Chapter 8
Disability Services
Disability Services
8.1 The Bill provides that the supply of disability services is GST-free
if the supplier receives funding under the Disability Services Act
1986 or a complementary State or Territory law and the services are
of a kind described as accommodation services, community support services,
community access services or respite services, within the meaning of the
Commonwealth/State Disability Agreement. [1]
8.2 The Vos Committee considered the practical difficulties in separating
the delivery of residential care and community care services for the aged
and for people with a disability. The Committee thought that since the
services for the aged were GST free, they should be GST free for people
with a disability. However, the Vos Committee further thought that applying
GST-free treatment to additional services provided to people with disabilities,
including advocacy, information, print disability, competitive employment
training and placement, and supported employment services, went beyond
the Government's policy intent. [2]
8.3 The Vos Committee, having regard to the design principles of the
GST, considered that sales of products from supported employment services
such as sheltered workshops should be subject to GST. However the Committee
emphasised:
- that sales provided on a non-commercial basis by income tax deductible
charities would, of course be GST-free. (See discussion in the section
on the non-commercial activities of charities); and
- that it was particularly concerned about the impact of tax reform
on sheltered workshop services, and noted that the impact should be
monitored and that Governments should give careful consideration to
providing additional assistance if necessary.
The Vos Committee recommended that the Government not extend GST-free
treatment for disabled services beyond its recommendations regarding residential
care and community care. [3]
Issues relating to people with disabilities and their carers
Impact on people with a disability
8.4 The GST-free status of disability services applies to government
funded residential and community support services and to some private
for profit services. The extensive list of GST-free medical aids and appliances
only includes those aids and appliances specifically designed for people
with an illness or disability. However, as ACOSS said:
8.5 There are 1.5 million Australians with a disability who need
personal assistance or supervision with the activities associated with
daily living. These people have significantly higher unemployment rates
and lower incomes than other Australians, yet, at the same time, their
cost of living is significantly higher. The Australian Quadriplegic Association
succinctly listed the specialised everyday living costs for people with
a disability, including housing, transport, medical and pharmaceutical,
disability equipment, personal care and miscellaneous. [5]
8.6 A major concern with the GST was that, while certain goods and services
specifically designed for people with a disability will be GST-free, many
of the expenses which are discretionary for most people are essential
for people with a disability and will incur a GST. [6]
Many examples of these items of expenditure were provided to the Committee,
including the crucial area of transport. Taxis are commonly used because
people with a disability are often unable to access public transport or
drive a car and so have no other option. Additional items or services
included kitchen appliances, computers, mobile phones, and home maintenance
services such as cleaning, lawn mowing and gardening, car washing and
maintenance, assembling furniture and painting the house.
8.7 This issue goes to the heart of the concerns of people with a disability
and was described as the difference `between living independently and
requiring the extra cost of assistance with meals, household chores and
other daily activities'. [7] For people with
disabilities who live independently and find themselves unable to cover
the additional costs associated with paying someone to cook, clean and
bathe them, supported care will be their only alternative.
8.8 ACROD understood that personal care assistance services and home
help that were the equivalent to home and community care (HACC) services
for the aged would come under the GST-free disability services umbrella.
ACROD pointed out that it was the services that did not parallel aged
care that have been discriminated against. These include print disability,
advocacy, employment, and information services for people with disabilities.
[8] These vital services are designed to ensure
that people with disabilities can participate fully and actively in their
community. In light of their reliance on and frequent use of these services,
the application of the GST on them would be financially disadvantageous
for people with disabilities.
8.9 The Physical Disability Council of NSW submitted an analysis of the
effect of the GST on people with a disability. The Council contended that
the CPI effect on people with disabilities will be greater than the 1.9–2.2
per cent Treasury calculations and could be as high as 2.4–2.7 per
cent. The Council concluded that `many people with physical disabilities
will be absolutely worse off as a result of the GST package, even after
accounting for tax compensation measures, and even after accounting for
the concessions which have been made to people with disabilities in the
tax package'. [9] To emphasise the inequity
of the tax changes, a single person on $75 000 will receive an increase
of $68.55 per week – equivalent to 38 per cent of the total weekly
Disability Support Pension that will increase by only $2.54 per week.
