The AAT has held that a retirement village developer’s input tax credit (ITC) entitlements for certain acquisitions for the relevant periods was 13%, but remitted to the Commissioner consideration of its ITC entitlement of other acquisitions.

  • The taxpayer company is a member of a GST registered group comprised of 6 members that operate retirement villages.
  • The taxpayer’s principal activity is that of a developer, operator and manager of the retirement villages, which provide independent living units (ILUs) for occupation by their residents.
  • A lease is entered into between the residents and the applicant (or the relevant subsidiary) as operator of the respective village.
  • The taxpayer had claimed input tax credits (ITCs) for creditable acquisitions relating to the villages.

The ATO audited the taxpayer and disallowed the ITCs claimed on the basis they related to input taxed supplies of residential premises. An administrative penalty was also applied for failure to exercise reasonable care. The taxpayer’s objection was allowed in part with the Commissioner allowing the ITC claim based on a creditable purpose of 13% for the relevant periods (ie the quarterly tax periods ended 30 September 2007 and 31 March 2008).

The taxpayer appealed to the AAT.

The Tribunal had to determine to what extent acquisitions made by the taxpayer, in relation to the development, construction and operation of various retirement villages, were related to the making of input taxed supplies. One of the retirement villages (Glenhaven Estate) was chosen as a representative member of the 6 villages.

On all the evidence before it, and applying GST Ruling GSTR 2012/4 (GST treatment of fees and charges payable on exit by residents of a retirement village operated on a leasehold or licence basis), the Tribunal found that the expression “residential premises” (or the supply of “residential premises”) in the present case included: (i) the premises by way of lease or licence (that is, the ILU); and (ii) facilities or services that were integral, ancillary or incidental to the Lease. The Tribunal was of the view that the Commissioner’s determination of the taxpayer’s ITC entitlement of 13% for the relevant periods was, on the basis of the evidence, correct. However, because of what the AAT said was the limited hearing, it found it would be necessary “for all of the (or all of the other) expenses listed in the 2011 Glenhaven profit and loss statement to be considered and dealt with by both the parties”. In these circumstances, the Tribunal remitted the matter to the Commissioner for further consideration pursuant to s 42D of the AAT Act.

(AAT Case [2014] AATA 168, re Living Choice Australian Limited and FCT, AAT, Dunne SM, AAT Ref: 2012/3250, 28 March 2014.)

[LTN 62, 1/4/14]