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Ruling

Subject: Adjustments and refunds - sale of retirement village - vendor not registered for GST

Questions

1. Were you, as trustee for a trust, required to make an increasing adjustment under Division 138 when you cancelled your GST registration?

2. Was the supply of the Retirement Village, a taxable supply?

3. Do you have a decreasing adjustment as a result of selling the Retirement village pursuant to Division 129?

a. If so are you entitled to a GST refund?

Answers

1. Not necessary to answer.

2. Not necessary to answer.

3. No

a. Not applicable

Relevant facts

You, as trustee for the Trust, registered for GST.

On June 200L you acquired land.

You subsequently constructed a Retirement Village and a Health Centre and Office on the land.

You did not claim any input tax credits for GST incurred on acquisitions relating to the construction and operation of the Retirement Village. However, you claimed credits in relation to the construction and operation of the Health Centre and Office building.

The Health Centre building was sold at a later date as a going concern.

The retirement village was to comprise of a specified number of independent Living units (ILUs). However, a lesser amount were constructed prior to the final sale of the retirement village. The Village did not have any communal facilities used for commercial purposes, such as a hairdresser, beauty salon, pharmacy, medical centre, nursing room or restaurant.

The Village commenced operation in the financial year ending 30 June 200M. Residents of the Village entered into loan/lease agreements under which the resident was granted the right to occupy a unit of accommodation in the Village and also the right to use the common property.

When asked when you formed an intention to sell the retirement village, your agent advised that you received a number of offers to buy the village. However, it was not until 200N that an acceptable offer was made.

Your agent advised that during 200N, you entered into a contract to sell the retirement village. The contract you supplied is dated in the next calendar year.

You deregistered, effective October 200N as you were only making input taxed supplies. At the time of sale the units would have been classified as new residential premises as defined in the GST Act.

Settlement of the Village occurred the next year. You did not account for GST on the supply of the village, on the basis that the supply was considered not to be a taxable supply and the Village was sold without GST applying.

In a letter dated May 200Q, your agent notified the Commissioner of an expected entitlement to a decreasing adjustment in respect of the last adjustment period applying to you. In that letter, your agent advised that the Village was sold without GST applying.

Contentions

Relevant legislative provisions

Division 9-5 of the A New Tax System (Goods and Services Tax) Act 1999

Section 105-55 of Schedule 1 to the Taxation Administration Act 1953

Division 129 of the A New Tax System (Goods and Services Tax) Act 1999

Section 27-40 of the A New Tax System (Goods and Services Tax) Act 1999

Division 138 of the A New Tax System (Goods and Services Tax) Act 1999

Reasons for decision

Under section 105-50 of Schedule 1 to the Taxation Administration Act 1953, (TAA) an unpaid net amount of GST ceases to be payable four years after it originally became payable by you, unless the Commissioner has given notice to you within that four year period, or the payment was evaded, or avoided by fraud.

In this instance, the Commissioner is not alleging evasion or fraud.

Section 105-55 of the TAA provides that you are not entitled to a refund other payment or credit in respect of a tax period unless within 4 years after the end of the tax period you notify the Commissioner that you are entitled to the refund.

Division 129 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) provides for an adjustment if the actual use of an acquisition is different from the intended extent of creditable purpose. It is noted that:

§ Under subsection 129-5(1) of the GST Act an adjustment can arise under this Division for an acquisition, even if it is not a creditable acquisition and

§ Under subsection 129-20(1) of the GST Act an adjustment period for an acquisition is a tax period applying to you that starts at least 12 months after the end of the tax period to which the acquisition or importation is attributable (or would be attributable if it were a creditable acquisition and ends on 30 June in any year; or if none of the tax periods applying to you in a particular year ends on 30 June-closer to 30 June than any of the other tax periods applying to you in that year.

§ In addition, a tax period provided for under section 27-39 or 27-40 or subsection 151-55(1) or 162-85(1) of the GST Act is an adjustment period for the acquisition or importation.

§ Subsection 27-40(2) of the GST Act (which specifies an entity's concluding tax period) provides that if an entity's registration is cancelled, the entity's tax period ceases at the end of the day of cancellation.

Division 138 and the sale of the retirement village

Any increasing adjustment under Division 138 of the GST Act is attributable to the tax period that ends on the day on which you cancelled your GST registration. This is also your final tax period (and adjustment period) for the purposes of Division 129.

In addition, settlement on the sale of the retirement village occurred on April 200P and any GST liability arising from the sale of the retirement village, if you were registered or required to be registered, would normally be attributable to the tax period ending 30 June 200P.

The Commissioner has not notified you of an unpaid net amount of GST arising as a result of you cancelling your GST registration, or from the sale of the retirement village. Further, the Commissioner is not alleging that an unpaid net amount of GST arising from these events was evaded, or avoided by fraud.

Accordingly, under section 105-50 of Schedule 1 to the TAA, any unpaid net amount of GST arising from these events is no longer payable. Therefore, it is not necessary to consider whether any unpaid net amount of GST arose from these events.

Division 129 decreasing adjustments

Despite our requests, your agent has failed to advise the date on which you first commenced to apply the retirement village to the purpose of sale. However, you cancelled your GST registration from 1^st October 200N, on the basis that you were not required to be registered for GST. As a consequence, you no longer had any tax periods applying to you.

If the application to the purpose of sale commenced after 1 October 200N, any entitlement to a decreasing adjustment would normally arise, and be attributable, after this date. As there are no tax periods applying to you after this date, you do not give a GST return to the Commissioner and therefore do not claim any decreasing adjustment.

If the application to the purpose of sale commenced before 1 October 200N, any entitlement to a decreasing adjustment would arise before this date and would be attributable to your concluding tax period.

Your agent has notified the Commissioner of an expected entitlement to a decreasing adjustment in respect of the last adjustment period applying to you (being your concluding tax period). However, the notification letter was dated May 200Q. This is not within 4 years of the end of your concluding tax period. Therefore, in accordance with section 105-55 of the TAA, you are not entitled to a decreasing adjustment as a result of applying the retirement village to the purpose of sale.