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3 November 2010
Media release 2010/35
Tax Commissioner Michael D'Ascenzo today warned retirement village operators that the ATO will review arrangements where they sell services, such as electricity, to residents in an attempt to gain a tax advantage.
GST is not charged on residential accommodation. This means that retirement village residents do not pay GST on their accommodation and consequently retirement village operators are not entitled to claim GST credits on the costs of supplying that accommodation.
Under the arrangement, the retirement village operator requires residents to buy electricity which the operator has bought from an electricity supplier. The retirement village operator claims GST credits by treating its supply of electricity to residents as a taxable supply, separate from the non-taxable supply of residential accommodation.
Mr D'Ascenzo said these arrangements appear artificial and contrived in their design and execution.
"It is unlikely these operators would begin supplying electricity under a separate contract if it wasn't for the GST credits they believe they will gain from the arrangement," Mr D'Ascenzo said.
The ATO will examine these arrangements and any others that attempt to take advantage of the GST provisions contrary to the intention of the law.
"Retirement village operators unsure about their situation should seek independent advice from someone who is not selling the arrangement or contact the ATO for a private ruling on their individual circumstances."
Taxpayer alert 2010/7 provides more information on these arrangements and is available from the ATO website www.ato.gov.au/atp
Taxpayers who are unsure about their own circumstances should seek independent advice or apply for a private ruling from the ATO.
Taxpayer alerts are intended as an 'early warning' to taxpayers and their advisers of significant tax planning issues or arrangements that the ATO has under risk assessment or about which it has concerns.
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