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  • Retirement Villages Working Group key messages December 2019

    Sales of villages by charities

    This issue has since been removed from this consultation as the Retirement Living Council will pursue this matter separately.

    GSTR 2011/1 transitional concessions

    Discussions of the working group were in reference to the purpose of the ‘commercial commitment’ test in GSTR 2011/1 Goods and services tax: development, lease and disposal of a retirement village tenanted under a 'loan-lease' arrangement and the potential impacts any proposed strategy may have on the RV Industry more broadly.

    While the RV industry does not agree with the ATO’s substantive view in GSTR 2011/1, they accept that this is outside the scope of this consultation.

    Various scenarios are being considered to illustrate where the ‘flags in the sand’ are, and whether further guidance may be required to provide more certainty.

    Apportionment safe harbour

    The working group are considering whether a safe harbour is appropriate to help reduce the costs of compliance and GST administration. Options for how a safe harbour could operate include use of:

    • a ‘flat rate’ (e.g. of 5%) for determining an entity’s extent of creditable purpose – which the Commissioner would accept as ‘fair and reasonable’ if the relevant circumstances were met, or
    • a 'floor space ratio' basis to apportion development costs.

    Industry representatives expressed their preference for one safe harbour using a flat rate (e.g. of 5%). There was agreement that the proposed ‘floor space ratio’ option could be discarded.

    The use of a safe harbour would be optional. The ATO would review the safe harbour percentages periodically based on industry feedback and changes in industry models and/or practices.

    Intention to sell/'dual intention'

    Industry representatives appreciated the need to demonstrate that a taxpayer has an intention to sell the village, however, expressed some concerns in meeting evidentiary requirements that a village is held for sale, as it is common for villages to be developed in stages (which are then tenanted as each stage is completed). There are also commercial sensitivities in advertising that a village is up for sale.

    The ATO is continuing to work with industry to determine what evidence is required to demonstrate an intention to sell.

    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. GST at Settlement implications are still being considered.

    The group is also considering a number of issues in relation to characterisation of supplies involving leasehold interests.

    It was acknowledged that this is a complex issue that requires further work and consultation.

    Meals in serviced apartments

    Following submissions from Leading Aged Services Australia , 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.

    The ‘meals’ issue has been referred to the Public Advice & Guidance Unit.

      Last modified: 20 May 2020QC 62691