[10]
8.10 A number of groups providing support to people with disabilities
developed this point noting that the major concern of people with physical
or intellectual disability and their families was that people on low and
fixed incomes will not be fully compensated for the impact of the introduction
of the GST. [11] Compensation calculations
are based on the expected rise in the CPI. However, the CPI reflects the
spending of the community as an undefined whole, whereas actual expenditure
patterns are frequently a reflection of a person's income level. People
with disabilities are frequently on low and fixed incomes most of which
is expended on the basic necessities of life that currently are not directly
taxed. Their consumption patterns bear absolutely no resemblance to the
consumption patterns of people without disabilities. It is vital that
the actual expenditure of people with a disability is compensated, not
some theoretical cost based on an across-the-board average.
8.11 ACOSS referred to the proposal in `Fightback' for the introduction
of a Disability Allowance to assist people with disabilities with the
special costs that they face as they attempt to operate within the mainstream
community and workplace. The concept of a special allowance as compensation
was supported in a number of submissions. The Committee considers that
such an allowance or enhanced compensation package is required to cover
the special and diverse expenditure requirements associated with people
with a disability and ensure that barriers to their full participation
in the workforce and society are reduced.
Case Study – Narkaling
A small non-profit organisation providing a service to people with
development and intellectual disabilities through the production of
book/cassette kits narrated at a range of slow speeds.
Combined impacts of the imposition of a GST on books and incurring
an FBT liability of $20,000:
- increased selling price for the kits;
- reduced numbers of kits available;
- reduction in staff hours;
- jeopardise the work of providing access to the printed word by people
with development disabilities.
Source: Submission No. 845, Narkaling.
8.12 People with a disability and their families are constantly battling
physical, emotional and financial burdens in order to maintain a reasonable
existence. Any additional financial demands quite simply could not be
covered, so that decisions have to be made to forego necessary goods and
services. People who could not afford to cover these additional costs
would most likely turn to government and community services for assistance,
thereby placing an additional burden upon the amount of accommodation
and respite care that is available.
8.13 With institutional care being GST-free it would become a more financially
viable option for struggling families and individuals who are already
having to cope with an unparalleled lack of support and respite care services.
However, the situation concerning current crisis levels of unmet need
has been widely documented and it is obvious that additional demands on
these already overloaded services simply would not be met.
Impact on carers
8.14 People with Disabilities (NSW) pointed out that many of the disadvantages
for people with a disability are shared by their associates (parents,
spouses, other carers) who must frequently forgo other income opportunities
in order to provide support to a person with a disability. Often they
must subsidise the disability related costs of the person with a disability
out of their own income or capital, as the person with a disability can
not afford these costs personally. [12]
8.15 The Carers Association of Australia noted that many family carers
are among the poorest in the community. Over two-thirds of carers are
women. About half a million carers provide care on a full-time or substantially
full-time basis and thus cannot work or can only work part-time. Over
half of all full-time carers have incomes less than $200 per week and
over two-thirds pay under $20 per week in personal income tax. [13]
They will gain very little from the proposed personal income tax cuts.
8.16 The Carers Association referred to their 1998 survey which found
that carers and their families were spending an extra ordinary 26 per
cent of disposable household income on health and community care and disability
related costs.
8.17 Family carers provide unpaid, informal care for some of the most
vulnerable members of our community – adults and children who, not
just through disability but also illness or frailty in old age, are unable
to care fully for themselves. Carers provide an enormous economic benefit
to society by caring for people who would otherwise be placed into institutional
or community care.
8.18 Full-time caring is not just economically disadvantaging but physically
and emotionally stressful on a personal level. Members of the Gippsland
Carers Association graphically outlined the personal as well as economic
hardships and difficulties of taking on the full time care of a frail,
aged or disabled loved one. [14]
8.19 The Carers Association submitted the results of an analysis of the
financial impact of a GST on carers and their families, which confirmed
that a GST would have a major effect. Based on the abolition of wholesale
sales taxes and the introduction of a 10 per cent GST and expenditure
on accommodation use and health/community/disability care costs being
exempted, the analysis concluded that carers on average would have their
spending power reduced by over 4 per cent. This figure would be higher
for certain carer families, for example larger families with higher consumption
of food, clothing and other basic consumables and services which are currently
tax free. The Carers Association argued that their analysis supported
the view that that the imposition of a GST would have a differential impact
on different groups of people, with the biggest impact on people with
lower incomes. [15]
Impact on service providers
8.20 The majority of services provided to people with a disability and
their families are provided by non-government organisations that are currently
tax exempt public benevolent institutions and charities. The work of these
organisations is vital in ensuring that the needs of people with a disability
are met. In addition, there are peak bodies that do not directly deliver
services, but provide generic advocacy services on behalf of their constituency
and information services to everybody.
