Senate

Revised Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

GST-free treatment for National Disability Insurance Scheme funded supports

Outline of chapter

7.1 Schedule 9 to this Bill amends the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to ensure that certain services and other things ('supports') supplied to a National Disability Insurance Scheme (NDIS) participant as part of an NDIS plan under the National Disability Insurance Scheme Act 2013 (NDIS Act) are GST-free.

7.2 All legislative references in this chapter are to the GST Act unless otherwise stated.

Context of amendments

7.3 Supplies of various disability supports are GST-free under a number of provisions in Subdivision 38-B if the supplier receives government funding for the supplies. These provisions include but are not limited to the following:

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section 38-40 which provides that a supply of services is GST-free if the supplier receives funding under the Disability Services Act 1986 or under a complementary State or Territory law in respect of the services;

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subsection 38-30(2) which provides that a supply of care is GST-free if the supplier receives funding under the Home and Community Care Act 1985 in connection with that supply; and

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subsection 38-30(4) which provides that a supply of care is GST-free if the supplier receives funding from the Commonwealth, a State or a Territory in connection with the supply; and the supply is of a kind determined in writing by the Aged Care Minister.

7.4 However, the NDIS government funding for some of these disability support types is not provided to the suppliers. Instead, the NDIS funding (referred to as 'NDIS amount' in the NDIS Act) is provided to the NDIS participant (that is, the person with a disability) or another person managing the funding for the participant.

7.5 The NDIS funding may be:

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managed by the participant (or a nominee of the participant) in accordance with the participant's plan for purchasing and paying for the supports;

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managed by a registered plan management provider in accordance with the participant's plan for purchasing and paying for the supports required by the participant; or

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managed by 'DisabilityCare Australia' (DCA) (the Agency managing the NDIS) in accordance with the participant's plan for purchasing and paying for the supports required by the participant.

7.6 A supply to an NDIS participant of a support they purchase is not GST-free under any of the current GST provisions which rely on the supplier receiving government funding for the supplies. This is because the supplier does not receive NDIS funding from the government for the supplies. However, some limited kinds of these supplies may be GST-free under other provisions in the GST Act, which do not require the supplier to be in receipt of government funding.

7.7 These amendments ensure that certain supplies to an NDIS participant of supports that are part of an NDIS plan are GST-free.

7.8 Suppliers may receive non-NDIS government funding for supplies of disability supports that are not part of an NDIS plan. These supplies will continue to be GST-free if a relevant provision in Subdivision 38-B is satisfied.

Summary of new law

7.9 Schedule 9 amends the GST Act to ensure that certain disability supports supplied to an NDIS participant as part of an NDIS plan under the NDIS Act are GST-free.

7.10 Specifically, Schedule 9 requires that for a supply to be GST-free it must be made under a written agreement between the supplier and the participant (or another person on behalf of the participant) and it must be of a kind which is included in a determination by the Disability Services Minister.

7.11 The amendments made by this Schedule apply in relation to supplies made on or after the commencement of provisions in the NDIS Act relating to participants' plans.

Comparison of key features of new law and current law

Detailed explanation of new law

Overview

7.12 The amendments require that for a supply of a disability support to be GST-free it must be a reasonable and necessary support supplied to a participant as specified in the participant's plan.

7.13 A disability support could be any support provided, by a person or entity, intended to assist people with disability to realise their potential for physical, social, emotional and intellectual development, and participate in social and economic life.

7.14 The supply must also be made under a written agreement between the supplier and the participant or another person (including a person acting on behalf of the participant). The written agreement provides supporting evidence that the appropriate GST treatment has been applied for the relevant supplies.

7.15 Also, for the supply to be GST-free, it must be of a kind determined in a legislative instrument by the Minister in charge of disability services.

Supply must be of one or more reasonable and necessary supports specified in the participant's plan

7.16 Section 33 of the NDIS Act specifies what information must be included in a participant's plan, including a statement of participant supports. This statement sets out any general supports that will be provided to, or in relation to, the participant, and any reasonable and necessary supports that will be funded under the NDIS.

