Preamble
Yes. Accommodation bond retention amounts or accommodation charges paid by residents of a residential care facility, that is supplying GST-free services under subsection 38-25(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), are consideration for the GST-free supply of the residential care services that the approved provider [1] makes to residents under subsection 38-25(1) and the GST-free supply of accommodation that the approved provider makes to the resident under subsection 38-25(4) of the GST Act.
Periodic payments of an accommodation bond that are retained by the approved provider and are not refunded when a resident leaves the aged care facility are also consideration for the GST-free supplies of residential care services and accommodation that the approved provider makes to the resident under subsections 38-25(1) and 38-25(4) of the GST Act.
Stan is required to pay an accommodation bond to enter an Australian Government funded aged care facility. The amount of the assessed accommodation bond ,that Stan is required to pay is $100,000. Stan agrees to pay the amount of the assessed accommodation bond as a combination of a $50,000 lump sum and periodic payments of $420 per month .
Because the $50,000 lump sum payment paid by Stan is large enough to cover the monthly amounts that the approved provider is entitled to retain, Stan only needs to pay a periodic payment equivalent to the amount that the approved provider could have earned if the remainder of the accommodation bond had been paid as a lump sum .
The periodic payments Stan makes to the approved provider are not refundable and are kept by the approved provider. The amounts of these periodic payments are consideration for the GST-free services and accommodation supplied to Stan by the approved provider .
After 7 years, Stan leaves the facility and is entitled to the repayment of the bond less the retention amounts deducted and retained by the approved provider. [2] The amounts retained by the approved provider from the $50,000 lump sum payment made by Stan are consideration for the GST-free supplies of residential care services and accommodation, under subsections 38-25(1) and 38-25(4) of the GST Act, supplied to Stan by the approved provider .
This Determination applies both before and after its date of issue. However, this Determination will not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of this Determination (see paragraphs 75 and 76 of Taxation Ruling TR 2006/10).
Appendix 1 - Explanation
There are two types of accommodation payments that may be payable to Australian Government subsidised aged care facilities that are regulated by the Aged Care Act 1997 (Aged Care Act): • Residents requiring low care or entering an extra service place (at high or low level care) may be asked to pay an accommodation bond . • Residents requiring high care other than on an extra service basis may be asked to pay an accommodation charge .
An accommodation bond is an amount a resident of a residential care facility may be required to pay when they enter an aged care facility that is covered by the Aged Care Act.
There are a number of ways in which an accommodation bond may be paid, including: • a lump sum; • periodic (fortnightly or monthly) payments; or • a combination of lump sum and periodic payments.
Any part of an accommodation bond that is paid as a lump sum is in the nature of an interest-free loan from the resident to the approved provider. An approved provider is an approved provider as defined in the Aged Care Act and the entity that operates an aged care facility.
Periodic payments of an accommodation bond comprise of two components: • the income that the approved provider could be expected to have derived; and • the retention amounts that would have been permitted to be deducted, if the accommodation bond had been paid as a lump sum. [3]
When a resident leaves an aged care facility, the approved provider is required to refund the amount of the balance of the accommodation bond paid as a lump sum by the resident, less a monthly retention amount that provider is entitled to keep.
Periodic payments of accommodation bonds, discussed at paragraph 9 of this Determination, are retained by the approved provider and are not refunded when a resident leaves the aged care facility.
In certain circumstances when a resident enters an aged-care facility covered by the Aged Care Act, they may be required to pay a daily amount to the approved provider called an accommodation charge.
Section 9-15 of the GST Act provides that a payment is consideration for a supply if the payment is 'in connection with', 'in response to' or 'for the inducement' of a supply. Thus, there must be a sufficient nexus between a particular payment and a particular supply for the payment to be consideration for that supply. [4]
Accommodation bonds, which are in the nature of an interest-free loan to the approved provider of a residential care service under the Aged Care Act, are paid by an aged person to gain access to an Australian government funded aged care facility and access residential care services.
Therefore, the retention amounts deducted from an accommodation bond by the approved provider, and the periodic payments of an accommodation bond retained by the approved provider, are payments made by the resident 'in connection with' a package of services and accommodation supplied to them by the approved provider. That is, these amounts are consideration for a supply of services and accommodation supplied by the approved provider.
Where an approved provider makes GST-free supplies of residential care under subsection 38-25(1) of the GST Act, the supply of the accommodation to the resident in the course of making those GST-free supplies is also GST-free under subsection 38-25(4). Therefore, the retention amounts deducted from an accommodation bond by an approved provider and periodic payments of an accommodation bond are consideration for GST-free supplies of services and accommodation.
Like accommodation bonds, accommodation charges are paid by an aged person, to an approved provider, so that they can access the care services and accommodation supplied by the approved provider in the context of an aged care facility that is covered by the Aged Care Act. Therefore, accommodation charges are also consideration for the services and accommodation supplied by the approved provider, and accommodation charges paid to an approved provider that is making GST-free supplies of residential care under subsection 38-25(1) of the GST Act are consideration for GST-free supplies of services and accommodation under subsections 38-25(1) and 38-25(4) of the GST Act.