On 25 August 2006, the ATO released a draft GST ruling which seeks to clarify the definition of what constitutes a 'retirement village' for GST purposes and, in particular, when retirement village premises will include 'communal facilities'.
This question is important for operators and developers in determining whether the supplies of care services and accommodation in a retirement village are GST-free. The ATO's comments should cause developers and operators to consider whether the physical environment they operate or seek to build and the services they are providing, falls within the definition of a retirement village.
It is, however, a draft ruling and represents the preliminary view of the ATO. A final ruling will ultimately be issued by the ATO yet it is unknown when this will occur.
how is the need for 'communal facilities' relevant to retirement villages?
For GST purposes, a retirement village is defined as premises that:
are residential premises (for example, independent living units and serviced apartments); and
provide accommodation for persons who are at least 55 years old or more; and
include communal facilities for use by residents.
communal facilities - physical, proximate and have a 'communal use' purpose
It is the ATO's view that residential premises include communal facilities if the communal facilities:
are physical (for example a library, dining room or pool)
are within, attached or connected to the residential buildings of the retirement village or constructed on the surrounding land that actually or substantially contributes to the enjoyment of the building or to the fulfilment of its purpose as a residence
have the primary purpose, determined objectively, of communal use by residents.
what are not 'communal facilities'?
Things which the ATO does not consider satisfy the definition of communal facilities may include:
pathways, gardens, driveways and landscaping (the ATO does not accept that the primary purpose of these objects are for communal use)
television antennas, or other facilities that are for residents' own use in their individual villas or units
services provided under a residence or services contract are not communal facilities (they are not physical objects).
what are 'communal facilities'?
Things which the ATO considers do satisfy the definition of communal facilities may include:
Operators will need to consider whether 'user pay' arrangements of communal type services will fall within the definition.
things to note
Residential premises will be a retirement village for the purposes of the GST Act where the premises include at least one 'communal facility'.
Where off-site facilities are provided for communal use, for example, such as a nearby community hall, the communal facility requirement is not met.
The communal facility needs to be accessible to and able to be used by the residents of the Village to satisfy the ATO's test.
by Arthur Koumoukelis & Matthew Mallos
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This publication is provided to clients and correspondents for their information on a complimentary basis. It represents a brief summary of the law applicable as at the date of publication and should not be relied on as a definitive or complete statement of the relevant laws.
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Liability was apportioned between the VMO, Dr.Brown, and the hospital on an 80/20 basis in favour of the hospital.
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