7.17 In order to be GST-free, the supply of a disability support to a participant must be a supply of one or more 'reasonable and necessary supports' (as referred to in paragraph 33(2)(b) of the NDIS Act) that is specified in the statement of participant supports in the participant's plan. [Schedule 9, item 1, paragraphs 38-38(a) and (b)]

Example 7.68 : Supply must be a reasonable and necessary support specified in the participant's statement of participant supports Jason is an NDIS participant who owns his own home. The statement of participant supports in Jason's NDIS plan specifies that he is to be provided with an NDIS amount of $20,000 for home modifications to his bathroom. However, Jason identifies this as a good time to renovate his kitchen and engages the same builder. For the purposes of this example, it is assumed that home modifications is specified in a determination made by the Minister for Disability Services as a kind of support that will be GST-free if the other conditions in section 38-38 are met. However, DCA has determined that the renovation to the kitchen did not qualify as a reasonable and necessary support in Jason's particular circumstances. It is therefore not listed as a reasonable and necessary support in Jason's statement of participant supports. To determine whether the supply of the renovation to the kitchen is GST-free under section 38-38, the builder checks to see if it is listed as a reasonable and necessary support in Jason's NDIS plan. Because the kitchen renovation is not listed as a reasonable and necessary support in Jason's plan, the supply is not GST-free under section 38-38.

7.18 If required, DCA can work with a participant who is self-managing the funding for their supports to develop documentation that sets out relevant reasonable and necessary supports from their plan, for the participant to give to suppliers.

7.19 The plan must be in effect under section 37 of the NDIS Act. This requires the CEO of DCA to have approved the participant's statement of participant supports. The plan ceases to be effective when the plan is replaced by another plan, or the participant ceases to be an NDIS participant. [Schedule 9, item 1, paragraph 38-38(a)]

Written agreement requirement

7.20 To ensure that only a supply to a participant that is specified as a 'reasonable and necessary support' in a participant's NDIS plan is GST-free, the supply must be made under a written agreement between the supplier and the participant (or another person on behalf of the participant) that:

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identifies the participant; and

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

[Schedule 9, item 1, paragraph 38-38(c)]

7.21 For the purposes of these amendments, a 'written agreement' is not limited to legally executed contracts but may include documents (including those in electronic form) which provide written evidence of a legally binding obligation on the supplier to make the supply to the participant as specified in the participant's plan. If the relevant parties can demonstrate that they have a binding agreement in written form that identifies the participant and states that the supply is a supply of one or more reasonable and necessary supports as specified in the participant's plan, the requirement for a written agreement is satisfied.

7.22 The written agreement may be a single document. Alternatively, it may be evidenced from several documents. Accordingly, correspondence between the parties and receipts or invoices issued by the supplier that are consistent with the existence of a binding agreement may be sufficient evidence of the written agreement.

Example 7.69 : Supply made under a written agreement in accordance with a self-managed participant's plan

Joe, an NDIS participant, requires five hours of support on a weekly basis which is specified as a reasonable and necessary support in his NDIS plan. He requests XYZ Co (XYZ) to supply him with the support for a period of three months based on the NDIS published price. Joe provides XYZ with a letter identifying that he is an NDIS participant, and also provides XYZ with the relevant part of his NDIS plan that specifies the type of support that he is to be provided with.

XYZ writes to Joe to confirm its agreement to provide the support, including the start date, and signs the letter. For the next three months, XYZ supplies Joe with the requested supports. These supplies are made under a 'written agreement' that identifies Joe and states that the supplies are a reasonable and necessary support specified in Joe's plan.

If all the other requirements of section 38-38 are satisfied, the supplies that XYZ makes to Joe as specified in Joe's plan are GST-free.

Example 7.70 : Supply made under a written agreement in accordance with a participant's plan managed by a plan management provider registered with DCA

ABB Co (ABB) is registered with DCA as a plan management provider for NDIS participants. A number of NDIS participants have engaged ABB to manage their NDIS plans for them.

