Retirement village operators in the not-for-profit sector have had both a win and a loss over the GST treatment of their operations.
Some not-for-profit retirement village operators lost out on the GST concession that allowed them to claim the GST input costs on building their facilities.
They, along with for-profit aged care providers, also looked like losing the GST rebate attached to providing nursing assistance or daily living care to their residents.
The Australian Tax Office decreed that it would no longer grant GST rebates to the aged care sector for either building costs, in the case of not-for-profits, or on the GST free status attached to providing nursing assistance or daily living care.
However, Revenue Minister Mal Brough said the Government would legislate some minor amendments to the New Tax System to remove public uncertainty to GST treatment in retirement villages.
He said the Government’s policy regarding the GST-free treatment of serviced apartments in aged care villages had not changed.
“Put simply, residents of serviced apartments in retirement villages who require daily living and nursing assistance will receive these services GST free and the operators of those serviced apartments will be required to provide the daily living and nursing care in line with the Quality of Care principals under the Aged Care Act,” Mr Brought said.
PricewaterhouseCoopers indirect tax partner Ken Fehily said the not-for-profit sector would still lose its GST rebates on construction costs, something that could pose a major problem for the sector’s expansion.
He said there had been concessions for not-for-profit organisations when the GST came in.
However, the question arose about what happened when the not-for-profit and for-profit sectors were involved in the same business.
The ATO solved this by looking at the motives of the organisation.
It decided that if a charity was selling something for less than 75 per cent of the market value then it was GST free.
Mr Fehily said the problem arose for not-for-profit aged care providers because while they were selling their aged care services at less than 75 per cent of market value, some were asking their residents to make an interest free loan to the organisation at the same time.
He said the ATO had decided that the interest free loan exceeded the less than 75 per cent of market provision and they would have to pay GST costs on any construction of aged care villages they had built after 2000.
The removal of the GST-free status for all inputs required in the care of somebody who required nursing or daily living services threatened both not-for-profit and for-profit aged care providers.
Retirement Village Association WA chairman Ray Fitzgerald said the ATO’s interpretation of the GST-free system for those who required care came to setting.
"If they were in a government-run hostel they were covered by the GST-free status," he said.
"But the question of GST-free eligibility was over people in independent living units that they had paid for."
Mr Fitzgerald said the ATO’s stand on GST-free status was contrary to the Federal Government’s own ageing-in-place policy.
Under that policy people were to go into aged care villages when they turned 55. At that stage they would be in independent living units.
However, as they aged and required additional services, those services would be supplied by the group running the village.
Mr Fitzgerald said the ATO’s proposed change to the GST-free rulings would have been worth an extra $12 to $15 a week to residents in aged care facilities.
He said the industry had been seeking certainty on the GST status of aged care providers for some time.
"It is not a big cost to the Government to provide us with some certainty," Mr Fitzgerald said.
