A Backdated Concession, Not a New Burden: Inside Treasury's Aged Care GST Draft

Aditi Sarkar

28 October 2026 07:38 PM AEDT

A Backdated Concession, Not a New Burden: Inside Treasury's Aged Care GST Draft

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Highlights

A Treasury exposure draft would restore GST-free treatment for specified aged care services from 1 November 2025.
The same package would correct super valuation rules for the Division 296 tax from 1 July 2026.
The draft would extend tax offsets for genuine redundancy leave payments, but only on a prospective basis.
Nothing has been introduced to Parliament, and the details could change before a bill emerges.

Four days from now, 1 November marks a full year since the new Aged Care Act commenced, replacing the previous framework. It is also the date a Treasury exposure draft would use to restore GST-free treatment for specified aged care services, closing a gap that has hung over providers and residents for almost a year. The draft is one of Treasury's periodic packages of minor and technical amendments, and it also tackles Division 296 super valuation rules and redundancy leave offsets. None of it is law yet, but the backdating makes the aged care change the one to watch.

What is in the exposure draft

Treasury regularly releases packages of "minor and technical amendments" to fix drafting errors, unintended outcomes and outdated references in tax and corporate law. The latest is listed on its consultation hub as c2026-810713. The draft would restore GST-free treatment for specified aged care services from 1 November 2025, correct the super valuation rules for Division 296 from 1 July 2026, and extend leave-payment tax offsets for genuine redundancies on a prospective basis. It would also clarify the definition of "director" in the Corporations Act and remove a statutory declaration requirement for transfers of government stock held by deceased estates.

The aged care GST fix

Under the GST law, certain aged care services, such as residential care and specified home care services, are GST-free. Providers do not charge GST on them but can generally still claim GST credits on related business inputs. The draft would "restore" that treatment for specified services from 1 November 2025, which suggests the GST-free status of some services was lost or became uncertain from that date.

The date lines up with the commencement of the new Aged Care Act. The GST provisions refer to aged care laws, so an overhaul of the system could leave those references out of step, although the available summary does not state the cause and the explanatory material should confirm it. Because the fix would apply retrospectively, it would cover services already provided, and how providers have treated them meanwhile is not set out.

What the GST gap could mean

Imagine a hypothetical home care recipient receiving specified services worth $1,000 a month. If the services are GST-free, nothing is added. If treated as taxable, 10% GST lifts the price to $1,100 a month. Across the 12 months from 1 November 2025 to 31 October 2026, the GST at stake would be $1,200 ($100 x 12).

The Division 296 valuation fix

Division 296 is the additional tax on earnings linked to super balances above $3 million, applying from 1 July 2026. The draft would correct the valuation rules from that start date, though the available summary does not detail the error. Valuation is central to how the tax works, particularly for interests without a simple account balance.

The ATO says that at 30 June 2027, defined benefit interests and income streams without an account balance will be valued using a method set out in the regulations, rather than through the transfer balance account. APRA-regulated funds will receive information requests through Online Services for Business and have 28 calendar days to respond.

The other fixes

Unused annual leave and long service leave paid out on a genuine redundancy currently attract a concessional tax rate through a tax offset. The draft would extend those offsets, but only prospectively, so payments already made would not be affected. Which payments would be newly covered is not set out.

The director definition is a corporate law change rather than a tax change, yet it matters for directors' duties and, indirectly, for the ATO's director penalty regime. The deceased estates change could reduce paperwork for executors. The retrospective aged care fix will not take legal effect until a bill passes both houses and receives Royal Assent.

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