Edited version of private advice

Authorisation Number: 1051642018412

Date of advice: 13 March 2020

Ruling

Subject: Treatment of retirement village residency arrangements

Question 1

For income tax purposes, will the receipt of an interest-free resident loan that is borrowed by the Operator from a resident under the Loan Agreement be capital in nature?

Answer

Yes

Question 2

Will the receipt of the interest-free loan amount from a resident give rise to a 'non-cash business benefit' pursuant to subsection 21A(2) of the Income Tax Assessment Act1936 (ITAA 1936)?

Answer

Yes

Question 3

If the non-payment of interest on the loan amount under the Loan Agreement is a non-cash business benefit, does the 'otherwise deductible' rule in subsection 21A(3) of the ITAA 1936 reduce the non-cash business benefit to nil such that there are no amounts included in the Operator's assessable income?

Answer

Yes

Question 4(a)

For income tax purposes, will the upfront payment under the New Contract constitute income according to ordinary concepts (ordinary income) which is assessable to the Operator under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer

Yes

Question 4 (b)

For income tax purposes, will the upfront payment paid by a resident on the commencement of the lease be derived by the Operator over the same term for tax purposes as for accounting purposes?

Answer

No

Question 5

Is the payment of a resident's share of the Capital Gain made by the Operator to an outgoing Resident a deductible outgoing allowable to the Operator under section 8-1 of the ITAA 1997?

Answer

Yes

Question 6

Will Subdivision 14-D of Schedule 1 to the Taxation Administration Act 1953 (TAA) apply only in relation to the upfront payment which an incoming resident pays to an Operator on commencement of the lease under the New Contract?

Answer

Yes

Relevant facts and circumstances

The Operator is an Australian resident for tax purposes. It owns and operates a number of retirement villages in Australia and enters into a variety of lease contracts with incoming residents.

The Operator is introducing a New Contract for leases that future residents will enter into.

Under the New Contract, the resident is required to pay the Operator on the commencement of the lease an interest-free loan amount pursuant to a Loan Agreement, a non-refundable prepaid rent amount and a non-refundable upfront payment. No part of the upfront payment is refundable either during the lease or following its termination.

For accounting purposes, the Operator will recognise the upfront payment as income on a straight-line basis over a period of X years, being the average term of the lease.

The resident is also required to pay a number of other costs during their term of residency, including a service charge and a maintenance charge which is a contribution to the operating costs of the village.

The operating costs include both maintenance and management costs. The maintenance charge is calculated by apportioning the budgeted operating costs for the village over the total number of units in the village.

Following the termination of the lease, the resident (or her or his estate) is entitled to receive from the Operator any market value increase (Capital Gain), or is required to pay the amount of any market value decrease (Capital Loss) to the Operator.

The Operator is required to repay the interest-free loan to the outgoing resident (or her or his estate) in accordance with the Loan Agreement. This repayment is not contingent on the sale of the premises to a new resident.

Under the New Contract, the resident must not assign the lease without obtaining the Operator's consent.

Reasons for decision

All legislative references to relate to the Income Tax Assessment Act 1997 (ITAA 1997) unless otherwise specified

Question 1

Summary

For income tax purposes, the receipt of the interest-free resident loan by the Operator under the New Contract is capital in nature.

Detailed reasoning

The Operator is in the business of owning and managing retirement villages. It enters into and terminates lease agreements of units with residents in those retirement villages in the ordinary course of its business.

Taxation Ruling TR 2002/14: Income tax: taxation of retirement village operators (TR 2002/14) sets out the Commissioner's view on various income tax matters for entities operating retirement villages.

TR 2002/14 distinguishes between various types of leasing arrangements, and in order to determine the tax consequences it is necessary to determine the nature of the arrangements the Operator has with its residents under the New Contract.

The interest-free loan amount is subject to a separate Loan Agreement. Some of the conditions are that the loan is unsecured, interest-free and repayable by the Operator.

Based on the terms of the New Contract, we consider it is similar to the interest-free loan-lease (non-assignable lease) arrangement, as described in paragraph 90 of TR 2002/14 as follows:

Loan/lease (non-assignable lease): Under this arrangement, a resident is granted a long-term lease, generally for a period of 99 years, of a dwelling in the retirement village, conditional upon immediate payment to the operator of an 'interest-free loan' equal to the market value of the dwelling. Upon termination of the lease, the operator is obliged to repay the loan to the outgoing resident (or personal representative) and the outgoing resident may be required to pay a 'deferred management fee' to the operator. The deferred management fee is offset against the amount repayable to the outgoing resident.

