- Many disability services are
specifically funded under a "business model", where the Government funds extra
support staff to assist people with disabilities, but the organisation is
responsible for running a business. How will this be treated?
If the disability service
business produces commercial supplies then those supplies will be subject to
GST and the entity will be able to claim input tax credits on any creditable
acquisitions acquired to make the supply.
- What will be the treatment of
organisations with both "commercial" and "non-commercial" roles? The products
produced from sheltered workshops will attract GST yet the employment
assistance component will be GST-free. How will this be done?
Grants are consideration for
supply and they will be subject to GST. The entity receiving the grant will
need to remit 1/11 of the amount to the ATO. The entity that provides the
grant will pay the GST inclusive price and will be entitled to an input tax
credit.
- Will disability organisations
which produce goods for which there is not a traditional market be considered
commercial and therefore be subject to GST? Braille books are a good example
of this.
The grant from the Government to
the disability service business will be subject to GST, whereas the salary and
wages paid by the disability service to its employees is not subject to GST.
The Government will be able to claim an input tax credit for 1/11 of the grant
paid to the disability service business. Business enterprises that are
registered for GST will be able to claim full input tax credits for creditable
acquisitions that relate to taxable and GST-free supplies.
The ATO, in consultation with
representatives of the Charities Consultative Committee, is developing
guidelines to assist entities determine the market value of supplies where the
market is not clearly defined. This market value will then be used to
determine whether a supply is commercial or non-commercial and therefore
taxable or GST-free.
Braille books are a GST-free
medical aid.
- Is the treatment with respect
to GST different for disability services that have different funding
arrangements such as HACC or variations between the states?
Grants to the disability services
will be subject to GST. The reason is that the Government is purchasing a
service from the organisation (see the response to 4a). The Government will be
able to claim an input tax credit for 1/11 of the grant paid to the disability
service. Disability services that are registered for GST will be able to claim
full input tax credits for creditable acquisitions that relate to taxable and
GST-free supplies.
- A supported service
organisation undertakes two retail types of operations of which one is funded
by a Commonwealth grant? Is there any difference in the GST treatment of these
operations since one is supported by government funding?
Both types of retail operations
will be considered commercial and therefore subject to GST where the normal
rules apply.
- How will cars for disabled
people be treated during the transitional period for GST
implementation?
The following table summarises
the treatment of cars supplied to disabled persons and assumes that the person
receiving the car meets the requirements in sections 38-505 and
38-510.
|
Purchase of car on or after
1 July 2000 (includes purchase under a hire purchase agreement)
|
GST-free if person intends
to use car during all of the Subdivision 38-P period. |
|
Lease of car on or after 1
July 2000 |
All lease payments GST-free
if person intends to use car during all of the Subdivision 38-P period,
ie the lease must be at least as long as the Subdivision 38-P
period.
Lessor can claim input tax
credit for purchase of car, as paragraph (4)(c) of section 20 of the
A New Tax System (Goods and Services Transition) Act 1999 (the
Transition Act) applies. |
|
Payment of residual
|
GST-free if lease was
GST-free |
|
Lease of car before 1 July
2000 |
Lease payments on or after
1 July 2000 GST-free if lease was exempt from sales tax.
|
|
Payment of residual
|
GST-free if lease was
exempt from sales tax |
It is accepted that the supply of
a car by means of a lease is the "supply of a car" for the purposes of
sections 38-505 and 38-510.
A lease is a single supply,
notwithstanding the fact that Division 156 treats a lease as a progressive or
periodic supply for the purposes of the attribution rules.
It is the intention of the
provisions that the supply of a car be GST-free if it is intended that the car
be used during all of the Subdivision 38-P period, counting from the first
supply. Therefore, at the time of the payment of the residual there is no
requirement that the car be intended to be used during all of the Subdivision
38-P period, starting from the payment of the residual.
Other Matters
It is likely that a Bill will be
presented to Parliament that will amend section 20 of the Transition Act to
ensure that an acquisition by way of a lease will not be treated as an
acquisition to which section 20 applies, ie the phase-in of input tax credits
will not apply to an acquisition by way of a lease. This is the current
interpretation and the amendment will confirm that interpretation by putting
the matter beyond doubt.
The fact that Subdivision 38-P
only applies to cars whereas the equivalent sales tax exemptions apply to
motor vehicles (and accordingly covers such vehicles as motor cycles and
trucks) has been raised with Government. In its present form, Subdivision 38-P
only covers cars, and cannot be extended to other types of
vehicles.
A document detailing the
procedures to be followed when purchasing or leasing a car to which
Subdivision 38-P applies is currently being developed by the Motor Vehicle
Industry team.
- Cars for the disabled - will
they be GST-free on purchase or will a refund be granted?
The legislation provides that a
supply of a vehicle to certain disabled persons will be GST free. On this
basis GST should not be charged and then refunded. It is suggested that
persons complying with the requirements submit documentation to the ATO
supporting their claim. A ruling/certificate could then be issued to these
persons which they can present to the car dealer and thereby purchase the
vehicle GST free.
- What happens where a charity
(disability service) gives a family money to purchase care from a provider of
their choice? How do they account for this and what can the family spend their
money on?
The charity is not
providing the care directly and is therefore not making a supply to the
recipient of the care. When providing the money directly to the family they
are in effect providing a grant of assistance to the family. The family would
generally not be registered for GST and therefore the supply would not be
subject to GST. When the family uses the funds to acquire care services those
services will be GST-free if they fall within sections;
38-7 (medical
services),
38-10 (other health
services),
38-15 other
government funded health services),
38-20 (hospital
treatment), or
38-25 (residential
care etc).
If the care does
not fall within these sections the recipient will be charged GST on the
provision of the service. The charity can choose to pay the family the full
amount (inclusive of GST) but they will not be entitled to an input tax credit
for any GST
amounts because the
supply of the assistance to the family is not a taxable supply.
- Will computers used by
disabled people be GST-free?
A supply of a medical aid or
appliance is GST-free if it is specified in Schedule 3 of the GST Act or is
specified in the Regulations. Further, to be GST-free, the specified item must
also be specifically designed for people with an illness or a disability, and is
not widely used by people without an illness or disability.
Therefore, ordinary computers will
not be GST-free as they are widely used by people without an illness or
disability.
However, certain hardware and
software that is specifically designed for people with disabilities is GST free,
including:
- Printers and scanners
specifically designed for the disabled;
- Alternative keyboards;
- Computer modifications required
for the disabled;
- Enlarged text computer monitors
for the visually impaired.
