Edited version of private advice

Authorisation Number: 1051908341790

Date of advice: 27 July 2023

Ruling

Subject: GST and retirement villages

Question 1

Do you make a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST ACT) when you construct and sell a newly completed Manufactured Home to an incoming resident under a 'land-lease model'?

Answer

Yes.

Question 2

Do you make a taxable supply pursuant to section 9-5 of the GST Act in relation to the lease granted to a resident under a land-lease model granting a specified resident the right to occupy a specified site/lot on the Land?

Answer

Yes.

Question 3

If the answer to Question 2 is 'Yes', do you make a taxable supply of commercial accommodation that is predominantly for long-term accommodation pursuant to Division 87 of the GST Act in respect of the land-lease model?

Answer

No.

Question 4

If you make input taxed supplies (to any extent) to a resident under a land-lease model, will you be required to directly allocate and apportion costs to determine their extent of creditable purpose?

Answer

Yes, you will be required to directly allocate and apportion costs in respect of any acquisitions that relate to making both input taxed supplies to loan-lease residents and taxable supplies to land-lease residents.

Question 5

Are you required to make an adjustment under Division 129 of the GST Act where the original tenant chooses the land-lease model but the incoming tenant chooses the loan-lease model?

Answer

Yes.

Question 6

Are you required to make an adjustment under Division 129 of the GST Act where the original tenant chooses the loan-lease model but the incoming tenant chooses the land-lease model?

Answer

Yes.

Relevant facts and circumstances

You are the sole owner of the whole of the land located at a specified location (the Property).

Your intention when you acquired the Property was to develop the site into a 178-unit retirement community designed for people aged over 55 (the Village)' operate the Village and subsequently sell the fully occupied Village (possibly at least 5 years after the last apartment has been let and occupied) subject to market conditions at that time.

The Development on the Village involves the design, construction and completion of the retirement living self-care apartments and related facilities which will comprise the Village, together with the initial leasing of the dwellings to residents.

Your activities involves both:

• The development activities, being the carrying out of the design and construction of buildings and other improvements on the Property and the initial leasing of all dwellings; and
• The management activities, being the management of the leases and loans of dwellings and new dwelling lease and lease surrenders by an existing resident of a dwelling and fees to be paid by residents, together with any other business.

The Village

The Village will be staged development, with construction occurring over multiple stages. To date, Stage 1 comprising xx dwellings and communal facilities such as a bowling green, community centre, and cinema have been completed. Construction of Stage 2, featuring an additional xx dwellings, has commenced and are still being progressively developed, with subsequent Stages to be constructed in the future at dates yet to be decided.

The Village is designed around the residents having a strong sense of community, with the community centre being at its heart. To this end, the Village showcases meeting spaces, areas for group or individual activities such as tai chi, yoga and swimming and plenty of recreational areas in and around the Village.

The dwellings feature high-quality amenities, with single-level homes, large and open plan rooms, high ceilings and best practice standards in place for disabled and aging residents.

The original Development Approval (DA) on the Property was approved by the local council under the Retirement Villages Act 1999 (NSW) (Retirement Villages Act) as a retirement village, and not as a manufactured home estate. You acquired the site with this DA in place. Council zoning is rural, with a retirement village being an allowable use. All planning and development approvals have been on the basis of a retirement village and you are confident that it meets all its requirements under the Retirement Villages Act.

The entirety of the Village is a retirement village as defined in the Retirement Villages Act. The Village has all the physical characteristics that distinguish it from any other type of estate, such as the design of the hallways, walkways, driveways, paths and other building requirements. Further, the Village can only have as residents who are individuals over the age of 55 and people with certain disabilities.

The Village is entirely governed by the Retirement Villages Act and is not, in any way, governed by the Residential (Land Lease) Communities Act 2013 (RLLCA). In all regulatory respects, the Village is a retirement village under the Retirement Villages Act.

The Village is not a caravan park, land-lease community, lifestyle community or any other type of estate under State law.

The current zoning does not allow for the operation of a community or residential community or a facility governed by the RLLCA to any extent.

Land Development - Stage 1

Stage 1 operates under a standard 'lease or licence arrangement' of the kind described by the Commissioner of Taxation (the Commissioner) in Goods and Services Tax Ruling GSTR 2011/1; Goods and services tax: development, lease and disposal of a retirement village tenanted under a 'loan-lease' arrangement.