Paragraphs 28-29, 119 and 121 of TR 2002/14 also state as follows:

28.      Where the relevant arrangement requires the resident to make a loan, the receipt and repayment of the loan are on capital account. This situation arises where:

·                an amount of money (sometimes referred to in retirement village contracts as an 'interest-free loan' or 'security deposit') is paid to a retirement village operator by an incoming resident; and

·                the operator has an obligation to pay the same amount to the resident upon termination of the lease.

29.      Where an amount, that may be described, for example, as an 'interest-free loan' or 'security deposit', is not repayable to the outgoing resident upon termination of the lease, it is regarded as a lease premium, prepayment of rent or other fee. Similarly, where an 'interest-free loan' is not repayable unless or until another resident enters into an agreement to occupy the accommodation unit vacated by the outgoing resident, the arrangement is not properly characterised as a loan and will be regarded as a lease premium. The fact that the repayment of the 'loan' is contingent upon a new resident being found, an event that may not happen, means than an essential element of a loan - the obligation to repay - is absent. In these circumstances, the intention that reasonably can be inferred is that the resident is not entitled to repayment of the 'loan' if a new resident is not found...

119. Lease agreements sometimes describe the entry price in a way that does not correspond with the form of the arrangement. For example, where the entry price is described as a 'lease premium', but the agreement provides that the amount of the entry price will be repaid to the resident on termination of the lease, the proper characterisation of the entry price is that it is a loan in form and not a lease premium.

121. Where an entry price is described as an 'interest-free loan' or a 'security deposit', but the operator is obliged to make a payment to the outgoing resident calculated by reference to the new resident's entry price, the proper characterisation of the entry price is that it is a lease premium and not a loan, because it cannot be regarded as other than a payment that is required to be made in consideration for the granting of the lease. The taxation treatment of entry prices is determined by the legal form of the particular arrangement rather than the name used to describe it (see also paragraphs 133-134).

Although the repayment of the interest-free loan amount can occur as a result the Operator receiving an Ingoing Contribution from a new resident, ultimately the repayment of the loan amount is not contingent on the sale of the premises to a new resident. Therefore, the Commissioner considers that the interest-free loan made to the Operator as part of the Ingoing Contribution under the New Contract is an interest-free loan-lease (non-assignable) arrangement as described in paragraph 90 of TR 2002/14 which is on capital account.

Question 2

Summary

The receipt of the interest-free loan amount from a resident gives rise to a 'non-cash business benefit' pursuant to subsection 21A(2) of the ITAA 1936 and as such the Operator is required to include the value of the non-payment of interest on the loan amount in its assessable income.

Detailed reasoning

Section 21A of the ITAA 1936 provides that a non-cash business benefit is to be treated as convertible to cash for the purpose of determining the income of a taxpayer that carries on a business.

Subsection 21A(2) of the ITAA 1936 brings to account all non-cash business benefits, whether or not convertible to cash, that are income derived by a taxpayer in carrying on a business for the purpose of gaining or producing assessable income.

Subsection 21A(5) defines a 'non-cash business benefit' as:

Non-cash business benefit means property or services provided after 31 August 1988:

(a)       Wholly or partly in respect of a business relationship; or

(b)       Wholly or partly for or in relation directly or indirectly to a business relationship

Subsection 21A(5) defines 'services' to include:

an arrangement for or in relation to the lending of money.

The application of Section 21A of the ITAA 1936 in relation to interest-free loans was considered by the Administrative Appeals Tribunal (AAT) in Case 7/96 97 ATC 143. The AAT held that:

...The benefit provided is the continual provision of the principal sum loaned. The amount that each applicant could reasonably be expected to have been required to pay for the continued provision of the principal sum by the lender, under a transaction where the parties to the transaction were dealing with each other at arm's length in relation to the transaction, is the amount of interest that would have been payable in an ordinary commercial transaction.

The non-cash benefit is the continued provision of the loan interest-free.