8.21 The Committee received evidence from many of these organisations
expressing concern about the impact of the tax changes on the operation
and financial viability of their organisation – concerns that are
common to all charitable organisations under the GST proposal. These included
the FBT changes and impact for salary packaging, additional administrative
and compliance costs, printing and distribution of publications and general
information, fund raising and other activities undertaken on a not for
profit basis, memberships, sponsorships, donations and on-sale of motor
vehicles. [16]
Case Study – Western Australian Deaf Society
The Society relies heavily upon self-generated revenue to maintain
financial stability;
Current sales tax exemption creates virtually no administrative work;
Possible financial expenses to be incurred from GST &FBT changes:
- Salary and office operating expenses - $10,000
- Raffles - $23,800
- Interpreting services - $11,000
- Resource Centre Sales - $3,000
- Memberships - $150
- Fundraising and sundry income - $29,000
Total additional costs $78,000
- Increased expenditure from the proposed tax changes will be a serious
detrimental impact on this Society.
Source: Submission 632, pp.3-5, Western Australian Deaf Society.
8.22 The Committee considers that if the tax changes force organisations
such as the Western Australian Deaf Society to curtail their services
or at worst close down altogether, the effect could be devastating for
people with a disability and their families, as well as for the governments
that would need to step in and support these people.
8.23 Supported employment services will also bear the brunt of the GST
in terms of the loss of revenue raised and the administrative burden compliance
involves. Evidence from supported employment providers indicated that
they would have to cut services to pay for the additional costs of the
GST. [17]
Supported accommodation facilities
8.24 The area of supported accommodation further demonstrated the confusion
surrounding the implementation of the GST.
8.25 The supported accommodation industry provides low cost, non-government
funded personal care services for residents suffering from various forms
of disability. In South Australia supported residential facilities are
regulated under the Supported Residential Facilities Act and provide
personal care to people of all ages, people with physical, mental and
intellectual disabilities, as well as those with brain injuries and those
affected by drug and alcohol related illnesses.
8.26 These residents are given very little assistance from government
or government funded agencies and are expected to fully fund their own
care from within their limited income. They are often the most marginalised
group of tenants, generally on lower incomes (usually only the disability
support pension) and with higher support needs than many other members
of the community. People live in supported accommodation because government
has failed to provide a service, or as a result of government policy like
deinstitutionalisation and there are no other suitable accommodation facilities
for them. Supported accommodation is supplying a community service at
no expense to federal or state governments. [18]
8.27 However, the Committee was advised that the supported accommodation
industry is included in the `commercial residential premises' category
of the GST legislation, which puts them into a similar category as hotel
and motel accommodation and thereby attracting the same fees and charges
as those levied on the tourist industry. Accordingly, meals and other
services provided by the industry will attract the full GST rate of 10
per cent, while the rent component will be charged at a reduced rate calculated
to equate to 5 per cent. [19]
8.28 The legislation is anomalous in treating the accommodation and services
provided by the industry very differently from the accommodation and services
provided to other disadvantaged groups in the aged care and disabilities
areas through government funded or subsidised services (as defined in
the Aged Care or Disability Services Acts) which will be GST-free. Supported
accommodation providers argued that this anomaly clearly discriminates
against their residents who view this accommodation as their principal
place or residence. The providers submitted that the impact of the GST
on the residents of their facilities would be between $22 and $28 per
fortnight. With most residents having no income other than the disability
pension, the 4 percent increase in pension offered in the compensation
package was seen as entirely inadequate. [20]
8.29 Premises within the industry have struggled to maintain economic
viability in recent years with many closing down, especially around inner
city locations. The industry viewed the introduction of a GST, as it currently
applies to both the supported accommodation and boarding house sectors,
as likely to exacerbate this trend with many more premises closing.
8.30 The supported accommodation industry concluded that the GST in its
present form would impact on both the economic viability of the industry
as well as on the residents' quality of life. The legislation fails to
either simplify the tax collection system (particularly as it applies
to commercial residential premises) or to make it fairer as both residents
and industry participants will suffer increases in costs and charges.
Neither the industry nor the residents that they house will have the capacity
to meet the increased costs generated by the GST. [21]
Medical aids and appliances
8.31 The Government's original tax package stated that GST-free status
would be available for medical aids and appliances that are for use by
people who suffer from severe illnesses or disabilities. In considering
the scope of medical aids and appliances used by people with disabilities
to be GST-free, the Vos Committee considered two options for effectively
delivering a GST-free approach – a rebate approach or a GST-free
list approach. The Committee adopted the latter approach recommending
an extensive list of aids and appliances to be GST-free, where such aids
and appliances are specifically designed for people with an illness or
disability (dropping the `severe' qualification) and are not of a kind
ordinarily used in the wider community. The Government accepted this recommendation.
