This Draft GST Ruling, released on Wed 29.2.2012, sets out the Commissioner’s views on the treatment of exit payments which a resident becomes liable to pay to the operator of a retirement village when the resident’s interest in the village terminates.
The Tax Office will generally view an exit payment as consideration wholly for supplies that would be input taxed if the operator does not provide services other than incidental services (as defined in the Draft) or, if the operator does provide non-incidental services, where: (i) the resident is liable to provide separate consideration for them; and (ii) the value of that consideration is not significantly less than the market value of the services. If there is no liability to provide consideration or the consideration is “considerably less” than market value, the Tax Office will treat the exit payment as consideration wholly or partly for supplies that are taxable. The exit payment may be apportioned between the 2 components, if necessary.
Comments: are due by 12 April 2012. ATO Contact: Patrick Giovannelli – Tel: (07) 3213 8724; Email: patrick.giovannelli@ato.gov.au. Steve Iselin – Tel: (07) 3213 8417; Email: Steven.Iselin@ato.gov.au.
[LTN 40, 29/2]