Service Providers. ● You: ● Are not making a creditable acquisition under section 11-5 of the GST Act in relation to the services provided by the Service Provider as it is the care recipient (through you as their agent) that has acquired the services from the Service Provider. ● Are only making a GST-free supply under subsection 38-30(1) of the GST Act for the management services you provide to the care recipient for which you receive the Case Management and Administration Fee.

Relevant facts and circumstances: You received a private ruling (the earlier private ruling). This private ruling replaces the earlier private ruling. You are registered for GST. You are a home care approved provider pursuant to the Aged Care Act 1997 for the purposes of the federal government Home Care Packages Programme (HCPP). You are eligible for home care subsidies under the Aged Care Act 1997 in respect of individual care recipients. Your business model is to provide governance and administrative services for HCCP arrangements. You currently have case managers to develop case plans for care recipients and manage payments to service providers for services performed. The case managers are employed as contractors. You charge a fee to the care recipient for your services. Home care agreement You enter into a home care agreement with all care recipients. Through case managers, care plans are developed in consultation with the care recipient to best meet the needs of the care recipient with the funds available. You have provided a copy of your Home Care Agreement (The Agreement) with care recipients. Service provider agreement You engage service providers as agent for the care recipient. The service providers are general service provider companies (such as a gardening or housecleaning service supplier) and not contractors/employees of you. The service providers are not home care approved providers in respect of the care recipient. The service providers are required to have their own relevant insurances such as public liability insurance. This is required under their contract of services with you You have provided a copy of the contract you enter into with service providers (Service Provider Agreement).

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 Section 11-5 | A New Tax System (Goods and Services Tax) Act 1999 Section 38-30

Reasons for decision: Detailed Reasoning - Your contentions:: ● You contend that the home care subsidy paid under the Aged Care Act 1997 belongs to the care recipient and not the approved provider. ● As a home care approved provider pursuant to the Aged Care Act 1997 for the purposes of the federal government Home Care Packages Programme (HCPP), you contend that you can dispense your obligations under the Age Care Act 1997 by being an agent on behalf of your care recipient clients or by treating other suppliers of services to your care recipient clients as your subcontractors. ● As your care recipient clients have a HCCP home care package in place with you, you contend that all supplies to the care recipient including those made directly to the care recipient by a third party Service Provider will be GST-free. ● If you were to treat other suppliers of services to your care recipient clients as subcontractors rather than being an agent on behalf of your care recipient clients, you would have an increased administrative burden that would reduce the amount of direct care available to care recipients as funds would be diverted to administrative roles. | Detailed Reasoning - In this reasoning:: ● unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) ● all terms marked by an asterisk are defined terms in the GST Act ● all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on ato.gov.au | Detailed Reasoning - Home care: For a supply to be GST-free under section 38-30 it must satisfy one of the following subsections: (1) A supply of *home care is GST-free if home care subsidy is payable under Part 3.2 of the Aged Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 to the supplier for the care. (2) A supply of care is GST-free if the supplier receives funding under the Home and Community Care Act 1985 in connection with the supply. (3) A supply of *home care is GST-free if the supply is of services: (a) that are provided to one or more aged or disabled people; and (b) that are of a kind covered by item 2.1 (daily living activities assistance) of Part 2 of Schedule 1 to the *Quality of Care Principles. (4) A supply of care is GST-free if: (a) the supplier receives funding from the Commonwealth, a State or a Territory in connection with the supply; and (b) the supply of the care is of a kind determined in writing by the *Aged Care Minister to be similar to a supply that is GST-free because of subsection (2). ‘Home care’ has the meaning given by section 45-3 of the Aged Care Act 1997 which provides: Home care is care consisting of a package of personal care services and other personal assistance provided to a person who is not being provided with residential care. | Detailed Reasoning - Home care subsidy or other government funding: It is also a requirement under subsections 38-30(2) and 38-30(4) that the supplier receives government funding in connection with the supply. It is a critical element of these two subsections that the government funding is payable directly to the supplier for the supply to be covered by either of these subsections. Similarly, one of the requirements for GST-free home care under subsection 38-30(1) is that the supplier receives a home care subsidy under Part 3.2 of the Aged Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 for the care. It is a critical element of subsection 38-30(1) that the home care subsidy is payable under either of these Acts to the supplier for the supply to be covered by this subsection. It is an approved provider and not the care recipient that is eligible