Edited version of private advice

Authorisation Number: 1051817020217

Date of advice: 16 March 2021

Ruling

Subject: GST and apportionment

Question

To what extent are you entitled to GST credits, pursuant to section 11-20 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), on the construction of shared facilities at z?

Answer

You are entitled to GST credits on the construction of the shared facilities to the extent your acquisitions do not relate to making input taxed supplies. You may use any reasonable method to apportion your GST credits.

The principles set out in the 'Green Acres - example A' on the ATO's website, in the 'Retirement Villages Industry Partnership' site have application to your situation.

Relevant facts and circumstances

You (z) are building a complex known as the z project. It is located at z.

The z will comprise of two distinct types of facilities along with associated infrastructure:

•         z

•         a z which provide apartment style living. Residents occupy the ILUs using a typical loan/licence agreement commonly used in retirement villages. This is the way in which residents of ILUs acquire their rights to residential accommodation. The ILU residents have z.

•         z.

The ILUs are built for residential accommodation with physical characteristics including bedroom(s), bathroom(s), toilet(s) and kitchen.

You have advised that, pursuant to section 38-25, your supplies of services and accommodation in relation to the z are GST-free.

You are leasing the ILU's to the residents and have stated that your supplies of accommodation in relation to the ILUs are input taxed.

The shared facilities include:

•         only the outdoor car parks;

•         z;

•         common gardens apart from reasonable curtilage to either the z;

•         z;

•         the main driveway;

•         service driveways;

•         footpaths; and

•         the office and z.

Your agent advised on the XX January 20XX that he felt the Green Acres example on the ATO website provided a potential method for calculating your entitlement to GST credits.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999

Paragraph 11-5(a)

Paragraph 11-5(b)

Paragraph 11-5(c)

Paragraph 11-5(d)

Subsection 11-15(1)

Paragraph 11-15(2)(a)

Paragraph 11-15(2)(b)

Section 11-20

Section 11-25

Paragraph 11-30(1)(a)

Section 38-25

Reasons for decision

In this reasoning:

•         unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

•         all terms marked by an asterisk are defined terms in the GST Act

•         all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on ato.gov.au

Section 11-20 states:

You are entitled to the input tax credit for any *creditable acquisitions that you make.

Section 11-25 states:

The amount of the input tax credit for a *creditable acquisition is an amount equal to the GST payable on the supply of the thing acquired. However, the amount of the input tax credit is reduced if the acquisition is only *partly creditable.

Section 11-5 states:

You make a creditable acquisition if:

(a) you acquire anything solely or partly for a *creditable purpose; and

(b) the supply of the thing to you is a *taxable supply; and

(c) you provide, or are liable to provide, *consideration for the supply; and

(d) you are *registered, or *required to be registered.

Paragraph 11-30(1)(a) states:

An acquisition that you make is partly creditable if it is a *creditable acquisition to which one or both of the following apply:

(a) you make the acquisition only partly for a *creditable purpose;

Subsection 11-15(1) states:

You acquire a thing for a creditable purpose to the extent that you acquire it in *carrying on your *enterprise.

Subsection 11-15(2) states:

However, you do not acquire the thing for a creditable purpose to the extent that:

(a) the acquisition relates to making supplies that would be *input taxed; or

(b) the acquisition is of a private or domestic nature.

Shared facilities

The shared facilities listed in the facts relate partly to making input taxed supplies and partly to making GST free supplies. So, your acquisitions in respect to the shared facilities are only partly for a creditable purpose pursuant to subsection 11-15(2) which provides that you do not acquire a thing to the extent that the acquisition relates to making supplies that would be input taxed. Therefore, your GST credits are reduced.

Goods and Services Tax Ruling GSTR 2006/4 Goods and services tax: determining the extent of creditable purpose for claiming input tax credits and for making adjustments for changes in extent of creditable purpose (GSTR 2006/4) provides guidance on the calculation of the extent of creditable purpose.

Paragraph 30 of GSTR 2006/4 states:

If your planned extent of creditable purpose is less than 100% (but greater than zero), then the acquisition or importation is partly creditable and you need to apportion the total purpose between that which, on your estimate, is creditable and that which is not (see paragraphs 39 to 52 of this Ruling).

Paragraph 34 of GSTR 2006/4 states:

Following the principles set out by the High Court, the apportionment method you choose needs to:

•         be fair and reasonable;

•         reflect the planned use of that acquisition (or in the case of an adjustment, the actual use); and

•         be appropriately documented in your individual circumstances (see paragraphs 98 to 100 of this Ruling).

You will need to choose a methodology that meets the criteria set out above. Your agent advised that he felt the Green Acres example on the ATO website provided a potential method for calculating your entitlement to GST credits.

We consider that the principles set out in the 'Green Acres - example A' on the ATO's website, in the 'Retirement Villages Industry Partnership -, have application to your situation and would be a reasonable basis to calculate your entitlement to GST credits.

We note for your information that you may have adjustments under Division 129 in future. This can occur when the actual application for a creditable purpose differs from the extent of your planned use.

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).