How secure is your GST free status?

Do you operate an aged care residential service or a residential care service for disabled persons?

The ATO has just finalised a ruling to help you determine whether the services you provide are GST free.

As a residential care provider, you’re probably aware that there are three basic criteria you must satisfy in order to qualify for GST free status:

1. You must provide services to one or more aged or disabled persons in a residential setting.
2. The services you supply must be of a kind specified in Schedule 1 of the Quality of Care Principles (a copy of the principles is available here).
3. The services must include, and must only be provided to, people who need daily living activities assistance and nursing services, as set out in Schedule 1 of the Quality of Care Principles.

The new ruling, which applies to care services and accommodation provided in retirement villages and privately funded nursing homes and hostels, now clarifies the meaning of “residential setting” in the first criterion.

Firstly, according to the ATO, the following locations do not meet the criteria specified above for GST free status:

• a person’s private home; or
• any place where the care outlined above is secondary in nature to the medical services provided by the facility, such as a hospital or psychiatric facility.

Secondly, if you operate a privately funded nursing home or aged care hostel, you are likely to qualify for GST free status, provided:

• your residents do not have an ownership interest in the property;
• in certain circumstances, you can move the residents at your discretion;
• the homes or hostels are marketed to the public as a place for care and accommodation, rather than just accommodation; and
• your residents have limited rights compared to residents who own or lease their own properties.

Lastly, the ATO has outlined examples of residential and non-residential care to illustrate the new criteria. The ruling outlines the following points:

1. An independent living unit in a retirement village is not considered to be GST free.
2. A serviced apartment in a retirement villages is also not considered to be GST free unless there is a written agreement which states that the operator of the village is required to provide daily meals and heavy laundry services to all of the residents in the apartment.

The ruling contains a lot of detail, so it might be worth reading to see how it impacts on you. You can find a copy of the ruling here.

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Tags: GST