Australian Property News

Retirement village operators warned by ATO

Posted on Friday, November 05 2010 at 4:43 PM

The Australian Taxation Office (ATO) has warned retirement village operators about excessive GST claims.

Tax Commissioner Michael D’Ascenzo says the ATO will review arrangements where retirement village operators sell services such as electricity to residents in an attempt to gain a tax advantage.

GST isn’t charged on residential accommodation, so retirement village residents don’t pay GST for their accommodation. Consequently the operators of the retirement village aren’t entitled to claim GST credits on the costs of supplying that accommodation.

However, there seems to be arrangements whereby retirement village operators are requiring residents to buy electricity, which the operator has bought from an electricity supplier. The retirement village operator then claims GST credits by treating its supply of electricity to residents as a taxable supply, separate from the non-taxable supply of residential accommodation.

D’Ascenzo says these arrangements appear artificial and contrived in their design and execution.

“It’s unlikely these operators would begin supplying electricity under a separate contract if it wasn’t for the GST credits they believe they’ll gain from the arrangement,” he says.