On entry, a resident enters into a Retirement Village Contract pursuant to which:

• the resident obtains a long-term lease of 99 years in respect of a dwelling, together with a licence of a private garage;
• the resident must provide an entry payment as an ingoing contribution in the form of an interest-free loan;
• the resident must also pay recurrent charges, generally monthly, in respect of the lease which are ostensibly for the provision of the accommodation in the dwelling and other incidental and ancillary services. These recurrent charges do not include optional services such as meals, laundry services and home cleaning which can be arranged for additional fees on a user pays basis; and
• on exit or termination of the lease, you must repay the ingoing contribution together with any capital appreciation amount. Conversely, the resident must pay a "departure fee" (hereafter, referred to as a "deferred management fee" or "DMF") together with any capital depreciation amount, non-refundable component of the ingoing contribution and any unpaid recurrent charges.

Concurrently with executing the Retirement Village Contract, the resident is also required to execute a Loan Agreement pursuant to which:

• the resident will provide an interest-free loan to you; and
• you will repay that loan to the resident in accordance with section 180(2) of the Retirement Villages Actor within three years of the termination of the lease.

Land Development - Subsequent Stages

Whereas Stage 1 was developed and occupied by residents using the loan-lease model, you are proposing to allow future residents the option of choosing either a loan-lease model or a land-lease model. At the outset, Stage 1 will continue to operate under a loan-lease model and future Stage 1 residents will not be provided with any optionality. That is, the optionality of choosing the loan-lease model or land-lease model only relates to residents of the Subsequent Stages.

The land-lease model is gaining popularity as an alternative to the loan-lease model and has been predominantly used in manufactured home estates. The only component of a lifestyle or land-lease community that has been adopted for Stage 2 and onwards of the Village is simply the choice of funding arrangements. The funding model itself does not have any bearing on the Village's classification as a retirement village. Under a land-lease model:

• A resident would execute a Lease pursuant to which it would lease or licence a site within the Village. The Lease is not for any dwelling but is an agreement in respect of the land on which a dwelling will be placed. In return, the resident will pay a monthly rental fee.
• A resident would not be liable for any ingoing contribution or any other type of entry payment. Further, the resident is not being provided with any optional services and is not liable for any additional recurrent charge beyond the rent payment.
• A departing resident is not liable for a Deferred Management Fee (DMF) or any type of exit fee, beyond recovery of outstanding rent and charges for optional services.
• At the same time as executing the Lease, a resident would enter into a second agreement ("Sales Agreement"). Under the Sales Agreement, you sell, and the resident acquires, the dwelling ("Manufactured Home") which will be located on the site leased to the resident under the Lease. The Manufactured Home will be constructed on a chassis or in prefabricated sections and, once installed, will be freestanding and with solid walls and a roof. The Manufactured Home will be the same style and type of dwelling that is constructed in a loan-lease model scenario in the Subsequent Stages. All dwellings in the Subsequent Stages are/will be relocatable regardless of the model chosen. While Stage 1 dwellings may visually and outwardly be similar to dwellings in the Subsequent Stages, Stage 1 dwellings are not capable of being relocated due to their construction type, materials and annexation to the land (e.g., timber framing and brickwork).
• A resident will enter into a Facilities Agreement with a related entity for the common areas and other services on the same terms as under the loan-lease model.

The option of the loan-lease model is purely an alternative funding model and does not change the council requirements and approval of the Village as a retirement village. The alternative funding model alone does not result in the Village community or facility governed by the RLLCA to any extent.

In regard to the Manufactured Home, you would, as per the loan-lease model, outsource the physical build to a third party and acquire the Manufactured Home. Under the land-lease model, the Manufactured Home will be acquired by the resident from you rather than being leased to the resident.

You have provided a copy of an executed Sales Agreement entered into you and a resident.

You have also provided a copy of an executed Lease.

Both of the above agreements are in relation to a resident of Stage 2 who has chosen to adopt the land-lease model.

The Sales Agreement, provides the following:

•         On completion the Purchaser will receive the unencumbered ownership of the Home and Inclusions.

•         The Purchaser will use the Horne as a place of residence.

•         The Purchaser will not sell, assign or otherwise transfer the Home without the written consent of the Vendor and in accordance with the Act.

•         The Purchaser (or one of them if there is more than one Purchaser) is over the age of 55 years and/or permanently retired.

•         The Vendor discloses the sale of the Home is a taxable supply but the Price is GST inclusive.

The Manufactured Home will be constructed on a chassis or in prefabricated sections and, once installed, will be freestanding and with solid walls and a roof. Each site contains a concrete pad to which the dwelling is affixed by way of bolts and other fixings.

