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Wednesday, 8 December 2004
Page: 104


Senator McLUCAS (4:34 PM) —I ask senators to cast their minds back to 2000 when the GST was trumpeted as a simpler tax system, one that was going to make compliance with tax law in Australia simpler, fairer and easier for all concerned. The fact that we are here four years afterwards debating the Tax Laws Amendment (Retirement Villages) Bill 2004 that is trying to clean up this mess makes an absolute lie of the claim. Four years on, we are cleaning up the mess that the retirement village sector has been complaining about since even before the tax law came into effect on 1 July 2000. We are still cleaning up that mess. I have to say I am pleased that finally the government has been brought to the table to deal with the uncertainty in the retirement village sector about the application of GST to services that they provide. However, I am disappointed that the government has not quite got it right and has not really solved the problem.

Let us be clear about why we are debating this legislation. The reason is that the Labor Party, on behalf of the retirement village sector, has been pursuing the government for more than two years to try to get some resolution on how the GST is applied to services provided to retirement village residents. It may have taken a long time but, once again, it is the Labor Party leading from the front and it is the coalition government that has belatedly listened and finally acted on Labor's calls. I am pleased to say that it has finally acted to sort out the mess regarding GST and retirement villages, albeit not completely. The lack of clarification about how retirement village residents are taxed has dragged on since before the GST was introduced in 2000. Prior to the government introducing the GST act, which was effective on 1 July 2000, the implications of how the GST would be applied to the retirement village sector were unclear. In particular, it was unclear how it would impact on retirement village residents who require types of care similar to that provided in residential aged care—services which are GST free.

Over the last few years Labor, along with the industry, have called on the government to clarify the issue of how the GST on retirement villages is applied, to bring certainty and security to the sector. Finally they have listened to our concerns and that of the industry. However, the history of this issue, given the time it has taken for the government to respond, is illustrative of the way the coalition have failed to treat older Australians with dignity and security. The original intent of the GST legislation appeared to support the view that people in retirement villages should not pay the GST on services that were similar to services provided by Commonwealth funded aged care providers. But what happened was that the Australian Taxation Office had such a narrow definition of what `residential setting' meant that it caused widespread confusion within the sector for residents of retirement homes and for their families. In March 2000, the then shadow Treasurer, Simon Crean, pursued the issue with the Treasurer of the absurd situation of the GST applying to services received by one elderly person living in a retirement village but not applying to a person in a nursing home receiving exactly the same service.

People living in retirement villages have faced an uncertain situation for over four years. These retirement villages, which have been operating privately or by community organisations since the 1950s, cater for people aged over 55, through either self-care accommodation or continuous care. The primary point at issue was how the GST was applied to residents of serviced apartments in a residential setting. Independent living units are very similar to serviced apartments: they provide a range of accommodation services such as meals, the provision of daily living assistance, nursing care where needed and, if required, cleaning and other accommodation services. Residents of self-care units often provide their own food and personal care but they also utilise common village facilities and services. In this respect, many retirement village residents are self-supporting. On the other hand, older people living in serviced units often have their meals as well as other services, such as cleaning and nursing services, provided.

The problem is the grey area that exists between self-supporting residents and those requiring some form of assistance. This has been particularly complex for the retirement village sector when factoring in the GST. There was a lack of clarity and clarification in relation to how the GST applied to retirement villages because of the ATO's extremely narrow definition of `residential setting'. The ATO commenced a review of the GST in retirement villages through the Retirement Village Industry Partnership in February 2003. The association representing the sector, the Retirement Village Association, was involved with the ATO's partnership as they tried to get the ATO to clarify GST issues and not radically change, by reinterpretation, their understanding of how the GST was to be applied to services provided in retirement villages. Over time the ATO, in a number of private tax rulings, has been making determinations that differed from the understandings that had been reached with the sector when the GST was first introduced. Of particular concern at the time to the industry was the ATO's position that serviced apartments were not residential settings. The ATO's then position was that serviced apartment residents were not living in a residential setting as the ATO did not believe serviced apartments met its definition of a `congregate care' facility.

The purpose of this bill therefore is to clarify the definition of `residential setting' in relation to retirement villages so that those people living in a serviced apartment located in a retirement village who are receiving nursing or living assistance on a daily basis will have those services provided GST free. The bill seeks to link the term `residential setting' with `residential facility', meaning that services delivered in a residential setting are now recognised as similar to those delivered in publicly funded residential care, such as a nursing home. This change will go a long way towards removing the grey area that has caused so much anxiety and so many problems among residents, village owners and the families of people in retirement villages.

As I said before, Labor does have concerns about other aspects of the bill with regard to the provision that the Minister for Ageing or the aged care secretary can assess and determine the degree and level of daily living and nursing style assistance that is GST exempt and can delegate the power to assess a person as requiring a specific level of care to members of an aged care assessment team, or ACAT. Labor's amendments are designed to remove the discretion given to the Minister for Ageing and the secretary to specify the level of care that a resident needs to enjoy to be deemed to be in a serviced apartment in a residential setting.

The industry has raised concerns about changes to the status quo and about the retention of the system whereby a resident's doctor or a registered nurse who is independent of the retirement village can make the assessment, as the doctor or nurse often has more intimate knowledge of their patient's changing health status. We do not want to see the ACAT assessment process bogged down or the aged care assessment teams unable to make timely assessments of residents in retirement villages or delays in the work that they are doing assessing needy people who are looking for further support, either through residential aged care or through community aged care packages. Even though the bill does not specify who should do this assessment, we see no reason why medical doctors or registered nurses could not be trusted to provide the proper assessment of the level of daily assistance a client may require.

The government has, to some extent, fixed up the problems of defining residential settings by including serviced apartments in retirement villages. I suggest that adopting Labor's amendments would go a lot further towards clarifying the GST issues for people in retirement villages. I believe that the sector has advised the government of its concerns in this area. At this point in time we hope the government has taken on board the sector's concerns and will continue to work with it to improve the care and services provided to older Australians. During the committee stage we will further explain Labor's amendments, and I urge the government to consider them in good faith.