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Edited version of private advice
Authorisation Number: 1051599515146
Date of advice: 7 November 2019
Ruling
Subject: GST and retirement villages
Question
Are you required to include the value of the liabilities to repay ingoing contributions to which Entity A may become exposed, as consideration pursuant to section 9-15 of the GST Act for Your supply of the Retirement Village ("RV") to Entity A?
Answer
No, as you are entitled to apply the interpretation in paragraph 32 of GSTR 2011/1 to the supply of Your RV.
Relevant facts and circumstances
You are registered for GST. You are not an endorsed charity. You own a property located in Australia which had existing premises from which You operated Your enterprise.
History of the development of the site
Before April 201X, You:
A. made investigations to develop Your site with a new facility that included a RV and new premises for Your existing enterprise: You spent $X on this process,
B. held a meeting of the board of directors, who resolved to proceed with development of the RV, and
C. obtained planning advice and lodged with the local council a Development Application to develop a multi-purpose facility that included a RV facility.
After April 201X, You sought separate advice about how best to structure ownership of the completed facilities to best manage commercial risk: this advice included advice on the tax consequences of the recommended structure.
You followed this advice and created subsidiaries, one of which (Entity A) is intended to acquire the completed RV.
The Project
You demolished the existing premises on the Property and are constructing the new facilities. It comprises:
1. A RV with X independent livings units (ILUs) together with associated village community facilities.
2. New facilities to conduct Your previous enterprise, and
3. Car bays for the RV and Your new facilities.
Development of the RV is being conducted in a staged manner. As each stage is completed, You will enter into loan/lease agreements with residents. whereby:
1. You (as current owner of the Land on which the complex is being constructed) grant the lease to residents, and
2. Residents make the loan directly to Entity A.
Upon completion of the Project, You intend to sub-divide the property to create, inter alia, a separate title for the RV.
You will then sell the completed RV to the nominated subsidiary, Entity A.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 Division 9
A New Tax System (Goods and Services Tax) Act 1999 Section 195-1.
Reasons for decision
The ATO considers that the arrangement You have entered into meets the criteria of paragraph 6 of GSTR 2011/1 and therefore GSTR 2011/1 applies to You.
However we consider that You were commercially committed to construct and develop a RV in accordance with the arrangement in this Ruling prior to the issue of GSTR 2011/1 and therefore are not required to include the value of the ingoing loan contributions as consideration where You sell the RV as a taxable or GST free supply.