The dwellings in the Subsequent Stages of the Village are, technically, 'relocatable homes' since they are largely manufactured on-site. They are not 'manufactured homes' for State regulatory purposes despite the Sales Agreement labelling them a manufactured home. The fundamental difference between a relocatable home and a manufactured home from a regulatory perspective is how and where the dwelling is constructed:

• a manufactured home is required to be constructed off-site and transported and affixed to the site in three components; and
• a relocatable home can be entirely or largely constructed on-site.

Manufactured and relocatable homes are required by law to be movable. To this end, relocatable homes are designed and built in three sections and contain "lifting pockets" whereby, once certain bolts and fixings are removed, the home can be lifted in sections and moved onto a truck for further transportation off-site if the owner so desires. Once relocated, they can be affixed to a new site in much the same way as a manufactured home is affixed to a site.

The only practical difference between the dwellings/units in the Subsequent Stages and a unit in Stage 1 is that a Stage 1 unit cannot be relocated from the site in the future. Stage 1 units were also constructed in situ but using timber framework, which is not relocatable.

Units in the Subsequent Stages utilise steel framework which allows for ready removability should the resident desire to relocate the home at the end of their lease. Subsequent Stage homes were technically relocatable homes rather than manufactured since they were largely constructed on-site rather than constructed off-site.

The slab and driveway are ancillary, though necessary, components allowing for a Manufactured Home to be constructed, used and enjoyed. These are 'Inclusions' of the construction process but have no separate value and no part of the price for the home is specifically payable for the slab or driveway. This is similar to any pipes, cables, drains or similar items which must be installed to allow a home to be used and functional but would remain in their original place even if a home was removed.

At the end of a land-lease model resident's lease, the resident would be entitled to have the dwelling removed from the site and located elsewhere should they choose to. If a resident were to relocate the home at the end of their lease, they cannot take the slab or driveway with them and nor is the resident required to remove the slab and driveway to return the site to vacant land.

In effect, once a home is removed, the resident forfeits any entitlement to the slab or driveway and you are entitled to use the remaining slab or driveway in any manner it chooses. That is, you could seek to re-use the existing slab or driveway for the next resident who places a home on the site or you could remove the slab and / or driveway. Any costs to remove or alter the remaining slab or driveway would be at your cost.

The sample executed Lease you have submitted is for a term of 5 years.

You are obliged under the Retirement Villages Act to use the standard form retirement village contract for residents irrespective of whether they choose the loan-lease or land-lease model.

You have also provided a copy of a Retirement Village Contract (RV Contract).

The RV Contract includes the following information:

•         The resident does not own the premises. You grant the resident the right to occupy the premises on the following basis: Non-registered interest holder for Term: 5 years

•         The RV contract is subject to the provisions of the retirement village laws.

•         During the Licence Period, the Operator grants the Resident the right to:

(a)  use, occupy and reside in the Unit as a residence; and

(b)  use in common with the Operator and the residents, the following:

                              (i)    the Common Areas;

                             (ii)    such of the communal services of the Retirement Village as may be required by the Village Rules or provided by the Operator; and

                            (iii)    such other rights to accommodation and services as the Operator may in its discretion, determine from time to time.

•         The resident shall have the right to sell the unit to a new resident subject to the new resident being approved by the Operator (such consent not to be unreasonably withheld) and entering into a new lease for the land.

•         The resident grants to the Operator the right of first refusal to purchase the unit erected on the land.

You will also enter into a Facilities Agreement with a resident which includes the following relevant terms:

•         In consideration of payment of the Licence Fee, the Operator hereby confers upon the Resident a non-exclusive licence to access all Common Areas of the Village (other than any area used by the Operator as offices for its personnel) and such license shall continue for as long as the Resident holds the Contract from the Owner over the Unit.

•         During the Term the Operator will provide (or have provided by third parties) to residents of the Village the general services and access to the facilities as listed.

• The Resident shall pay a Recurrent Charge to the Operator for the provision of the general services and facilities.
• During the Term the Operator will offer to the residents of the Village optional services.
• Optional services will be provided to residents on a user pays basis at market rates from time to time, at prices as notified to residents from time to time by the provision of a list of charges current for such services.

The Facilities Agreement includes the following services and facilities available to residents:

Staff - A Village Operator will be available on site from 9.00am to 5.00pm Monday to Friday (public holidays excepted) to manage the Village as a retirement village for the benefit of all residents.

Emergency Call System - Each resident will be provided with a pendant for emergency calls.