One participant identifies that they are interested in considering Elite, a provider of disability supports, to deliver one of the reasonable and necessary supports in their plan. With the participant's consent, ABB emails Elite with the relevant requirements of the participant, including the participant's name and the number of hours of support needed as specified in the participant's plan as a reasonable and necessary support. Elite meets with the participant and they discuss arrangements for the delivery of the supports. Elite writes to the participant and ABB setting out the details of the support to be provided and the price to be paid, but makes no reference to the participant's plan. ABB replies in writing to confirm the participant's agreement to receive the supports from Elite.

The 'written agreement' requirement under section 38-38 is satisfied by the written evidence provided by the combination of ABB's email setting out the supports required in accordance with the reasonable and necessary supports specified in the participant's plan, Elite's letter confirming support arrangements and ABB's letter of acceptance.

Neither Elite's letter nor ABB's letter of acceptance, nor both together would be sufficient evidence of the written agreement. This is because these documents do not state that the supply is of a reasonable and necessary support as specified in the participant's plan. ABB's email on its own is also not sufficient evidence of the written agreement because it does not evidence a binding obligation on Elite to make the supplies to the participant.

If all the other requirements of section 38-38 are satisfied, the supplies Elite makes to the participants in accordance with their plans are GST-free.

Supply must be of a kind determined in a legislative instrument by the Minister in charge of disability services

7.23 These amendments enable the Disability Services Minister to make a determination by legislative instrument of the kinds of supports that are GST-free. [Schedule 9, items 1 and 2, paragraph 38-38(d) and subsection 177-10(5)]

7.24 This approach ensures that GST-free treatment is provided only for those kinds of supports specified in the legislative instrument. This minimises the risk of extending GST-free status in unintended circumstances. It also provides flexibility for revising the determination, if required, as circumstances change.

7.25 A legislative instrument made under this power may apply retrospectively, to align with the application date for the measure. This retrospective power deals with the possibility that the legislative instrument might not be made until after the application date for the amendments in this Schedule. [Schedule 9, item 2, subsection 177-10(6)]

7.26 This is generally to the benefit of taxpayers, as without the ability to apply the determination retrospectively, it is possible that no determination will apply at the time these amendments begin to apply. In that case, these amendments would have no effect as no supports would meet this condition for the GST-free treatment when these amendments begin to apply.

7.27 A defined term for Disability Services Minister is included in the dictionary in the GST Act. The Disability Services Minister is the Minister administering the NDIS Act. [Schedule 9, item 3, section 195-1 ]

Application provision

7.28 The amendments made by this Schedule apply in relation to supplies made on or after the commencement of section 37 of the NDIS Act. Section 37 of the NDIS Act deals with when an NDIS plan comes into effect. The application provision ensures that GST-free treatment can be provided once supplies start to be made under NDIS plans. [Schedule 9, item 4 ]

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

GST-free treatment for National Disability Insurance Scheme funded supports

7.29 Schedule 9 to this Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

7.30 Schedule 9 to this Bill amends the A New Tax System (Goods and Services Tax) Act 1999 .

7.31 The purpose of Schedule 9 is to ensure that certain services and other things supplied to an NDIS participant as part of an NDIS plan under the National Disability Insurance Scheme Act 2013 are GST-free.

Human rights implications

7.32 Schedule 9 to this Bill engages the following human rights.

Right to social security

7.33 Article 9 of the International Covenant on Economic, Social and Cultural Rights recognises the right to social security for all persons while Article 28 of the Convention on the Rights of Persons with Disabilities requires countries to recognise the right of people with disabilities to social protection and to take appropriate steps to ensure access by people with disabilities to social protection and poverty reduction programs and to retirement benefits and programs.

7.34 The amendments to the GST Act make clear that a supply of a reasonable and necessary support to a participant in accordance with their NDIS plan is exempt from GST.

7.35 The amendments promote the right to social security by ensuring that reasonable and necessary supports that are supplied to an NDIS participant are not taxed.

Conclusion

7.36 Schedule 9 to this Bill is compatible with human rights as it promotes the right to social security.

The Assistant Treasurer, the Hon David Bradbury