Where non-cash business benefits are income which is derived in carrying on a business for the purpose of gaining or producing assessable income, the amount of the income under subsection 21A(2) of the ITAA 1936 is the arm's length value of the benefit, reduced by any amount of consideration paid to the provider by the recipient in respect of the provision of the benefit (the recipient's contribution).

As the interest-free loan provided by the resident is provided to the Operator in the course of carrying on its business, the non-payment of interest on the loan constitutes 'services' as defined at paragraph (c) of the term as defined in subsection 21A(5) of the ITAA 1936, and in turn as the definition of a 'non-cash business benefit' includes the provision of 'services', the non-payment of interest on the loan will constitute a non-cash business benefit provided to the Operator for the purposes of section 21A of the ITAA 1936.

Question 3

Summary

The 'otherwise deductible' rule contained in subsection 21A(3) of the ITAA 1936 reduces the non-cash business benefit to nil such that there is no amount of income included in the Operator's assessable income.

Detailed reasoning

Subsection 21A(3) of the ITAA 1936 states that where:

(a) a non-cash business benefit is income derived by a taxpayer in a year of income; and

(b) if the taxpayer had, at the time the benefit was provided, incurred and paid unreimbursed expenditure in respect of the provision of the benefit equal to the amount of the arm ' s length value of the benefit - a once-only deduction would, or would but for section 82A, and Subdivisions F, GA and G of Division 3 of this Part, of this Act, and Divisions 28 and 900 of the Income Tax Assessment Act 1997, have been allowable to the taxpayer in respect of a percentage (in this subsection called the deductible percentage ) of the expenditure;

the amount that, apart from this subsection, would be applicable under subsection (2) of this section in respect of the benefit shall be reduced by the deductible percentage.

As concluded in the Detailed reasoning for Question 2, the non-payment of interest on the interest-free loan provided to the Operator by a resident constitutes a non-cash business benefit provided to the Operator.

However, any amounts calculated pursuant to subsection 21A(2) of the ITAA 1936 are reduced by the deductible percentage worked out pursuant to subsection 21A(3) of the ITAA 1936.

The interest-free loan amount paid by the resident on commencement of the lease is provided to the Operator in the course of carrying on its business and therefore any interest that is payable on such a loan would be deductible to the Operator. The deducible percentage would be 100% which would reduce the non-cash business benefit to nil.

Accordingly, the 'otherwise deductible' rule contained in section 21A(3) of the ITAA 1936 operates to reduce the non-cash business benefit to nil such that in respect of that interest-free loan there is no statutory income amount that is included in the Operator's assessable income pursuant to sections 6-10 and 10-5.

Question 4 (a)

Summary

The upfront payment made under the New Contract constitutes ordinary income of the Operator which is assessable income under section 6-5.

Detailed reasoning

Section 6-5 includes ordinary income in assessable income. Subsection 6-5(2) provides that an Australian resident entity's assessable income includes the ordinary income it derives directly or indirectly from all sources, whether in or out of Australia, during the income year.

The Operator receives the upfront payment in the course of carrying on its business of operating retirement villages, which involves leasing units to incoming residents. The upfront payment is received in relation to this leasing arrangement from an incoming resident.

As an Australian resident taxpayer, the Operator's assessable income includes, among other amounts, ordinary income derived directly or indirectly from all sources during an income year. As the upfront payment is business income of the Operator, it is ordinary income and therefore is included in assessable income pursuant to subsection 6-5(2).

Question 4 (b)

Summary

The Operator derives the non-refundable upfront payment paid by the resident on the commencement of the lease in the income year that the Operator receives the payment.

Detailed reasoning

As set out in the Detailed reasoning for Question 4(a), the non-refundable upfront payment is assessable income of the Operator pursuant to section 6-5.

In Taxation Ruling TR 2002/14, the Commissioner looks to the character of the income in working out when it is derived. Whether an amount received at commencement of a lease from an incoming resident is for example rent in advance or a lease premium is determined by the proper characterisation of the legal rights of the parties.

The Commissioner states in paragraphs 23 and 25:

23. To the extent that a village operator receives amounts that are in form rent in advance, and non-refundable, the rent is assessable in full on receipt. Where the rent is fully abatable, it is assessable over the term of the lease, in accordance with the Arthur Murray principle.