Indoor Facilities:

• Library;
• Community room/centre;
• Activities/games room;
• Medical consultation room;
• Visiting hairdresser;
• Swimming Pool;
• Storage area for boats/caravans;
• Work Shop

Outdoor Facilities:

• Vegetable garden

Medical, Nursing and Pharmaceutical Assistance - Staff will assist residents to arrange medical and nursing assistance as required. Arrangements will be made for a local chemist to provide a "pick up and deliver" prescription service.

Transport - The Village will provide a village bus.

The Facilities Agreement includes the following optional personal that may be provided on a user pays basis:

Social, recreational and cultural activities including:

• Special dinners and BBQs;
• Morning and afternoon teas;
• Card and board games;
• Exercise classes;
• Shopping outings;
• Allied health services;
• Care support;
• Hospitality staff;
• Cleaners;
• Gardeners;
• Activities officers;
• Maintenance services;
• Mail out facilities will be available from the front reception area.

Personal Care and Support Services - Personal care and support services may be available on an ad hoc, short term or long-term basis, as required, with appropriate notice, subject to availability.

Home cleaning and Laundry - cleaning, laundry, bed making, etc. may be available, subject to demand, on an ad hoc, short term or long-term basis, as required.

Ongoing optionality between the two models for Subsequent Stages

The optionality between models will not be limited to the first resident occupying a dwelling. Any incoming resident who follows the first (now departing) resident will also be provided with this optionality to choose their preferred model, albeit the models are slightly modified to cater for the ownership of the dwelling.

Residents will never be forced to choose a particular model and both models will continue to be offered.

The optionality that you propose in relation to the Retirement Village is driven by a few key factors:

• The loan-lease model is being increasingly seen as high-cost and unattractive, from the point of view of both the resident (e.g., funding the ingoing contribution, the quantum of DMFs) and the operator (e.g., carrying the ongoing liability of repaying ingoing contributions and the cash-flow implications of waiting many years to receive the DMF);
• By contrast, the land-lease model can provide lower up-front costs for residents and better cashflow for operators. Over time, the expectation is that a majority of residents will choose this option, but it is likely that there will continue to be a market for the loan-lease model; and
• Typically, council zoning would prohibit the potential to provide both models in the same retirement village. However, you have sought legal advice to confirm that the local zoning of the Property will allow the optionality of both models in the Retirement Village and the local council has agreed to allow both models to operate on the Property.

Relevant legislative provisions

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

Section 9-5

Division 11

Section 11-5

Paragraph 11-5(b)

Section 11-15

Division 38

Division 40

Subdivision 40-B

Section 40-35

Subsection 40-35(1)

Paragraph 40-35(1)(a)

Paragraph 40-35(1)(b)

Subdivision 40-C

Section 40-65

Subsection 40-65(1)

Division 66

Paragraph 66-5(2)(e)

Division 87

Section 87-15

Section 87-25

Division 129

Section 129-10

Section 129-20

Section 195-1

Retirement Villages Act 1999 (NSW)

Section 180(2)

Retirement Villages Regulation 2017 (NSW)

Residential (Land Lease) Communities Act 2013

Conveyancing Act 1919

Section 84

Section 85

Section 144

Aged Care Act 1997

Aged Care Quality and Safety Commission Act 2018

Reasons for decision

In this ruling, unless otherwise stated,

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

•         all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act.

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

Question 1

Do you make a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST ACT) when you construct and sell a newly completed Manufactured Home to an incoming resident under a 'land-lease model'?

Yes

Section 9-5 provides that an entity makes a taxable supply if all of the following requirements are satisfied:

(a)  the supply is made for consideration,

(b)  the supply is made in the course or furtherance of an enterprise that the entity carries on,

(c)   the supply is connected with the indirect tax zone, and

(d)  the entity is registered, or required to be registered, for GST.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

In this case, your sale of a newly completed Manufactured Home will satisfy all of the positive limbs specified in paragraphs 9-5(a), (b), (c) and (d). Accordingly, the sale will be a taxable supply unless it is GST-free or input taxed.

Division 38 and Division 40 provide for certain supplies to be GST-free and input taxed respectively.

Based on the facts, we consider Division 38 has no application to the sale. Therefore, the sale of a Manufactured Home will not be GST-free.

Under Division 40, of relevance for consideration is section 40-65 which discusses sales of residential premises.

Subsection 40-65(1) provides:

A sale of 'real property' is input taxed, but only to the extent that the property is 'residential premises' to be used predominantly for residential accommodation (regardless of the term of occupation).

