The Australian Tax Office (ATO) has released a Draft Addendum to a current GST Ruling (GSTR 2012/3) regarding the GST treatment of care services and accommodation in retirement villages and privately funded nursing homes and hostels.

The impact of the Draft Addendum, if finalised as a public ruling, will be that residents living in a retirement village or aged care facility that consist of freestanding units, rooms or houses will have GST added to the price of services provided to those residents at those facilities.

However, if a resident is at a facility that has rooms and units all inside the one building (or at least are connected by a common corridor/walkway (as described below)), there will be no GST added to the price of services provided to those residents at those facilities.

The substantial amendments to the Ruling are as follows:

  1. The definition of ‘serviced apartment’ under section 195-1 of A New Tax System (Goods and Services Tax) Act 1999 is broadened by reference to the requirement for a ‘common corridor’ that connects the apartments in a single complex of apartments such that:

    1. a common corridor includes internal and external passageways that connect the apartments in a single complex of apartments;

    2. a ‘single complex of apartments’ includes a single building in which each apartment shares a common wall/s with other apartments and does not include a single freestanding apartment ;

    3. a common corridor does not include an uncovered passageway that connects an apartment to another apartment that is outside of the single complex of apartments, nor pathways or roads; and

    4. a common corridor must provide access to and between all apartments in the single complex and may include a covered passageway which provides protection from the elements, is lit and is wide enough to allow passage of mobility assistance devices.

      The extended definition of ‘serviced apartment’ provides for apartments/units which have physical characteristics indicating they are designed for people who require daily living activities assistance and nursing services.

      Services supplied to residents of ‘serviced apartments’ are taken to be provided in a residential setting and may be GST-free supplies of residential care.

  2. If a unit is freestanding (not linked by common walls) then the unit will not be a part of a single complex of apartments accessible from an internal/covered passageway linking the apartment to other apartments and accordingly will not satisfy the definition of ‘serviced apartment’.

    Services supplied to residents of such apartments are not GST-free supplies of residential care.

  3. One retirement village may comprise more than one single complex.

The Addendum is only in draft phase and is open for public comment to the ATO until 26 February 2016.

A further alert will be issued when the final Addendum is issued and becomes a public ruling for the purposes of the Taxation Administration Act 1953.

For further information regarding Retirement Living and Supported Accommodation please contact:

Stefan Manche
Associate
Harwood Andrews
T: 5226 8542
E: smanche@harwoodandrews.com.au

Sam Rowland
Lawyer
Harwood Andrews
T: 5226 8595
E: srowland@harwoodandrews.com.au  

Andrew Robson
Principal
Harwood Andrews Ballarat
T: 03 5329 6920
E: arobson@harwoodandrews.com.au