25. Whether an amount payable by an incoming resident is a lease premium is determined by the proper characterisation of the legal rights of the parties. Where at law the amount received is a lease premium, then, having regard to the nature of the business - developing or acquiring a retirement village and putting that to profit by the recurrent granting of leases - the amount received for the grant of a lease, whether it be termed a lease premium or otherwise, is on revenue account and constitutes assessable income of the operator in the year in which it is derived.

Paragraphs 122 to 127 and paragraph 133 then discuss further the distinction between rent and premium:

122. The question of whether an amount described as rent in advance paid by a resident of a retirement village should be regarded as rent rather than as a premium was considered by the Supreme Court of NSW in Frazier v. Commissioner of Stamp Duties (NSW). An amount of about $31,000 was said to be rent in advance for 20 years. However, there was no indication of its relationship to any weekly or periodic amount of rent. The resident was told by her solicitor that the sum was to cover rent for 20 years, and that a portion would be refundable in certain events. The resident also had to pay regular maintenance charges, which were agreed to be rent.

123. In determining the amount payable in advance, the retirement village owner's real estate agent fixed the term for the amount by reference to the cost of the building, taking into account current rental values, the value to the village owner of rent in advance, and the security of tenure being granted under the lease. However these matters were seen as not pointing, one way or the other, to whether the amount was 'rent' or 'premium'.

124. Lee J said the question was to be determined by deciding whether the sum "is a payment required as a consideration for the granting of the lease or whether it is a payment for the use and enjoyment by the lessee of the land"

125. The Court considered that the matter was not to be controlled by the way in which the parties described the payments. The fact that the lease document granted a lease for 20 years "upon payment by the lessee (resident)... of the rent in advance as a lump sum... for the grant of this lease", pointed to the payment being made "as a consideration for the grant of the lease" and therefore a premium. However, the Court said the whole circumstances must be looked at to determine as a fact whether the amount was paid as a consideration for the granting of the lease or whether it was a payment intended as rent for the use of the premises.

126. The Court placed great significance on the provisions for abatement in the case of destruction or damage by fire, flood etc., when the premises become unfit for occupation, or on early termination of the lease, such as on the death of the resident, when compensation was to be paid for the rent in advance for the unexpired term of the lease. The inference drawn was a clear intention by the parties that the amount paid was referable to the actual use and occupation of the premises by the resident, and therefore 'rent'. The fact that the amount was paid in a lump sum, and was not quantified by reference to any periodical payment, did not affect this conclusion.

127. In Case B51, 70 ATC 253, the taxpayer received three years rent in advance, but without provision for any abatement. The Taxation Board of Review held that the amount was in fact rent, but that it had "come home" to the taxpayer and was assessable in full in the year of receipt.

133. Whether an amount is a premium or not is a question of fact, and will not be determined by the description ascribed to it by the parties: Frazier's case (see paragraph 122 above). Similarly, in Radaich v. Smith McTiernan J said: "the parties cannot by the mere words of their contract turn it into something else. Their relationship is determined by the law and not by the label they choose to put on it".

Section 26AB(1) of the ITAA 1936 defines the term 'premium' as follows:

In this section, premium means a consideration payable in one amount, or each amount of a consideration payable in more than one amount, where the consideration is:

(a) in the nature of a premium, fine or foregift payable for or in connexion with the grant or assignment of a lease; or

(b) for or in connexion with an assent to the grant or assignment of a lease;

but does not include an amount in respect of goodwill or a licence.

Paragraph 15 of Taxation Ruling TR 96/24 Income tax: capital gains: guidelines to determine whether an amount described in a sale of business agreement as consideration for goodwill is properly characterised as a lease premium, states that a lease premium is an amount received as consideration for the grant of a lease which is to be distinguished from rent which is consideration payable under a lease for the right to use and occupy a leased premise during a given period.

Costs and charges which a resident must pay to an owner of a retirement village in order to gain entry to the village is required to be included in retirement village contracts under State regulation.

Consistent with the State regulation which is referred in the New Contract, the costs payable upon entry by a resident including the upfront payment are listed.

Under the New Contract income from providing services or maintenance to a resident is covered by a separate charge and not by the upfront payment.

The New Contract also does not provide for any refund of some or all of the upfront payment.

Having regard to the abovementioned Taxation Rulings, the terms of the New Contract and the relevant State regulation, the Commissioner considers that the non-refundable upfront payment which the Operator receives from a resident is income derived by the Operator in granting the resident the right to entry into the retirement village. It follows that the upfront payment is provided in connection with the provision of the lease and accordingly, the upfront payment is in the nature of a lease premium.