'Real property' is defined in section 195-1 to include:

(a)  any interest in or right over land; or

(b)  a personal right to call for or be granted any interest in or right over land; or

(c)   a licence to occupy land or any other contractual right exercisable over or in relation to land.

The term 'residential premises' is defined in section 195-1 to mean land or a building that:

(a)  is occupied as a residence or for residential accommodation; or

(b)  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.

Under the arrangement in this case, you will be entering into a number of agreements with an incoming occupant including:

• a Manufactured Home Sale Agreement (Sales Agreement) under which you will sell to the occupant a manufactured home that will be constructed on a chassis or in prefabricated sections
• a Site Agreement in the form of a Lease and a Retirement Village Contract whereby the occupant is granted a right to occupy a specific site in the Village.

The Manufactured Home will be placed on the site being leased by the occupant and will be used as the occupants primary place of residence.

Upon the expiry of the Site Agreement, the occupant is entitled to remove the Manufactured Home from the site and locate it elsewhere.

Paragraph 98 of Goods and Services Tax Ruling GSTR 2012/6 Goods and services tax: commercial residential premises (GSTR 2012/6) discusses that a supply (in this instance a Manufactured Home) cannot be characterised by reference to another supply (lease of the site). This was also discussed in the Full Federal Court decision of South Steyne Hotel Pty Ltd v. Commissioner of Taxation [2009] FCAFC 155 where [at 24], Emmett J stated:

There is nothing in the GST Act or the policy underlining the GST Act that suggests that the characterisation of an individual supply can be approached by treating it as if it were the aggregate of that supply and other supplies...

Consistent with the above, the GST treatment of the sale of a Moveable Home in accordance with the Sales Agreement will be determined without reference to the separate supply of the site pursuant to the Site Agreement. Whilst the sale of the Manufactured Home to an incoming resident, and the lease of the site to the same resident are interdependent with the settlement of the Sales Agreement occurring simultaneously with the execution of the Site Agreement, the agreements are nevertheless two separate contracts and two separate transactions for GST purposes.

Goods and Services Tax Ruling GSTR 2012/5 Goods and services tax: residential premises (GSTR 2012/5) states the following at paragraphs 49 and 50 (footnotes omitted):

49. A transportable building such as a demountable dwelling or moveable home⁴ that is designed as a residence, or to provide residential accommodation, is residential premises when placed on land and installed ready for occupation.

50. A supply of a transportable building before it is placed on land and installed ready for occupation is not an input taxed supply under sections 40-35, 40-65 or 40-70⁵. The supply is subject to the basic rules.

The term 'movable home' in paragraph 49 of GSTR 2012/5 means a structure designed to be used as a residence that can be relocated from site to site. Therefore we consider the Manufactured Home in this case will fall within the scope of a 'moveable home'.

In relation to your sale/supply of a Manufactured Home to an incoming occupant who will elect the land-lease model, the sale will not fall within the definition of 'real property' in section 195-1.

Therefore section 40-65 will not be applicable and the supply of the Manufactured Home will not be input taxed.

Consequently, your supply of a Manufactured Home to an incoming resident under the land-lease model will be a taxable supply as defined in section 9-5.

Question 2

Will you make a taxable supply pursuant to section 9-5 of the GST Act in relation to the lease granted to a resident under a land-lease model granting a specified resident the right to occupy a specified site/lot on the Land?

Yes

Similarly to the supply discussed above in Question 1, the supply of the right to occupy a specified site within the Village will satisfy the positive limbs of a taxable supply as defined in section 9-5. Furthermore, the supply will not fall within the provisions of Division 38.

Again, the remaining issue to consider is whether the supply of the site to a resident that has adopted the land-lease model is input taxed under Division 40.

Section 40-35 (specifically subsection 40-35(1)) provides:

(1)  A supply of premises that is by way of lease, hire or licence (including a renewal or extension of a lease, hire or licence) is input taxedif:

(a)  the supply is of residential premises (other than a supply of commercial residential premises or a supply of accommodation in commercial residential premises provided to an individual by the entity that owns or controls the commercial residential premises); or

(b)  the supply is of commercial accommodation and Division 87 (which is about long-term accommodation in commercial premises) would apply to the supply but for a choice made by the supplier under section 87- 25.

As discussed above, the supply of the site by way of lease is a separate supply to that of the supply of the Manufactured Home by way of sale.

