GST and residential care services

Is the entity, a proprietor and owner of a boarding house, making a GST-free supply of residential care services under subsection 38-25(3) of A New Tax System (Goods and Services Tax) Act 1999 (GST Act) when it provides care to its boarders either directly or by way of continuous facilitation of access to care providers?

No, the entity is not making a GST-free supply of residential care services under subsection 38-25(3) of the GST Act when it provides care to its boarders either directly or by way of continuous facilitation of access to care providers. The entity is making a taxable supply under section 9-5 of the GST Act.

The entity, a non-government funded supplier, owns a boarding house that provides full board. This includes lodging, three meals per day in a dining room setting, various personal services, laundry and weekly room cleaning.

The entity does not have a written agreement with boarders requiring it to provide both residential care services and accommodation.

The entity provides some care in varying degrees to boarders. This includes food preparation, maintenance and supervision of the taking of prescribed medication, assistance with personal health and hygiene or guidance and assistance with the management of the boarders' financial affairs.

The entity does not have either the equipment or the qualified staff necessary to meet all the care needs of its boarders. Therefore, they also facilitate access to care providers. The boarders do not pay the entity for the services provided by the care providers.

The entity is registered for the goods and services tax (GST). The supply satisfies the other positive requirements of section 9-5 of the GST Act.

In order for a supply of residential care services to be a GST-free supply, it must meet all of the criteria specified in subsection 38-25(3) of the GST Act.

Paragraph 38-25(3)(b) of the GST Act states that the supply of residential care services will be GST-free if 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 (Schedule 1).

The GST-free Supply (Residential Care - Non-Government Funded supplier) Determination 2000 (Aged Care Minister's Determination) requires that for services to be of a kind covered by Schedule 1, the services must be provided in the following circumstances: (a) the person (boarder) must have a continuing need for the services listed in item 2.1 or 3.8; and (b) the supplier has a written agreement with the person. Under the agreement the supplier is to provide a package made up of accommodation, services listed in item 2.1 or 3.8, and other services in Schedule 1 that are needed by the person; and (c) the charges for the services and accommodation are payable to the same entity (in this case the proprietor of the Boarding House).

For services to be of a kind covered by Schedule 1, all of the conditions in the Aged Care Minister's Determination need to be met. Paragraph (b) of the Aged Care Minister's Determination requires that: • the supplier must have a written agreement with the care recipient; and • under that written agreement the supplier must provide both the accommodation and the residential care services.

In this case, the entity does not have a written agreement requiring it to provide both residential care services and accommodation. Therefore, the requirements of paragraph (b) of the Aged Care Minister's Determination are not satisfied. Facilitating access to care providers is not the same as actually providing the care services. Where the entity merely facilitates access to care services, the entity is not the provider of those services.

Paragraph (c) of the Aged Care Minister's Determination requires that the charges for the services and accommodation are payable to the same entity. In this case, the charges for all of the care services provided by the care providers are not paid to the entity. That is, the boarder does not pay the entity for the services provided by the care providers. Therefore, the requirements of paragraph (c) of the Aged Care Minister's Determination are not satisfied.

As the entity does not meet paragraphs (b) or (c) of the Aged Care Minister's Determination, paragraph 38-25(3)(b) of the GST Act is not satisfied.

Furthermore, for a supply of services or accommodation to be GST-free under subsection 38-25(3) of the GST Act, it is essential that the supply be provided in a 'residential setting', in accordance with paragraph 38-25(3)(a) of the GST Act.

The term 'residential setting' is interpreted in the context of supplying 'residential care'. 'Residential care' is defined for the purposes of the GST Act as being care provided to a person in a residential facility in which the person is also provided with accommodation that includes: (i) appropriate staffing to meet the nursing and personal care needs of the person; and (ii) meals and cleaning services; and (iii) furnishings, furniture and equipment for the provision of that care and accommodation.

Residential care services require that the 'residential setting' have the necessary level of staffing and equipment to provide all of the care services required to meet the needs of the residents, including nursing care. That is, the 'residential setting' must have staff with the appropriate skills and training to meet the resident's care needs.

As the boarding house does not have the necessary equipment and qualified staff to provide these residential care services, the supplies the entity makes are not provided within a 'residential setting'.

As the entity does not meet all the criteria of subsection 38-25(3) of the GST Act, namely paragraphs 38-25(3)(a) and 38-25(3)(b), it is not considered to be supplying residential care services as defined in subsection 38-25(3) of the GST Act.

As the supply meets the positive requirements of section 9-5 of the GST Act and is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act; the supply will be a taxable supply.