ATO Interpretative Decision
ATO ID 2001/636
Goods and Services Tax
GST and monthly maintenance fees in non-freehold and non-strata titled retirement villagesFOI status: may be released
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Does a monthly maintenance fee consisting of components that can be reasonably characterised as part of the rental charge, form part of the consideration for an input taxed supply under paragraph 40-35(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when the entity, an owner-operator of a retirement village, leases an independent living unit to a resident?
Decision
Yes, the monthly maintenance fee consisting of components that can be reasonably characterised as part of the rental charge, does form part of the consideration for an input taxed supply under paragraph 40-35(1)(a) of the GST Act, when the entity leases an independent living unit to a resident.
Facts
The entity is an owner-operator of a non-freehold and non-strata titled retirement village. The entity is not an endorsed charitable institution or an endorsed trustee of a charitable fund. The entity leases an independent living unit to a resident of the retirement village. The resident is not receiving services referred to in paragraph 38-25(3)(c) of the GST Act being daily living activities assistance or nursing services as prescribed by that paragraph.
The lease of the independent living unit to the resident is an input taxed supply of residential premises under paragraph 40-35(1)(a) of the GST Act.
As part of the lease agreement between the entity and the resident, the resident pays a monthly maintenance fee to the entity.
The monthly maintenance fee covers the entity's costs in relation to the upkeep of the communal paths, driveways, parks, swimming pools and gardens within the retirement village complex.
The entity is registered for goods and services tax (GST).
Reasons for Decision
Under paragraph 9-15(1)(a) of the GST Act, any payment in connection with the supply of anything is consideration.
Under the lease the entity is responsible for the upkeep of the communal paths, driveways, parks, swimming pools and gardens of the retirement village. In return for this, it receives a monthly payment from the resident. Therefore, the entity is receiving consideration for a supply.
As stated in the facts, the supply of the independent living unit by way of lease is an input taxed supply of residential premises. Accordingly, the issue is whether the payment of the monthly maintenance fee forms part of the consideration for the supply of residential premises.
The extent to which resident's monthly maintenance fees are input taxed depends on whether the components of these fees can be reasonably characterised as part of a rental charge.
Under section 195-1 of the GST Act, residential premises is defined to mean land or a building that:
- •
- is occupied as a residence or for residential accomodation; or
- •
- is intended to be occupied and is capable of being occupied as a residence, or for residential accommodation;
(regardless of the term of the occupation or intended occupation) and includes a floating home.
The term 'residence' is central to the above definition. It is considered that the term 'residence' includes the building in which one resides and extends to include:
- •
- that part of any common area and other appurtenances to the building;
- •
- the land immediately contiguous to the building; and
- •
- that which is predominantly necessary for the use and enjoyment of the building as a place of residence for individuals.
Therefore, for retirement villages, residential premises include common areas such as paths, driveways, parks, swimming pools and gardens.
Areas not included in residential premises within a complex include restaurants and associated dining areas where prepared meals are provided, hairdressing/beauty salon, pharmacy, medical room, nursing station, convenience stores and areas geographically situated away from the residence.
Therefore, the monthly maintenance fee, which covers the entity's costs in relation to the upkeep of the communal paths, driveways, parks, swimming pools and gardens within the retirement village complex can be reasonably characterised as part of the rental charge. These services are incidental to the supply of the residential premises in the retirement village by way of lease to the resident. Accordingly, the monthly maintenance fee is consideration for an input taxed supply of residential premises under paragraph 40-35(1)(a) of the GST Act.
Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
paragraph 9-15(1)(a)
paragraph 38-25(3)(c)
section 38-250
section 38-260
section 40-35
paragraph 40-35(1)(a)
section 195-1
ATO ID 2009/103
ATO ID 2009/104
ATO ID 2001/634
ATO ID 2001/635
Other References:
Retirement Villages Industry Partnership - Issues Register - Issue 1
Keywords
Goods & Services Tax
GST residential premises
GST residential rents
GST retirement villages
Input taxed supplies
ISSN: 1445-2782
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