In considering paragraph 40-35(1)(a) above, paragraph 47 of GSTR 2012/5 states:

47. Vacant land is not capable of being occupied as a residence or for residential accommodation as it does not provide shelter and basic living facilities. Vacant land is not residential premises.

Therefore, the supply of the site on its own to an incoming resident who has elected the land-lease model will not be input taxed under paragraph 40-35(1)(a).

In considering the application of paragraph 40-35(1(b), the following definitions are relevant:

'Commercial accommodation': Section 87-15 provides that the term 'commercial accommodation' means the right to occupy the whole or any part of commercial residential premises ...

'Commercial residential premises': Section 195-1 defines commercial residential premises as:

(a) a hotel, motel, inn, hostel or boarding house; or

(b) ...

(c) ...

(d) ...

(da) ...

(e) a caravan park or a camping ground; or

(f) anything similar to *residential premises described in paragraphs (a) to (e).

However, it does not include premises to the extent that they are used to provide accommodation to students in connection with an *education institution that is not a *school.

'Retirement village': Section 195-1 provides that premises are a retirement village if:

(a)  the premises are * residential premises; and

(b)  accommodation in the premises is intended to be for persons who are at least 55 years old, or who are a certain age that is more than 55 years; and

(c)   the premises include communal facilities for use by the residents of the premises;

but the following are not retirement villages:

(d)  premises used, or intended to be used, for the provision of residential care (within the meaning of the Aged Care Act 1997) by an approved provider (within the meaning of the Aged Care Quality and Safety Commission Act 2018);

(e)  *commercial residential premises.

GSTR 2012/6 considers how section 9-5, Subdivision 40-B (section 40-35), and Subdivision 40-C apply to supplies of commercial residential premises and supplies of accommodation in commercial residential premises

Paragraphs 242 - 245 of GSTR 2012/6 clearly express that a 'retirement village' is not a hotel, motel, inn, hostel or boarding house or similar stating (footnotes omitted):

242. Retirement villages provide living accommodation in 'communal or semi-communal' facilities.⁸⁷

243. Retirement village living units are residential premises to be used predominantly for residential accommodation based on their physical characteristics. In addition, some of the buildings and facilities that residents can directly enjoy in conjunction with their residency form part of the residential premises.⁸⁸ This includes, for example, barbeque areas, gardens, car-parks and driveways.

244. A retirement village may also include parts that are not residential premises to be used predominantly for residential accommodation. This includes, for example, site offices, staff rooms, medical centres, and commercial premises, such as hairdressing salons, golf courses, shops, and restaurants or cafes. These are commercial premises the value of which should be apportioned or treated as separate supplies under the basic rules, depending on the circumstances of their supply.

245. A retirement village does not display sufficient physical, nor operational, features referred to at paragraphs 9 to 42 and 140 to 188 of this Ruling to be characterised as a hotel, motel, inn, hostel or boarding house, nor is it sufficiently similar to these premises for the purposes of paragraph (f) of the definition of commercial residential premises. See Example 1 at paragraph 43 of this Ruling.

Paragraph 212 of GSTR 2012/6 discusses that the terms 'caravan park' and 'camping ground' are not defined in the GST Act and take their ordinary meanings in context. Paragraphs 212 - 214A continue discussing the attributes of such premises (footnotes omitted):

213. Occupants of a caravan park or camping ground may stay in a caravan, a moveable home,⁶⁹ a permanent cabin or villa, or a tent provided by the operator on site. Alternatively, guests may park their own caravan, motor home, camper trailer or the like on a site, or pitch their own tent on a site. Sites may be powered or un-powered. Accommodation in a caravan park or camping ground is held out to the public for travellers' accommodation although long-term accommodation may also be provided to occupants. Caravan parks and camping grounds are operated on a commercial basis or in a business-like manner.

214. Supplies of sites within a caravan park or camping ground are taxable under the basic rules. However, supplies of long term accommodation may be taxed at a concessionary rate or input taxed.⁷⁰

214A. 'Home parks' in which sites for moveable homes are rented and the homes themselves either rented or occupied by their owners are commercial residential premises under paragraph (f), as they are similar to caravan parks. Similarities include the leasing of sites to residents separately to any building located on the site, and the provision of communal facilities to residents. Supplies of long-term accommodation in a home park may be taxed at a concessionary rate or input taxed.^70A

The question in this case is not whether the Village is similar to a home park or moveable home estate, or by contrast, asking whether the premises are similar to a retirement village. However, given the view in GSTR 2012/6 that home parks are commercial residential premises, it is relevant to consider whether the premises are, to any extent, such a 'home park' with the characteristics that lead to 'home parks' being similar to a caravan park. Similarly, GSTR 2012/6 sets out a view that a 'retirement village' is not commercial residential premises, so it is relevant to consider whether the Village has the same characteristics that lead to that conclusion.

