If you sell commercial premises, such as shops and factories, you are generally liable for GST on the supply.
How GST applies
You can claim GST credits on purchases you make that relate to selling the property (subject to the normal rules on GST credits) – for example, the GST included in real estate agents' fees.
If you sell commercial premises, you may be able to use the margin scheme to work out the GST that applies to the sale. Using the margin scheme means your GST liability is equal to one-eleventh of the margin for the sale of property, rather than one-eleventh of the total selling price – see Margin scheme.
If your commercial premises is being leased when you sell it, you may be able to treat your supply as a GST-free sale of a going concern – see Going concerns.
If you purchase commercial premises to use in your GST-registered business, you can claim the GST included in the purchase price of the premises. You may also be able to claim GST on other expenses that relate to buying the property – for example the GST included in solicitors’ fees.
You cannot claim GST credits if any of the following apply:
- the seller used the margin scheme to work out the GST included in the price
- you are not registered or required to be registered for GST.
- GSTR 2000/28 Goods and services tax: attributing GST payable or an input tax credit arising from a sale of land under a standard land contract
Leasing or renting commercial premises
As a lessor of a factory or shop, you are liable for GST on the rent you charge if you are registered, or required to be registered, for GST.
You can claim GST credits on purchases you make that relate to renting out your property (subject to the normal rules on GST credits) – for example, the GST included in the managing agent’s fees.
As a lessee you may be able to claim GST credits for the GST included in rent you pay if you lease the property to carry on your business and you are registered, or required to be registered, for GST.
- GSTR 2000/35 Goods and services tax: Division 156 – supplies and acquisitions made on a progressive or periodic basis (paragraphs 58 to 65)
Within the industry, the term ‘retirement village’ is used to describe various types of accommodation provided to village residents. A village may:
- be operated by charitable bodies, government, or commercial businesses
- consist of different types of premises, such as independent living units, serviced apartments, care facilities, or a combination of these
- offer different occupancy arrangements
- provide a wide range of facilities and services to residents.
How GST applies
GST may apply differently, depending on who is making the supply, or what is being supplied.
The term ‘retirement village’ has a particular meaning under GST law. The GST definition is only relevant for working out whether a supply is GST-free under specific GST concessional provisions. In this guide, we refer to these as ‘GST retirement villages’.
A GST retirement village is residential premises in which:
- the accommodation is intended for people at least aged 55 years or older
- there are communal facilities for the residents to use.
However, premises used, or intended to be used, to provide residential care (within the meaning of the Aged Care Act 1997) by an approved provider, or commercial residential premises are not a GST retirement village. This means that GST retirement villages are not commercial residential premises for GST purposes.
Types of living arrangements
Types of living arrangements can include:
Independent living units
An independent living unit in a retirement village is generally:
- described as a unit or villa
- designed for retirees who are able to live independently within a retirement village.
The unit can have one or more bedrooms and can be:
- a high- or medium-rise complex
- a terrace
Leasing an independent living unit
Leasing an independent living unit (including the use of common areas, such as paths, driveways, gardens and communal recreation facilities) to a resident of a retirement village is generally an input-taxed supply of residential premises. This means that you will not be liable for GST on the lease of the unit. You cannot claim GST credits for purchases that relate to making input-taxed supplies.
If you charge the resident an ongoing maintenance fee as part of the lease, this fee is generally consideration for an input taxed supply, being a payment in connection with the supply of the residential premises.
Selling an independent living unit
If you sell an independent living unit (that has not been continuously leased for a period of at least five years) in a retirement village for the first time since it was constructed, you are making a taxable sale of new residential premises – for example, an operator that sells a newly constructed unit for the first time to a resident.
Later sales of the unit (usually made by an existing resident to an incoming resident) are input taxed.
In a strata/freehold situation, ongoing maintenance fees you charge the owner resident represent consideration for a taxable supply.
A serviced apartment in a GST retirement village is different from a serviced apartment that would ordinarily be provided by an apartment chain providing short-term rental accommodation.
An apartment is a serviced apartment in a retirement village if all of the following apply:
- the apartment is designed to be occupied by aged residents who need assistance in a full range of daily living activities or nursing services (irrespective of whether individual residents require all or only some of the services)
- at least one responsible person in reasonable proximity to the apartment is continuously on call to provide emergency assistance, such as first aid or arranging other mobility, nursing or medical assistance, to the residents of the apartments
- the apartment is part of a single complex of apartments and is accessible from a common corridor linking the apartment to the other apartments in the complex
- there is a communal dining facility in the retirement village for the residents to use.
A serviced apartment is not a:
- detached house
- row house
- terrace house
- town house
- villa unit
- independent living unit.
If you supply a serviced apartment
Supplying a serviced apartment in a retirement village by lease, hire, licence, freehold or under a share arrangement may be GST-free if you supply it:
- to a resident who needs help with daily living activities or nursing services
- with the necessary care services and other services, such as meals, laundry and cleaning, that meet the GST-free requirements.
The GST-free requirements for care services are that the services must:
- be provided to an aged or disabled person in a residential setting
- be a kind covered by Schedule 1 to the Quality of Care PrinciplesExternal Link (made under section 96-1 of the Aged Care Act 1997)
- include daily living activities assistance or nursing services that are only provided to people who require them.
Charitable retirement villages
A supply of accommodation, services related to the supply of the accommodation or meals, in a retirement village is GST-free if both:
- the supplier is an endorsed charity that operates the village
- the supply is made to a resident of the village.
If all of these conditions are met, you will not be liable for GST on these supplies. You will be entitled to claim GST credits for any creditable purchases you make that relate to making your GST-free supplies (subject to the normal rules on GST credits).
- GSTR 2007/1 Goods and services tax: when retirement village premises include communal facilities for use by residents of the premises