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Is the entity, a personal care service provider, making a taxable supply to a third party, a business entity, under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it provides personal care services to aged or disabled people pursuant to an existing agreement with the third party for the provision of those services?

Yes, the entity is making a taxable supply to the third party under section 9-5 of the GST Act when it provides personal care services to aged or disabled people pursuant to an existing agreement with the third party for the provision of those services.

The entity is a provider of personal care services.

A third party, a business entity, engages the entity to provide personal care services to aged or disabled people. The third party and the entity enter into a written agreement prior to the commencement of the services. The agreement creates a binding obligation for the provision of the personal care services by the entity and for payment by the third party. The agreement specifies the personal care services that are to be provided. These services are covered by item 2.1 (daily living activities assistance) of Part 2 of Schedule 1 to the Quality of Care Principles, made under section 96-1 of the Aged Care Act 1997.

The personal care services are provided to aged or disabled people in their own homes. The entity does not provide residential care to those aged or disabled people. The entity does not receive subsidies or funding in relation to the personal care services.

The entity is registered for goods and services tax (GST). The supply is made for consideration, in the course or furtherance of the entity's enterprise and is connected with Australia.

Under section 9-5 of the GST Act, an entity makes a taxable supply if: • it makes the supply for consideration • the supply is made in the course or furtherance of an enterprise that the entity carries on • the supply is connected with Australia, and • the entity is registered or required to be registered for GST.

However, section 9-5 of the GST Act further states that a supply is not a taxable supply to the extent that the supply is GST-free or input taxed.

The entity's supply satisfies the positive limbs of section 9-5 of the GST Act, but will only be a taxable supply if it is not GST-free under Division 38 of the GST Act or input taxed under Division 40 of the GST Act.

Of relevance is subsection 38-30(3) of the GST Act, which provides that a supply of 'community care' is GST-free if the supply is of services: • that are provided to one or more aged or disabled people (paragraph 38-30(3)(a) of the GST Act), and • 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 (paragraph 38-30(3)(b) of the GST Act).

Section 195-1 of the GST Act defines 'community care' as having the meaning given by section 45-3 of the Aged Care Act 1997. Subsection 45-3(1) of the Aged Care Act provides that 'community 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.

A supply can only be one of 'care' or 'assistance' if it is made to the person requiring that care or assistance. Therefore, 'personal care services' and 'personal assistance' cannot, by their nature, be things that are supplied to a business entity. Accordingly, where personal care services and personal assistance are provided to an aged or disabled person pursuant to an agreement with a third party that is a business entity, and the terms of the agreement are such that the third party is the recipient of the supply, it is not a supply of 'community care' under subsection 38-30(3) of the GST Act.

Therefore, it is necessary to determine: • who is the recipient of the entity's supply, and • whether that recipient is in receipt of 'community care' (that is 'personal care services' and/or 'personal assistance').

Where there are only two parties involved, generally there is a single supply to which the GST Act applies. For example, where those two parties are a personal care provider and an aged or disabled person, the recipient of the single supply is the aged or disabled person. That supply is GST-free community care where the requirements of section 38-30 of the GST Act are met.

However, where there is a third party involved in a transaction there may be more than one supply to which the GST Act applies. For example, the terms of an agreement between the personal care provider and the third party may result in the personal care provider making a supply to the third party which is not GST-free community care. This supply is additional to any supply made to the aged or disabled person.

The GST status of each supply is considered separately. The supply from the personal care provider to the third party is taxable where the requirements of section 9-5 of the GST Act are met, whilst the supply to the aged or disabled person is GST-free community care where the requirements of section 38-30 of the GST Act are met.

A third party will be the recipient of a supply by a personal care provider where: • the third party engages the personal care provider to provide something to them or to someone else • that third party, by agreement with the personal care provider, determines what is required to be provided to them or to someone else, and • there is a binding obligation between that third party and the personal care provider for the thing to be provided and the third party is liable to provide payment.

The third party engages the entity to provide personal care services. The written agreement between the entity and the third party specifies the services that are to be provided (that is, personal care services), and it creates a binding obligation for the provision of the personal care services by the entity and for payment by the third party. Therefore, the third party is the recipient of a supply by the entity.

As a business entity cannot receive 'care', the supply to the third party can not be a supply of 'community care' and therefore, is not GST-free under subsection 38-30(3) of the GST Act.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under any other provision in Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it provides personal care services to aged or disabled people pursuant to an existing agreement with the third party for the provision of those services. Note 1. As the entity is registered for GST, it is liable to remit 1/11th of the payment made by the third party. Where the third party is registered for GST, it is entitled to claim an input tax credit equal to the GST payable on the supply. Note 2. In circumstances where the arrangement between the personal care provider and the third party is such that the third party does not engage the care provider but merely makes payment on behalf of the patient, the patient is the recipient of the supply. This supply will be GST-free where all the requirements of subsection 38-30(3) of the GST Act are satisfied.