The term 'home park' as used in GSTR 2012/6 is not defined. The references to 'leasing of sites to residents separately to any building located on the site, and the provision of communal facilities to residents' in paragraph 214A describes two similarities between home parks and caravan parks. These references are not the definition of a home park. That means these two characteristics are expected but are not sufficient for premises to be a 'home park'.

GSTR 2012/6 expresses clear alternative conclusions for 'retirement villages' and 'home parks'. This is relevant context in understanding the meaning of 'home park' as used in GSTR 2012/6. The terms need to be read in a way that gives meaning to each and a basis for distinction. Properly understood, GSTR 2012/6 distinguishes between retirement villages and home parks as mutually exclusive types of premises, with different characterisations for each.

The ordinary, natural meaning of 'home park' must be considered. In ordinary usage, a 'home park' is different to a retirement village. The Macquarie Dictionary defines 'home park' by reference to 'mobile home park' which is 'a commercially run estate designed specifically for the location of mobile homes'. In understanding the reference to a 'home park' in GSTR 2012/6 it is also relevant to consider state regulation of premises that involve separate sites for lease that allow residents to place their own mobile/manufactured/moveable home on the site. Each State has separate regulatory schemes dealing with retirement villages in contrast to variously described residential parks/land-lease communities. In NSW, regulation of 'communities' is under the RLLCA. Where premises are a 'community' to which the RLLCA applies, they are excluded from the application of the Retirement Villages Act[1].

In this case it is relevant to consider both the physical and operational characteristics of the Village in its entirety when categorising the premises for GST purposes.

The Village is a xxx-unit master planned retirement community designed for people aged over 55. To date, the Village comprises xx residential dwellings and communal facilities such as a bowling green, community centre, and cinema. The Village also contains meeting spaces, areas for group or individual activities such as tai chi, yoga and swimming and plenty of recreational areas to provide residents with a strong sense of community. Such physical characteristics are consistent and typical with those commonly available in a 'retirement village'.

The operational characteristics exhibited in the Village all align with those of a retirement village under its ordinary meaning:

• The current zoning allows for operation of a retirement village. It does not permit the operation of a caravan park or land-lease community.
• The operator of the Village is regulated pursuant to the Retirement Villages Act and is not subject to the RLLCA to any extent.
• The operator is required to enter into a standard retirement villages contract and has entered such agreements with the residents.
• Following future stages of development of the Village, residents may elect to enter into a loan-lease arrangement or a land-lease arrangement. This choice afforded to the residents is in respect of the funding arrangement only and does not impact the overall operation of the Village.
• The services provided and available to residents under the Facilities Agreement is consistent with those provided in a typical retirement village.

We consider the Village in its entirety is a 'retirement village' and is not 'commercial residential premises' as defined for GST purposes to any extent. That is, whilst the Village may exhibit some characteristics of a 'home park', we do not consider the Village to be a 'home park' in the context intended in GSTR 2012/6. Therefore we do not consider the Village as being similar to a caravan park or camping ground and as such not commercial residential premises to any extent.

Your supply to a resident under a land-lease model granting a specified resident the right to occupy a specified site/lot within the Village is not a supply of the right to occupy the whole or any part of commercial residential premises. Therefore, the supply does not satisfy the definition of 'commercial accommodation'.

Therefore, the supply of the site on its own to an incoming resident who has elected the land-lease model will not be input taxed under paragraph 40-35(1)(b).

Conclusion

Your supply to a resident of the right to occupy a specified site within the Village will satisfy the positive limbs of a taxable supply as defined in section 9-5. Furthermore the supply will not fall within the GST-free provisions contained in Division 38 and as discussed above, the supply will not be input taxed under section 40-35.

Therefore, your supply to a resident of the right to occupy a specified site within the Village will be a taxable supply.

Question 3

If the answer to Question 2 is Yes, do you make a taxable supply of commercial accommodation that is predominantly for long-term accommodation pursuant to Division 87 of the GST Act in respect of the land-lease model?

No

As discussed above, your supply of the right to occupy a specified site/lot within the Village to a resident that has adopted the land-lease model is not a supply of 'commercial accommodation' as defined for the purposes of Division 87.

