The Australian Taxation Office (ATO) recently released a GST Determination (GSTD 2011/4) to clarify the position relating to some accommodation payments by residents of aged care facilities.
What types of payments are covered by the Determination?
There are 2 types of accommodation payments made by residents of aged care facilities. These are:
- accommodation bonds – i.e. the interest free loan made to the approved provider on entering the facility; and
- accommodation charges – i.e. the ongoing charges for accessing care services, etc.
Accommodation bonds can be paid by lump sum, periodic payments or a combination of lump sum and periodic payments.
When a resident leaves an aged care facility, the approved provider will refund the balance of the lump sum payment (after deduction of a retention amount that the approved provider is entitled to keep).
Periodic payments are generally retained by the approved provider and not refunded to the resident upon the resident leaving the facility.
What is the GST treatment for the retention amounts?
The amounts retained by an approved provider are consideration for the GST-free supply of the residential care services made to residents.
Where the accommodation bond is paid by periodic payments and those payments are not refunded to the resident, the retained amounts are consideration for the GST-free supply of residential care services to the resident.
What is the GST treatment for the accommodation charges?
Accommodation charges are consideration for the GST-free supply of residential care services to the resident by the approved provider.
What is the date of effect of the Determination?
The Determination applies both before and after the date of issue (14 December 2011).
The Determination will not apply where it is in conflict with the terms of a settlement of a dispute before the date of issue.
Next steps for aged care providers
If you have been treating accommodation bonds or accommodation charges as taxable supplies, you will need to consider amending your business activity statements or other measures to address this.