GST issues registers

Charities consultative committee resolved issues

Part 12 - Disability services

Issue 1: How will the provision of specialist disability services by a government funded supplier be affected by GST?

Principle

Section 38-40 provides that all services for which the supplier receives funding under the Disability Services Act 1986, or under a complementary state or territory law, will be GST-free.

Specific questions and answers

Question 1. Many disability services are specifically funded under a 'business model', where the government funds extra support staff to assist people with disabilities, but the organisation is responsible for running a business. How will this be treated?

Non-interpretative - straight application of the law

If the disability service business produces commercial supplies then those supplies will be subject to GST and the entity will be able to claim input tax credits on any creditable acquisitions acquired to make the supply.

Question 2. What will be the treatment of organisations with both 'commercial' and 'non-commercial' roles? The products produced from sheltered workshops will attract GST yet the employment assistance component will be GST-free. How will this be done?

Non-interpretative - straight application of the law

Grants are consideration for supply and they will be subject to GST. The entity receiving the grant will need to remit 1/11 of the amount to the ATO. The entity that provides the grant will pay the GST inclusive price and will be entitled to an input tax credit.

Question 3. Will disability organisations which produce goods for which there is not a traditional market be considered commercial and therefore be subject to GST? Braille books are a good example of this.

Non-interpretative - straight application of the law

The grant from the government to the disability service business will be subject to GST, whereas the salary and wages paid by the disability service to its employees is not subject to GST. The government will be able to claim an input tax credit for 1/11 of the grant paid to the disability service business. Business enterprises that are registered for GST will be able to claim full input tax credits for creditable acquisitions that relate to taxable and GST-free supplies.

Braille books are a GST-free medical aid.

Question 4. Is the treatment with respect to GST different for disability services that have different funding arrangements such as HACC or variations between the states?

Non-interpretative - straight application of the law

Grants to the disability services will be subject to GST. The reason is that the government is purchasing a service from the organisation. The government will be able to claim an input tax credit for 1/11 of the grant paid to the disability service. Disability services that are registered for GST will be able to claim full input tax credits for creditable acquisitions that relate to taxable and GST-free supplies.

Question 5. A supported service organisation undertakes two retail types of operations of which one is funded by a Commonwealth grant? Is there any difference in the GST treatment of these operations since one is supported by government funding?

Non-interpretative - straight application of the law

Both types of retail operations will be considered commercial and therefore subject to GST where the normal rules apply.

Question 6. How will cars for disabled people be treated during the transitional period for GST implementation?

Non-interpretative - straight application of the law

The following table summarises the treatment of cars supplied to disabled persons and assumes that the person receiving the car meets the requirements in sections 38-505 and 38-510.

It is accepted that the supply of a car by means of a lease is the 'supply of a car' for the purposes of sections 38-505 and 38-510.

A lease is a single supply, notwithstanding the fact that Division 156 treats a lease as a progressive or periodic supply for the purposes of the attribution rules.

It is the intention of the provisions that the supply of a car be GST-free if it is intended that the car be used during all of the Subdivision 38-P period, counting from the first supply. Therefore, at the time of the payment of the residual there is no requirement that the car be intended to be used during all of the Subdivision 38-P period, starting from the payment of the residual.

For more information about cars for people with disabilities, refer to the web guidance, Tax concessions - cars available at ato.gov.au

Question 7. Cars for the disabled - will they be GST-free on purchase or will a refund be granted?

Non-interpretative - straight application of the law

The legislation provides that a supply of a vehicle to certain disabled persons will be GST-free. On this basis GST should not be charged and then refunded.

If the person with a disability does not have a declaration for exemption before purchasing the car or car parts, the supplier may charge GST. The purchaser may be able to obtain a refund of the GST from the supplier after the purchase but it is simpler if the declaration is provided before the purchase. Under the GST law, the ATO is unable to provide the purchaser with a direct refund of the GST paid on a car or car parts.

Question 8. What happens where a charity (disability service) gives a family money to purchase care from a provider of their choice? How do they account for this and what can the family spend their money on?

Non-interpretative - straight application of the law

The charity is not providing the care directly and is therefore not making a supply to the recipient of the care. When providing the money directly to the family they are in effect providing a grant of assistance to the family. The family would generally not be registered for GST and therefore the supply would not be subject to GST. When the family uses the funds to acquire care services those services will be GST-free if they fall within sections:

•

38-7 (medical services)

•

38-10 (other health services)

•

38-15 other government funded health services)

•

38-20 (hospital treatment)

•

38-25 (residential care etc)

•

38-30 (home care), or

•

38-35 (flexible care).

If the care does not fall within these sections the recipient will be charged GST on the provision of the service. The charity can choose to pay the family the full amount (inclusive of GST) but they will not be entitled to an input tax credit for any GST amounts because the supply of the assistance to the family is not a taxable supply.

Question 9. Will computers used by disabled people be GST-free?

Non-interpretative - straight application of the law

A supply of a medical aid or appliance is GST-free if it is specified in Schedule 3 of the GST Act or is specified in the regulations. Further, to be GST-free, the specified item must also be specifically designed for people with an illness or a disability, and is not widely used by people without an illness or disability.

Therefore, ordinary computers will not be GST-free as they are widely used by people without an illness or disability.

However, certain hardware and software that is specifically designed for people with disabilities is GST free, including:

•

printers and scanners specifically designed for the disabled

•

alternative keyboards

•

computer modifications required for the disabled,

•

enlarged text computer monitors for the visually impaired.

Issue 2: How will the provision of disability supports to participants under the National Disability Insurance Scheme be affected by GST?

Non-interpretative - straight application of the law

Principle

Section 38-38 of the GST Act provides that certain supplies of disability supports to participants of the National Disability Insurance Scheme (NDIS) are GST-free.

A supply to a participant of the NDIS is GST-free under section 38-38 of the GST Act if the supply:

(a)

is a supply to a participant for whom a participant's plan is in effect under section 37 of the National Disability Insurance Scheme Act 2013; and

(b)

is a supply of one or more of the reasonable and necessary supports specified in the statement of supports in the participant's plan; and

(c)

is made under a written agreement, between the supplier and the participant (or another person) that:

(i)

identifies the participant; and

(ii)

states that the supply is of one or more of the reasonable and necessary supports specified in the statement of supports in the NDIS plan; and

(d)

is of a kind determined in a legislative instrument by the Minister responsible for Disability Services.

For more information about the application of section 38-38 of the GST Act, refer to GST and the National Disability Insurance Scheme.

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