NDIS / SDA Residental Investment Properties are GST Free – How?
What is the NDIS / SDA?
The National Disability Insurance Scheme is a Federal Act developed in 2013 to allow people with a disability to exercise choice and control about matters that affect them- such as their housing.
SDA - Specialist Disability Accommodation
Typically, are otherwise residential properties built in the community to NDIS Certification, backed by a 20 year Federal Government Funding Guarantee, with higher ROI and GST Tax Credits.
SDA refers to accommodation for people who require specialist housing solutions – not readily available in the traditional Australian residential rental market.
As of January 1st, 2019, SDA funding is now rolling out in Queensland.
- 6% of NDIS participants will qualify for SDA in their care plan
- Australian Federal Government commitment to $700m p.a. funding for SDA for the next 20 years.
- The rate of funding per participant will depend on the type of property, on-site overnight assistance is provided (OOA), location - Pricing Arrangements for SDA 2021-2022
- High Quality Housing Provided
- Rent paid by NDIS & the Participant (around at 25% of the Disability Support Pension)
- See NDIS funding calculator
How is it that these otherwise residential properties can claim back GST Refunds?
Generally, residential investment properties are considered input tax supply under the GST Act. Meaning the Investors/landlords cannot claim or charge GST.
However, with the advent of the NDIS in 2013, amendments to the GST Act, was made to ensure various supplies to a participant of NDIS is GST Free, subject to Section 38-38, and in particular, Sec 38-38(d) supplies determined by the Disability Services Minister, as outlined in the explanatory Statement 2021 to the Act. (See at the end for details)
Conflicting Tax Information on NDIS SDA Residential Rental Housing due to the General GST Assumption that the supply of residential premises is an input tax supply, which generally is the principle, as per ATO Published Private Ruling 414008795736.
However the Private Ruling does not make mention of the exception allowed specifically for NDIS SDA specifically listed as being GST free under S38-38(d) of the GST Act. "Is of a kind that the *Disability Services Minister has determined in writing S38-38(d)" see Explanatory Statement specific listing of SDA for NDIS Participants as being a GST Free Supply.
Why is it important that NDIS SDA supply is GST Free?
As the income is GST free, you can claim all the GST on your inputs, while not charging any GST on your output, which makes your investment a uniquely GST positive cash flow. You will be able to claim back GST incurred in the supply (purchase of the NDIS SDA certified built, that is occupied by NDIS participants who have SDA included as part of their care plan)
Examples of inputs that normal residential investment properties cannot claim: -
- If the property is purchased from a developer and the GST Margin Scheme is not used, you will be able to claim the GST stated in the contract.
- NDIS homes are built to a much higher standard to meet SDA Certification.
- For example, if the cost of construction was $440,000, when otherwise a similar size investor grade property could be $100,000 + cheaper to build.
- A important cashflow benefit is that you can claim back $40,000 GST (1/11th of $440,000) on the construction costs, which investors in a typical residential property cannot, closing the gap, helping to fund the loan repayments during construction.
- The cashflow from GST Refunds during construction could meet all the loan repayments during the construction phase.
On-Going Income and Expenses
- Income will be GST-free – so nothing to remit to the ATO - only GST Refunds to look forward to!
- While the GST on expenses can be claimed – (i.e.) GST refunds
- Overall, this investment will be GST positive cashflow, adding to the already impressive returns on offer.
In next week's blog, we will provide a working example of how the GST claims will dramatically reduce the initial holding costs and improve the already potentially higher ROI over a typical residential investment property.
GST-free NDIS supplies see the legisalation
A supply to an NDIS participant is GST-free if all the following requirements are met:
Section 38-38 GST Act
For a supply to an NDIS participant to be GST-free under section 38-38 of the GST Act, the supply must be:
a) to a participant for whom a plan is in effect under section 37 of the National Disability Insurance Scheme Act 2013 (NDIS Act) - which means that the plan must be approved by the National Disability Insurance Agency (NDIA); and
b) of one or more of the reasonable and necessary supports specified in the statement of supports in the plan; and
c) made under a written agreement, between the supplier and the participant (or another person), that:
● identifies the participant; and
● states that the supply is of one or more of the reasonable and necessary supports specified in the statement of supports included under subsection 33(2) of that Act, in the participant’s plan; and
d) of a kind determined in a legislative instrument by the Minister responsible for Disability Services.
A New Tax System (Goods and Services Tax) Act 1999
There are 14 kinds of supplies of supports listed in the tables directly proceeding subsections 6(1) and (2) of this Determination. These supplies are GST-free where the supply meets the other requirements of section 38-38 of the GST Act and they are listed in the Explanatory Statement, see extract for NDIS SDA below.
|Classes of Supports||Example||Description|
|1. Specialist disability accommodation (within the meaning of the National Disability Insurance Scheme rules) and accommodation/ tenancy assistance||Specialist Disability Accommodation||Accommodation for NDIS participants who require specialist housing solutions to assist with the delivery of supports that cater for their significant functional impairment and/or very high support needs.|
Umbrella Property Accountants is a Property Specialist Accounting Firm, providing business and tax advice on everything property.
If you are considering investing in NDIS SDA Property we can help provide:-
- Correct GST Tax Advice on the condition required to ensure your NDIS SDA property will be GST Free.
- Unbiased assessment on the ROI,
- Tax Advice on claiming back GST
- Setting the appropriate Tax Structue
- Partnership of Trusts
- All associated compliance and tax returns.
- Please contact our office or book online