How will the provision of care for the aged be affected by GST?

Principle

Generally, if it satisfies the provisions of residential care, that is, payable under the appropriate aged care acts stated in s38-25 (1), (2) & (3), then it will be GST-free.

Specific Questions and Answers

1. There are a number of different ways in which residents of Aged Care facilities can receive their meals including:
• Attending the meals area in the facility.
• Meals provided to those same residents by services funded under the HACC program.
• Meals that are purchased for re-heating and delivered to private health care clients.

What will be the GST treatment in each case?

In each of these examples if the meals are provided as part of residential care as determined in s38-25 or community care as determined in s38-30 they are GST-free.

If they are not GST-free under these provisions and the supplies are for consideration that is equal to or greater than 50% of the GST inclusive market value then the meals would be taxable. If the consideration for the meals is less than 50% of the GST inclusive market value (or 75% of the cost of supply and the facility is a charitable institution registered for GST then the supplies would be GST-free.

2. Is respite care GST-free?

   Yes. Community care that is GST-free under s38-30 includes respite care for both aged and disabled people.

3. Aged care facilities offer a core of services that are included in the initial contract of the supply of accommodation, additional services can be purchased by residents as required. How will GST apply for both core and additional services where there is a mixture of funded and unfunded positions?

   Residential care that is GST-free under s.38-25 includes accommodation, appropriate staffing, meals, cleaning, furniture and equipment. Where these services are part of residential care, (and the conditions prescribed in s.38-25 are satisfied) they will be GST-free. Note; a supply of services that is covered by an extra services fee within the meaning of Division 35 of the Aged Care Act 1997 is only GST-free to the extent that the services are covered by Schedule 1 to the Quality of Care Principles.

4. Self care units are aged care facilities that have residents some of whom receive funding and others that do not. The numbers of funded to unfunded positions varies constantly. Does this mean that residents who are funded will receive GST-free supplies and those that are not funded will have to pay the GST?

Supply of residential care will be GST-free under s38-25 if those services:

• are covered by Schedule 1 of the Quality of Care Principles;
• are provided through a residential care service within the meaning of the 1997 Aged Care Act; and
• the supplier is an approved provider within the meaning of the 1997 Aged Care Act.

Provided the care qualifies under s38-25 the supply is GST free irrespective of whether they are funded or unfunded positions.

5. What is the position on meals provided in Aged Care Facilities given the different levels of care which are involved?

   If the provision of different levels of care are services under s38-25 then there should be no difference in how they will be treated as the provision of meals including special diet meals are GST-free.

6. Are self-care units to be input taxed?

   Not in all cases. For some, the supply of self-care units will be GST-free. The supply will be GST-free if the units are considered a supply of residential care. This will occur where they are supplied by a residential care facility that qualifies for funding under the Aged Care Act 1997, a facility that receives Commonwealth, State or Territory funding and is in accordance with a determination from the relevant Minister. Residential care is defined to include personal care and/or nursing care provided to a person in a facility in which the person is also provided with accommodation, appropriate staffing, meals, cleaning, furniture and equipment.

   Where the supply is not the supply of residential care the supply of accommodation will be GST-free if the units are supplied by a charitable institution and for consideration that is less than 75% of the market value.

   In all other cases the actual supply of self-care units may be input taxed. No GST will be payable on the supply of the units and there is no entitlement to input tax credits for acquisitions that relate to the supply. Special rules apply where the commercial residential premises are used for long-term accommodation, for example, accommodation is rented for a continuous period of 28 days or more. The supplier may treat such supplies as input taxed, or may elect to treat the supply as subject to concessional treatment. The concessional treatment means that the GST value is reduced by 50% if the premises are predominantly used for long-term accommodation.

7. Are special accommodation homes (aged care), retirement villages, nursing homes and hostels regarded as commercial or residential in regard to GST? We understand that residential accommodation is input taxed.

Generally if the accommodation satisfies the provisions in Sections 38-25 (1), (2) or (3) of the GST Act, the supply of the accommodation will be GST-free.

Residential care defined under s41-3 of the Aged Care Act 1973 will be GST-free under s38-25 if those services:

• are covered by Schedule 1 of the Quality of Care Principles (this includes the provision of goods such as meals, toiletries and consumables in the course of providing residential care); and
• are provided through a residential care service within the meaning of the 1997 Aged Care Act; and
• the supplier is an approved provider within the meaning of the 1997 Aged Care Act.

A supply of services supplied through private sector residential care facilities not receiving government funding is also GST-free if it is provided in accordance with a determination by the Minister responsible for Aged Care.

Where the accommodation provided is not residential care and it is supplied in a residential premises it will be an input taxed supply. However, if the accommodation is provided by a charity for less than 75% of the market value or the cost of supply the supply would be GST-free.

If the accommodation is not residential care then where it is provided in hostels and boarding houses it would be commercial accommodation.

The supply of accommodation in a commercial residential premises (including for example accommodation in boarding houses and hostels) is a taxable supply unless the non-commercial test above applies. Where the supply of accommodation is taxable, the special rules contained in Division 87 may be applicable where the supply is of long term accommodation (28 days continuous) in commercial residential premises. These rules have the effect of applying a lower rate than would otherwise apply thus reducing the amount of GST payable.

8. Where an aged care or childcare centre has been built on residential land and the property is under one thousand square meters, the lease is classed as a retail tenancy under the Retail Tenancy Act. Is the rental income subject to GST?

The rental of property is a taxable supply unless the property is classed as 'residential premises' (in which case the supply would be input taxed). In this instance, the rental property would not constitute residential premises. Accordingly, if the supplier is registered for GST, they would have to charge GST on the supply. If the tenant is registered, and is utilising the property in the course of an enterprise, they would be able to claim input tax credits in respect of the GST paid to the landlord.