GST and supply of community care services to a third party

Is the entity, a supplier of personal care services, making a GST-free supply under subsection 38-30(3) 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 agreement between the entity and a third party for the provision of those services?

No, the entity is not making a GST-free supply under subsection 38-30(3) of the GST Act when it provides personal care services to aged or disabled people pursuant to an agreement between the entity and a third party for the provision of those services. The entity is a making a taxable supply under section 9-5 of the GST Act.

The entity is a supplier of personal care services.

A third party engages the entity to provide personal care services to aged or disabled people. The third party and the entity enter into a written agreement. 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 nature of the care services that are to be provided.

The provision of personal care services to aged or disabled people occurs 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 care services.

The personal care services that the entity provides are covered by item 2.1 of Part 2 of Schedule 1 to the Quality of Care Principles that are made under section 96-1 of the Aged Care Act 1997.

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

Under subsection 38-30(3) of the GST Act, 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).

First, it must be determined if the entity's supply is of 'community care'. 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.

It is implicit in the definition of 'community care' that a supply can only be 'community care' when it is a supply of personal care services and other personal assistance provided to a person requiring this care. Community care cannot be provided to a business entity. Accordingly, where services are supplied to a third party that is a business entity, such that the third party is the recipient of the supply, the supply is of professional services and not a supply of community care.

Section 195-1 of the GST Act defines 'recipient' in relation to a supply to mean 'the entity to which the supply was made'. Where there are only two parties to an arrangement (the supplier of the personal care services and the aged or disabled person), the recipient of the supply is the aged or disabled person. However, where there is a third party involved and the third party is the payer, the recipient of the supply may be the third party. Therefore, in order to determine the GST status of the supplies under the agreement, it is necessary to determine whether the recipient of the supply is the third party, or the aged or disabled person to whom the care is given.

The third party will be the recipient of the supply where: • that third party engages the entity to make, or to be available to make, a supply to them or to someone else; • that third party, by agreement with the entity, determines the nature of the supply to be made to them or to someone else; and • there is a binding obligation between that third party and the entity for the supply 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 nature of the services that are to be made 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, it is the third party that is the recipient of the supply. Accordingly, subsection 38-30(3) of the GST Act is not satisfied.

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 agreement between the entity and a third party for the provision of those services.