The upfront payment can be ascertained with certainty at the commencement of the lease and the Operator can and does demand the payment at that time. Further, the upfront payment is not abatable regardless of whether the resident terminates the lease within 12 months or after a number of years. Therefore the upfront payment is not pre-paid rent in accordance with the Arthur Murray principles, as outlined in paragraph 23 of TR 2002/14.

The term 'derived' is not defined in the ITAA 1936 or ITAA 1997. For taxpayers that account on an accruals basis, the Australian courts have held that income is 'derived' when a recoverable debt is created such that the taxpayer is not obliged to take any further steps before becoming entitled to payment (Farnsworth v. FC of T (1949) 78 CLR 504; (1949) 9 ATD 33; Henderson v. FC of T (1970) 119 CLR 612; 70 ATC 4016; (1970) 1 ATR 596; FC of T v. Australian Gas Light Co. 83 ATC 4800; (1983) 15 ATR 105). An exception may arise in some instances when amounts are received or receivable in advance of the provision of goods or services (Arthur Murray (NSW) Pty Ltd v. FC of T (1965) 114 CLR 314; (1965) 14 ATD 98).

The Commissioner's view on derivation of income is set out in Taxation Ruling TR 2014/1 Income tax: commercial software licencing and hosted agreements: derivation of income from agreements for the right to use proprietary software and the provision of related services.

Although TR 2014/1 is the Commissioner's view on derivation of income from arrangements for the right to use propriety software and the provision of related services, the same principles apply.

At paragraph 5 of TR 2014/1 the Commissioner states that:

Where an amount properly attributed to a contractual obligation is subject to a 'contingency of repayment', the amount is derived for the purposes of section 6-5 of the ITAA 1997 when the obligation is fully performed or the contingency of repayment otherwise lapses.

A contingent obligation is defined at paragraph 6 of TR 2014/1 as any of:

(i)        A contractual obligation to make a refund

(ii)       A demonstrated commercial practice to make a refund, or

(iii)      Contractual exposure exists for damages in respect of non-performance.

The upfront payment, which we consider has the character of a lease premium, is defined in the New Contract as being calculated as a percentage of the Ingoing Contribution. The term Ingoing Contribution is defined in the New Contract and consists of the interest-free loan amount pursuant to a Loan Agreement and a non-refundable prepaid rent amount.

The New Contract also requires the resident to pay the upfront payment on or before the commencement of the lease and the Operator is not contractually obliged to refund some or all of the upfront payment. The New Contract also does not outline what services are to be performed in return for the upfront payment and so there is no exposure to damages for non-performance.

Paragraph 9 of TR 2014/1 states that:

Where no contingent obligation exists, the amount is derived when a recoverable debt arises in respect of the contractual fee.

There is no obligation to refund any part of the upfront payment under the new contract regardless of when the resident leaves. Therefore, there is no contingent obligation in relation to the upfront payment as the Operator has no contractual obligation to make a refund and there is no exposure for damages in the case of non-performance. Further, the recoverable debt arises on entry.

Based on the above, the upfront payment is a lease premium which the Commissioner considers in accordance with his view set out in TR 2002/14 is included in assessable income in full in the year of receipt. (Note for most typical taxpayers a lease premium is assessable on capital account, but because Retirement Villages are in the business of selling leases, TR 2002/14 sets out that they are on revenue account, refer paragraph 25).

Question 5

Summary

The payment of the '100% share of the Capital Gain' to an outgoing resident is an allowable deduction to the Operator under section 8-1 of the ITAA 1997.

Detailed reasoning

Taxation Ruling TR 2002/14 sets out the Commissioner's view on the deductibility of any payment made by an operator to a resident that represents a share of any increase in the entry price paid by a new resident, for example a capital gain in relation to the lease of a unit. Paragraph 50 of TR 2002/14 states that:

Where a village operator...makes a payment to an outgoing resident (or their legal representative) that represents a share of an increase in the entry price payable by a new resident (that is the difference between the entry price paid by the outgoing resident and the entry price payable by the new resident), such payments are deductible under section 8-1.

