The ATO has issued a Decision Impact Statement on the AAT decision in AAT Case [2011] AATA 298, Re The Retirement Village company and FCT. In that case, a taxpayer who purchased a retirement village and paid “Share Of Capital Appreciation Payments” to residents who terminated their leases was successful in arguing before the AAT that the payments were not capital in nature and were deductible under s 8-1 of the ITAA 1997.
The ATO indicated the decision was based on the facts and circumstances of the taxpayer and does not affect taxpayers who make payments in the “differing circumstances” covered by TR 2002/14 (Taxation of retirement village operators). That is, an existing village operator makes these payments to a former resident (or to their legal personal representative) under a contractual obligation between the village operator and the resident. In these circumstances, the ATO maintains the view, as outlined in para 50 of TR 2002/14, that these payments are capital in nature. The ATO added that it does not intend to review TR 2002/14.
The ATO added that it also does not intend to review GST Ruling GSTR 2011/1 (Development, lease and disposal of a retirement village tenanted under a “loan-lease” arrangement).
[LTN 104, 31/5]