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Retirement Villages Working Group key messages 4 April 2022

Summary of key topics discussed at the Retirement Villages Working Group meeting 4 April 2022.

Last updated 15 June 2023

Sales villages by charities

Agreement and confirmation that this issue is closed for the purposes of this Consultation. Retirement Living Council will pursue this matter separately.

GSTR 2011/1 transitional concessions

Confirmation that the scope of the Consultation does not extend to reviewing the ATO view or softening the transitional concessions in Goods and Services Tax Ruling GSTR 2011/1 Goods and services tax: development, lease and disposal of a retirement village tenanted under a 'loan-lease' arrangement.

ATO has considered the options proposed by industry but found limitations within the scope of this Consultation to identify additional factors (to those outlined in the Ruling) and draw general principles from scenarios that are factually dependent.

Industry accepts the ATO’s proposal to follow the Private Binding Ruling process that would allow the ATO to consider specific circumstances on a case-by-case basis and to provide more tailored advice.

Apportionment safe harbour – Practical compliance guide

The consideration of an administrative ‘safe harbour’ is to help reduce the compliance burden related to the apportionment of input tax credits for Retirement Village owners or operators making predominately input taxed supplies.

The apportionment ‘safe harbour’ is a de minimis fixed rate for operators to use in calculation of their entitlement to GST credits on their acquisitions. The safe harbour, neither on its terms or by reference to its purpose, cannot be used in the calculation of GST charged to residents on supplies made to them. GST must only be applied to supplies made by a village operator to a resident to the extent that they are taxable supplies.

The extent to which supplies made to residents are taxable depends on the particular village services and facilities provided to the residents. Whilst services that relate to the lease of residential premises are input taxed, other services, such as the provision of a village bus are taxable. A proportion of ‘recurring charges’, or levies may be subject to GST only to the extent that those charges relate to specific supplies that are taxable.

The practical compliance guide (PCG) is not intended to replace the Greenacres model. The model will continue to be useful to calculate the extent of taxable supplies in some instances.

The draft PCG has been referred to the Public Advice and Guidance (PAG) unit and will follow the normal PAG process.

Updates are available.

Intention to sell/dual intention

Industry is seeking greater clarity regarding ‘dual application’ and holding an asset for the purpose of sale, supporting evidence and the application of Division 129.

A Tax Counsel Network (TCN) minute considering Industry submissions on the issue was circulated to the working group. Industry have advised that they do not agree with many aspects of the TCN minute and wish to maintain the positions put forward in their submissions. Industry advised that they do not wish to pursue further consultation on this issue.

Leasehold issues

Acknowledgement that there are multiple permutations to this complex issue around the characterisation of supplies involving leasehold interests.

Industry have withdrawn this issue and will continue to pursue this matter outside of this consultation.

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 Residential care etc.(3A)(b) in the A New Tax System (Good and Services) Act 1999External Link is expressed too narrowly and may be expanded in certain respects to deal with other situations where a resident does not take a meal. This issue was referred to the PAG unit and will follow the normal PAG process.

The ATO has confirmed that provision of daily meals under a written agreement is subject to an underlying legislative requirement of continuing need. GSTR 2012/3 describes the daily meals requirement in these terms.