As the resident's share of the Capital Gain payment represents the outgoing resident's share of any increase in the entry price payable by a new resident, then according to paragraph 50 of TR 2002/14, this payment is an allowable deduction for AU.

For completeness, any payment to the operator for the Capital Loss (a share of a decrease in the entry price payable by the new resident) incurred by the Outgoing Resident will be assessable income of AU pursuant to section 6-5.

Question 6

Summary

Subdivision 14-D of Schedule 1 to the Taxation Administration Act 1953 (TAA) applies only in relation to the upfront payment which an incoming resident pays to an Operator on commencement of the lease under the New Contract, unless it is an excluded pursuant to section 14-215 of Schedule to the TAA.

Detailed reasoning

Subdivision 14-D of Schedule 1 to the TAA was introduced to assist in the collection of foreign residents' capital gains tax (CGT) liabilities in relation to assets that are taxable Australian property.

The obligation to withhold rests with the purchasers of taxable Australian property under contracts entered into from 1 July 2016.

Section 14-200 of Schedule 1 to the TAA states that:

You must pay the Commissioner an amount if:

(a) you become the owner of a *CGT asset as a result of *acquiring it from one or more entities under one or more transactions; and

(b) subsection 14-210(1) (about foreign residents) applies to at least one of those entities at the time one of those transactions is entered into; and

(c) at that time, the CGT asset is:

(i) *taxable Australian real property; or

(ii) an *indirect Australian real property interest; or

(iii) an option or right to acquire such property or such an interest;

unless a transaction referred to in paragraph (a) is excluded under section 14-215.

The term 'taxable Australian real property' (TARP) is defined in section 995-1 as having the meaning given by section 855-20 and includes a lease of land if the land is situated in Australia.

Paragraphs 2.131 and 2.132 of the Explanatory Memorandum to Tax and Superannuation Laws Amendment (2015 Measures No.6) Bill 2015 (EM) which introduced Subdivision 14-D state that:

2.131 A lease is a CGT asset that is TARP under section 855-20 of the ITAA 1997. Therefore, the acquisition of a lease asset by a lessee could be subject to withholding if the lessee has reason to believe the lessor is a foreign resident. However, the withholding obligation will only arise with respect to lease premiums paid for the grant of the lease.

2.132 A lease that does include the payment of a premium will not result in a withholding liability. Rent payable under the term of the lease does not form part of the first element of the cost base. This amount is used to determine the withholding amount.

The obligation to pay an amount to the Commissioner only arises if the vendor is a relevant foreign resident (which, where applicable, may include a resident who has not obtained a clearance certificate from the Commissioner), unless the CGT asset is an excluded asset under section 14-215 of Schedule 1 to the TAA.

Where the CGT asset is a lease over real property, a relevant exclusion may be paragraph 14-215(1)(a) of Schedule 1 to the TAA. This paragraph states:

...A transaction that results in the *acquisition of a *CGT asset is excluded under this section if:

(a)             just after the transaction, the CGT asset:

(i) is *taxable Australian real property; or

... and the *market value of the CGT asset is less than $750,000;...

Pursuant to paragraph 14-200(3)(a) of Schedule 1 to the TAA if the withholding obligation arises from a transaction entered into on or after 1 July 2017, the purchaser must withhold from the vendor, and pay to the Commissioner, an amount equal to 12.5% of:

·               the first element of the CGT asset's cost base just after the acquisition, less

·               if the acquisition is the result of the purchaser exercising an option - any payment the purchaser made and the market value of any property that the purchaser gave for the option (or for its renewal or extension).

If the relevant CGT asset that will be subject to the foreign resident CGT provisions under Subdivision 14-D of Schedule 1 to the TAA is a lease, then the first element of the cost base will be any lease premium paid to acquire the lease. The Commissioner considers that the upfront payment constitutes a lease premium as discussed in the Detailed reasoning for Questions 4(a) and 4(b) and this in turn is the relevant CGT asset for the purposes of Subdivision 14-D.

However if the upfront payment is less than $750,000, then paragraph 14-215(1)(a) of Schedule 1 to the TAA operates such that Subdivision 14-D of Schedule 1 to the TAA does not apply.

If the upfront payment is not excluded under section 14-215, an exception may apply under Subsection 14-210(2) of Schedule 1 to the TAA where the operator provides a clearance certificate issued under subsection 14-220(1). A clearance certificate is valid for 12 months after issue.

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