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  • Retirement Villages Working Group key messages August 2019

    The third quarterly meeting was held on 9 August 2019, with updates for the priority topics outlined below:

    Sales of villages by charities

    • Industry representatives presented their argument and accepted that this is an advocacy issue. The Retirement Living Council (RLC) will pursue this matter separately and it was agreed that this issue can now be removed from this consultation.

    GSTR 2011/1 transitional concessions

    The following 4 key points have been considered in more detail:

    • Should the GST transitional requirements in GSTR 2011/1 Goods and services tax: development, lease and disposal of a retirement village tenanted under a 'loan-lease' arrangement be more aligned to the income tax test in TR 2002/14 Income tax: taxation of retirement village operators which refers to owners of retirement villages who ‘began an arrangement’, instead of applying a ‘commercially committed’ test?
    • Is it appropriate for an agreed dollar amount to be used to determine when significant financial costs have been incurred, for the purpose of demonstrating commercial commitment?
    • Are the factors listed in paragraph 37 in GSTR 2011/1 reflective of the commercial reality of the steps and costs involved in undertaking a retirement village development?
    • Can the transitional concessions in GSTR 2011/1 apply to members of the same economic group where a member of the group can demonstrate commercial commitment before the relevant date?

    Each question is being considered with regard to the purpose of the commercial commitment test in GSTR 2011/1 and the potential impacts any proposed strategy may have on the RV Industry more broadly.

    Apportionment safe harbour

    • The group is considering whether there are common themes or principles that could be applied to design a method or rate of apportionment that could be used as safe harbours to apportion capital and redevelopment costs for villages being developed for operation (i.e. not for sale).
    • Examples are being collated of how apportionment has been applied in instances determined to be common- targeting three broad examples, ranging from relatively simple, limited circumstances, through to more complex and detailed circumstances.

    Intention to sell/'dual intention'

    The Commissioner accepts the possibility of dual application in relevant circumstances and further consideration is being given to further guidance including:

    • what evidence is necessary in practice to support a future intention to sell
    • how accounting treatments factor into this exercise, and
    • how Division 129 will operate in these circumstances.

    The group has invited further comments from Consultation members.

    Leasehold issues

    • The ATO is updating the guidance on its website to reflect that it is possible for a non-government entity to make a supply of property by way of long-term lease. However, the circumstances in which the definition of ‘long-term lease’ will be met are likely to be limited.
    • The group is continuing to consider issues around the GST characterisation of leasehold supplies, including circumstances where a RV is developed on leased land.

    Meals in serviced apartments

    • Following submissions from Leading Aged Services Australia (LASA), the ATO accepts in-principle that GSTR 2012/3 Goods and services tax: GST treatment of care services and accommodation in retirement villages and privately funded nursing homes and hostels, regarding the operation of paragraph 38-25(3A)(b) in the GST Act is expressed too narrowly and may be expanded in certain respects to deal with other situations where a resident does not take a meal. However, where any new line is to be drawn in this regard requires further analysis and consultation.
      Last modified: 14 Jan 2020QC 61109