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Authorisation Number: 1051274034260
Date of Advice: 7 September 2017
Subject: GST and Sinking Fund Contributions
Is the payment of a percentage of the Departure Fee by an Operator of a Retirement Village, to the Owners Corporation, consideration for a taxable supply pursuant to section 9-5 of the A New Tax System (Goods and Services Tax)Act 1999 (GST Act)?
Yes. There is a supply by the Owners Corporation to the Operator, being the obligation to maintain the retirement village to standard which will not impact on the viability of the Operators business operations or its future income stream. The payment by the Operator (being a proportion of the Departure Fee received from an outgoing resident) is consideration for that supply. As the Owners Corporation is registered for GST and all other requirements of section 9-5 are met, the Owners Corporation will make a taxable supply to the Operator. Where this supply is a creditable acquisition to the Operator, it will be entitled to GST credits pursuant to section 11-20.
Relevant facts and circumstances
The Retirement village is a strata titled property located in Australia.
The Owners Corporation is registered for GST and has the principle responsibility for the management of the strata scheme.
An Operator has been appointed by the Owners Corporation to manage and administer the common property and community facilities contained within the Strata Scheme.
The Operator acquired the rights to operate the village from the previous Operator.
The Operator entered into a Deed for the Provision of Management Services (Management Deed) with the Owners Corporation
The Management Deed governs the management and administration of the Village by the Operator, including the duties of caretaking, cleaning, security, supervision and general repair and maintenance obligations.
A copy of the Management Deed was supplied. The Operator agreed to undertake various management and upkeep duties of the common areas under the Management Deed.
Residents enter into an Agreement with the Operator. They pay various fees and when they exit the retirement village they pay a Departure Fee to the Operator. The Operator has agreed under the Agreement to pay a portion of that departure fee to the Owners Corporation.
The Operator and the Owners Corporation representative provided a number of facts and contentions in written correspondence, in regard to the practice of paying over a portion of the Departure Fee to the Owners Corporation.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Section 9-5 and
A New Tax System (Goods and Services Tax) Act 1999 Section 9-10.