[22]
8.32 In making its recommendation, the Vos Committee noted that some
items that should be included on the list `may have been unintentionally
excluded due to time restrictions' and suggested `that further refinement
of the list may be necessary prior to the development of legislation'.
[23]
8.33 In addition to the list of GST-free aids and appliances, the Bill
provides an option for a supplier and recipient to agree that a supply
of medical aids or appliances be treated as a taxable supply. This option
is available to ease administration for entities that make both taxable
and GST-free supplies. [24]
Issues
8.34 The Medical Industry Association of Australia (MIAA) expressed concern
at possible ambiguity in the wording of s.38-5(3) of the Bill, referring
to advice from Pricewaterhouse Coopers (PWC) which stated that:
It is not a requirement of [s.38-5(3)(b)] that the supplier of the
goods be the same person as the supplier of the service. On the basis
of that interpretation, PWC are of the opinion that goods supplied
directly to a patient by the company would be GST-free as long as
the goods are used by a medical professional in providing a (GST-free)
medical service to the patient. [25]
8.35 The MIAA believed that this interpretation was consistent with the
Government's policy intent that health services should be GST-free and
asked that the wording of s.38-5(3) be amended to ensure that it is not
a requirement of s.38-5(3)(b) that the supplier of the good be the same
person as the supplier of the service referred to in s.38-5(3)(a).
8.36 This interpretation of s.38-5(3) would include direct sales to patients
of `professional use' type products being GST-free. The MIAA submitted
that the Schedule of medical aids and appliances is not sufficiently comprehensive
to cover direct sales of `home use' type products (ie products normally
self-administered by the patient) and recommended the incorporation of
additional products in the list. ANHECA also provided a list of items
that are used in the provision of residential aged care or by the residents
for legitimate medical needs, and which do not appear on the existing
schedule. [26]
8.37 The MIAA recognised that expanding the Schedule to cover every product
type where `direct' sales may conceivably occur would not be a practical
proposition in administrative terms. With that consideration in mind,
the MIAA attempted to confine the list of proposed additions to those
`home use' product types where the incidence of `direct' sales is reasonably
substantial (or could become substantial in the future). [27]
8.38 The Committee notes the indication in the DHAC submission that `to
cover the possibility of any unintentional omissions and in recognition
of the changing technological developments in this field, the legislation
also includes provision for the list to be amended through regulation
as necessary. [28] Government Senators reiterated
this undertaking during public hearings. [29]
Clearly, further refinement of the list of medical aids and appliances
to be GST-free will be required.
8.39 Individual aspects of the list of medical aids and appliances were
also commented upon in evidence. For example, OPSM was concerned about
the `discriminatory and inconsistent' treatment of prescription spectacles
and certain associated goods under the GST in addition to the significant
compliance burden caused by taxing prescription spectacles. The legislation
has created confusion over its wording that lenses for prescription spectacles
will be GST-free, but spectacles with lenses are not. Spectacles in the
GST Bill mean frames. However, under current sales tax law spectacles
are regarded as a whole unit – including frames and lenses. [30]
8.40 OPSM also noted that the GST burden will fall heavily on the aged
since about 97 percent of over 55 year olds require some form of corrective
eye-wear. [31] Pensioner and older peoples
groups were also alarmed at this aspect. The CPSA/APSF commented that
`the cost of purchasing glasses is already prohibitive, and many States
apply strict means-tests to schemes, which provide low cost or concessionally
priced frames'. [32]
8.41 The Committee considers that the imposition of a GST on frames for
spectacles and not the lens defies logic. There needs to be a cap in place
to determine the point at which the frames become a fashion accessory
as opposed to a sight requirement. However, many disadvantaged people
such as the aged and people with a disability are required to wear spectacles
and this charge will simply be another expense they cannot afford.
Conclusions
8.42 The GST treatment of people with a disability further demonstrates
the contradictory and confusing approach to different groups within the
legislation.
8.43 The Committee concludes that people with disabilities will face
significantly higher GST costs than the rest of the population. Instead
of facing the 1.9 per cent price increase as claimed by the Government,
people with disabilities face impacts significantly higher than those
indicated by the Government.
8.44 The compensation package is totally inadequate for people with a
disability. The figures used by the Treasury rely on averages and have
not taken into consideration the very different expenditure patterns of
disabled people.