for a home care subsidy under Part 3.2 of the Age Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 . This is clear from subsection 46-1(1) of the Aged Care Act 1997 which states: | Detailed Reasoning - 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. (emphasis added) Under subsection 46-1(1) of the Aged Care Act 1997 , we consider that it is the approved provider that is eligible for the home care subsidy and is the entity that is required to provide the agreed home care to the recipient. We consider that there are no circumstances where the home care subsidy under Part 3.2 of the Age Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 is payable to the care recipient as it is clear that it is the approved provider that is eligible for the home care subsidy. Consumer Directed Care (CDC) is not a type of home care package by itself, but is the approach used to provide home care services to give greater flexibility and choice to the care recipient. The CDC approach does not impact on ‘who’ is eligible for the subsidy. We also consider that, under subsection 46-1(1) of the Aged Care Act 1997 , it is the approved provider that is to provide the home care to the consumer. The approved provider may: ● supply services directly to consumers, or ● subcontract another supplier to deliver the services to the consumer. In both circumstances, it is the approved provider that is eligible for the home care subsidy for the supply of the home care services they make to the care recipient. | Detailed Reasoning - Agency: Despite what we consider to be the correct position under the Age Care Act 1997 , you have entered into a Home Care Agreement with a care recipient whereby you (as agent for the care recipient) enter into a Service Provider Agreement with a Service Provider to provide the care services. Paragraph 28 of Goods and Services Tax Ruling GSTR 2000/37 Goods and services tax: agency relationships and the application of the law provides a list of factors that may show that you are an agent under an agency relationship. We accept that your arrangement results in you being an agent as you: ● are described in the Home Care Agreement (HCA) as agent, having authority to act for the care recipient ● enter into a Service Provider Agreement, as an agent for recipients of care services with third parties, to obtain the services from the Service Provider for the care recipient ● receive Fees from the care recipient pursuant to the HCA ● we note that there are some apparent discrepancies in your Service Provider agreement which suggest that the Service Provider is being contracted by you. For example: ● the agreement states that the Service Provider will provide the Services to or on behalf of the Approved Provider ● the agreement states the Service Provider is an independent contractor of the Approved Provider However, on balance, we consider that the intention of the agreement is for you to act as agent for the care recipient and not for you to contract the Service Provider as principal. | Detailed Reasoning - Acquisition through you as agent: To make a creditable acquisition you must satisfy all of the requirements of section 11-5 which states: (a) you acquire anything solely or partly for a *creditable purpose; and (b) the supply of the thing to you is a *taxable supply; and (c) you provide, or are liable to provide, *consideration for the supply; and (d) you are *registered, or *required to be registered. Typically, where an approved provider has a contractual obligation to supply home care services to a care recipient and acquires those services from a service provider, the service provider will supply a service to the approved provider of providing the stipulated services to the client of the care recipient. Generally, this results in the following treatment for GST purposes: ● There will be a taxable supply (subject to GST) from the service provider to the approved provider, where the service provider is registered for GST. ● The approved provider will make a creditable acquisition and be entitled to claim GST credits as it satisfies all the requirements of section 11-5. ● The supply from the approved provider to the care recipient will be GST-free under subsection 38-30(1) of the GST Act as the home care subsidy is payable under Part 3.2 of the Age Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 to the approved provider for the care. The timing of payments and claiming the GST credits may result in a cash flow impact. However, this is consistent with all other businesses that make acquisitions and have to claim GST credits. It is a business decision as to how this is managed Under your arrangement, the care recipient (through you as their agent) acquires home care services from the Service Provider. You enter into Service Agreements with the Service Provider, as agent for the care recipient, and the Service Provider supplies care to the care recipient and does not supply their services to you. As such you, as agent for the care recipient, are not making a creditable acquisition under section 11-5 in respect of care services supplied by the Service Providers to care recipients. | Detailed Reasoning - Supply by you to the care recipient: You have a contractual obligation under the Home Care Agreement with the care recipient to act as their agent to hold package funding (which we consider to be incorrect as it is the approved provider, and not the care recipient, that is eligible for the home care subsidy), instruct and manage services from external parties, and pay external parties for services for which you receive a fee. That is, you charge a Case Management and Administration fee for these services. As you have a contractual obligation under the home care agreement in relation to Case Management and Administration services to be provided to the care recipient and you receive the home care subsidy, your supply