Question 4

If you make input taxed supplies (to any extent) to a resident under a land-lease model, will you be required to directly allocate and apportion costs to determine their extent of creditable purpose?

Yes, you will be required to directly allocate and apportion costs in respect of any acquisition that relates to making both input taxed supplies to loan-lease residents and taxable supplies to land-lease residents.

The term 'creditable purpose' is defined in section 11-15 and provides in part that you acquire a thing for a creditable purposeto the extent that you acquire it in carrying on your enterprise. 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.

Your supplies to a resident under a land-lease model of the Manufactured Home and the separate supply of the right to occupy a site in the Village are taxable supplies and not input taxed supplies to any extent as discussed above.

In the situation you acquire a thing that solely relates to taxable supplies you make to residents using the land-lease model, you will not need to apportion the costs to determine your extent of creditable purpose in relation to those acquisitions.

Where you acquire a thing that relates to both your taxable supplies made to land-lease residents and any input taxed supplies you made to residents using the loan-lease model, the cost of those acquisitions will need to be apportioned to determine your extent of creditable purpose in relation to those acquisitions.

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 how to determine the extent of your creditable purpose in making acquisitions and importations to enable you to claim the correct amount of input tax credits.

Paragraph 32 of GSTR 2006/4 provides that you may choose your own apportionment method, but the method you choose needs to be fair and reasonable in the circumstances of your enterprise. The method you choose needs to appropriately reflect the intended use of your acquisitions or importations.

Paragraphs 104 - 123 of GSTR 2006/4 discusses choosing a method for determining the extent of creditable purpose and the use of both direct and indirect methods of apportionment.

Question 5

Are you required to make an adjustment under Division 129 of the GST Act where the original tenant chooses the land-lease model but the incoming tenant chooses the loan-lease model?

Yes

Division 129 contains provisions dealing with adjustments to be made when the initial or intended extent of creditable purpose of an acquisition changes due to later events.

As discussed above, acquisitions that solely relate to making taxable supplies to residents who have elected the land-lease model will have been for a fully creditable purpose. This may include such things as construction costs or the purchase price of a Manufactured Home that is sold to land-lease resident or costs directly related to the site leased to the land-lease resident.

Where a subsequent resident has chosen to adopt the loan-lease model, it is assumed the outgoing land-lease resident (non-GST registered) has sold the Manufactured Home back to you, the Operator of the Village. You will then supply the Manufactured Home and site together to the incoming loan-lease resident as an input taxed supply pursuant to section 40-35.

The acquisition of the Manufactured Home from the outgoing land-lease resident is a separate and distinct acquisition from that made originally from the supplier of the Manufactured Home to you. As such, Division 129 will not apply to your original acquisition of the Manufactured Home (or the construction services to construct the Manufactured Home).

In regard to your acquisition of the Manufactured Home from the outgoing land-lease resident, you will not be entitled to an input tax credit pursuant to Division 11. The acquisition made by you will not be a 'creditable acquisition' as defined in section 11-5 as the supply to you was not a 'taxable supply'.

Division 66, which varies the application of section 11-5 whereby in certain circumstances, an entity may make a creditable acquisition of second-hand goods regardless of the fact that the supply to that entity was not a taxable supply (as required pursuant to paragraph 11-5(b)), will not apply as you will supply the Manufactured Home to the incoming loan-lease resident as an input taxed supply (see paragraph 66-5(2)(e)).

In regard to any acquisitions you have made that were either solely or partially related to making a taxable supply of the site to the outgoing land-lease resident, and those acquisitions will now be applied or relate to your input taxed supply to the incoming loan-lease tenant, you will be required to make an adjustment pursuant to Division 129 subject to the value and number of adjustment period limits provided for in section 129-10 and section 129-20.

Question 6

Are you required to make an adjustment under Division 129 of the GST Act where the original tenant chooses the loan-lease model but the incoming tenant chooses the land-lease model?

Yes

In this scenario, any acquisitions you made that related to your input taxed supply to a loan-lease resident (pursuant to section 40-35) would not have been made for a fully creditable purpose noting that some acquisitions may not have been made for a creditable purpose to any extent.

Subsequently, where those acquisitions are applied to making taxable supplies of the Manufactured Home or the right to occupy the site to an incoming land-lease resident, the original extent of creditable purpose those acquisitions were acquired for has changed.

Therefore, you will be required to make an adjustment pursuant to Division 129, again subject to the value and number of adjustment period limits provided for in section 129-10 and section 129-20.

[1] Subsection 11(3) and paragraph 5(3)(d) of the Retirement Villages Act.