8.45 The Committee believes that health expenditure should be regarded
as an investment in human capital rather than a form of consumption expenditure
and the application of a GST on over the counter pharmecuetical products
would certainly prevent people with disabilities or those on a low income
from accessing these goods.
8.46 Charitable and community organisation providing services to people
with a disability will be forced to introduce costly accounting systems
in order to claim back taxes, diverting precious funds from an already
under-funded area.
8.47 The Committee concurs with the Physical Disabilities Council of
NSW that:
- Go without essential equipment, delay replacing obsolete aids
and equipment, or neglect essential maintenance and modifications.
Consequences will include deterioration in health and abilities/independence
as well as threats to safety;
- Reduce expenditure on food, clothing, home maintenance and outings,
with consequent effects on health, nutrition, self-esteem, safety
and social isolation;
Footnotes
[1] Section 38-40 of the Bill.
[2] Vos Report p.34.
[3] Vos Report pp.34, 40.
[4] Submission No.68A, p.15 (ACOSS).
[5] Submission No.652, pp.3-5.
[6] Submission No.1344, p.2 (National Multiple
Sclerosis Society of Australia) and Committee Hansard, 4.3.99,
p.1105 (Council of People with MS – Tasmania). The Physical Disability
Council of NSW provides a useful description of non-discretionary, essential
and discretionary expenditure by people with a disability – Submission
No.666, pp.4-6.
[7] Submission No.797, p.3 (PwD (WA)).
[8] Committee Hansard, 4.2.99, p.313
(ACROD).
[9] Submission No.666, pp.7-10 (PDC of NSW)
and Additional Information dated 23 February 1999.
[10] Submission No.600, pp.10-11 (National
Council on Intellectual Disability).
[11] Submission No.600, p.5 (NCID); Submission
No.673, p.3 (Head Injury Council of Australia).
[12] Submission No.656, p.7 (PwD (NSW)).
[13] Submission No.433, p.1 (Carers Association
of Australia).
[14] Submission No.278 and Committee Hansard,
11.2.99, pp.665-73 (Gippsland Carers Association).
[15] Submission No.433, pp.2-4 (Carers Association
of Australia) and Attachment 1 – Caring Costs: A Survey of Tax
Issues and Health and Disability Related Costs for Carer Families.
[16] For example Submission No.606, pp.8-14,
20-23 (ACROD); Submission No.433, pp.8-10 (Carers Association of Australia);
Submission No.674, pp. 3-10 (Royal Institute for Deaf and Blind Children);
Submission No.656, p.9 (PwD (NSW)); Submission No.344, p.8 (Deafness Forum
of Australia); Submission No.600, pp.12-13 (NCID); Submission No.1028,
pp.4-6 (The Spastic Centre of NSW).
[17] Submission No.37, p.1 (Advance Personnel
– Canberra).
[18] Committee Hansard, 5.2.99, p.412
and 24.2.99, p.916.
[19] Committee Hansard, 24.2.99, p.915.
[20] Submission No.557, p.2 (SAPA & BHOMA);
Submission No.724, pp.3-4 (SRFA – SA); Committee Hansard,
24.2.99, pp.915-16.
[21] Submission No.557, p.12 (SAPA & BHOMA);
Submission No.1026, p.2 (SRF Unit – SA); Committee Hansard,
24.2.99, p.915.
[22] GST-free supplies of medical aids and
appliances are listed in Schedule 1 and dealt with in section 38-45 of
the Bill
[23] Vos Report p.36.
[24] Section 38-45 of the Bill.
[25] Submission No.1330, p.3 (Medical Industry
Association of Australia).
[26] Submission No.1330, p.4 (Medical Industry
Association of Australia) and Attachment 4, and Additional Information
dated 11.3.99; Submission No.918, p.7 and Appendix 1 (ANHECA). See also.
Submission No.1066, p.1 (Baxter Healthcare).
[27] Submission No.1330, p.4 (Medical Industry
Association of Australia).
[28] Submission No.682, p.11 and Committee
Hansard, 2.2.99, p.3.
[29] For example Committee Hansard,
11.2.99, p.734; 25.2.99, p.1031 (Senator Knowles).
[30] Committee Hansard, 12.3.99, p.1171.
[31] Submission No.664, pp.1-3, 7-9 (OPSM Protector
Limited).
[32] Submission No.850, p.36 (CPSA/APSF).
[33] Submission No.666, p.1 (PDC of NSW).