of Case Management and Administration services satisfies the requirements of subsection 38-30(1) and will be GST-free. | Detailed Reasoning - Supply by the Service Provider to your care recipient clients: Under your arrangement, the Service Provider makes a supply of home care to the care recipient. However, as the a home care subsidy is not payable under Part 3.2 of the Aged Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 to the Service Provider for the care they supply to the care recipient, they cannot satisfy subsection 38-30(1) - it is you that is eligible for the home care subsidy and not the Service Provider. Neither can the Service Providers apply subsections 38-30(2) or 38-30(4) as they do not receive a payment directly from the Commonwealth, a State or a Territory in respect of the care. Under subsection 38-30(3), there is no requirement that the supplier receives government funding in respect of the care they supply to a care recipient. Where the Service Provider makes a supply of home care to the care recipient and those home care services are of a kind covered by item 2.1 (daily living activities assistance) of Part 2 of Schedule 1 to the *Quality of Care Principles and are supplied to aged or disabled people, the supply will be GST-free. Part 2 of Schedule 1 of the Quality of Care Principles 2014 states the following items of daily living activities assistance (Item 2.1): | Detailed Reasoning - Content: 2.1 Daily living activities assistance Personal assistance, including individual attention, individual supervision, and physical assistance, with the following: (a) bathing, showering, personal hygiene and grooming; (b) maintaining continence or managing incontinence, and using aids and appliances designed to assist continence management; (c) eating and eating aids, and using eating utensils and eating aids (including actual feeding if necessary); (d) dressing, undressing, and using dressing aids; (e) moving, walking, wheelchair use, and using devices and appliances designed to aid mobility, including the fitting of artificial limbs and other personal mobility aids; (f) communication, including to address difficulties arising from impaired hearing, sight or speech, or lack of common language (including fitting sensory communication aids), and checking hearing aid batteries and cleaning spectacles. Excludes hairdressing. The Charities consultative committee resolved issues document (search for ‘QC 27139’ on the ATO website) lists the following services that are not covered by Item 2.1: ● assistance with housework ● assistance with gardening ● meal preparation services ● grocery shopping for individuals ● monitoring medication ● rehabilitation services ● assistance with writing cheques, letters, etc ● advocacy services ● provision of social and community activities, such as providing companionship, craft and reading activities to individuals, and ● driving individuals to and from appointments. Where the Service Provider supplies a package of home care services that includes home care services of a kind not covered by Item 2.1 or that are not otherwise GST-free, then those items will generally be taxable. Where the Service Provider supplies a package of care that is partly GST-free and partly taxable, it will be making a mixed supply and it will be necessary to apportion between the GST-free and taxable amounts. Goods and Services Tax Ruling GSTR 2001/8 Goods and services tax: Apportioning the consideration for a supply that includes taxable and non-taxable parts provides methods and examples that may be used to help work out how to apportion the consideration for a supply that contains separately identifiable taxable and non-taxable parts. | Detailed Reasoning - Conclusion: In summary, under the arrangements you have with Service Providers and care recipients, there are the following GST consequences: ● Third party Service Providers: ● Will make GST-free supplies to care recipients under subsection 38-30(3) of the GST Act to the extent those services are of a kind covered by item 2.1 (daily living activities assistance) of Part 2 of Schedule 1 to the Quality of Care Principles 2014 (Item 2.1). ● Will not make GST-free supplies to care recipients under subsections 38-30(1) of the GST Act and subsections 38-30(2) or 38-30(4) of the GST Act respectively because a home care subsidy is not payable to the Service Provider under Part 3.2 of the Aged Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 and the Service Provider does not receive any other government funding in respect of the care. ● Your care recipient clients: ● Will not receive a GST-free supply of home care or care from the Service Provider under subsections 38-30(1), 38-30(2) or 38-30(4) of the GST Act respectively because a home care subsidy is not payable under Part 3.2 of the Aged Care Act 1997 or Part 3.2 of the Aged Care (Transitional Provisions) Act 1997 to the Service Provider and the Service Provider does not receive any other government funding in respect of the care. ● Will receive a GST-free supply of home care under subsection 38-30(3) of the GST Act to the extent those services are of a kind covered by item 2.1 (daily living activities assistance) of Part 2 of Schedule 1 to the Quality of Care Principles 2014 (Item 2.1). ● Are not making a creditable acquisition under section 11-5 of the GST Act in relation to the services provided to them by the Service Providers. ● You: ● Are not making a creditable acquisition under section 11-5 of the GST Act in relation to the services provided by the Service Provider as it is the care recipient (through you as their agent) that has acquired the services from the Service Provider. ● Are only making a GST-free supply under subsection 38-30(1) of the GST Act for the management services you provide to the care recipient for which you receive the Case Management and Administration Fee.