ATO ID 2003/423: GST and non-cash basis attribution rules for the operator of a Queensland retirement village when residents deposit money into the maintenance reserve fund
Date of decision: 31 October 2002
Business line: Indirect Tax

Issue
Does the entity, an operator of a Queensland retirement village that accounts for goods and services tax (GST) on a non-cash basis, attribute the GST payable on a taxable supply of maintenance services under subsection 29-5(1) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to the tax period in which a resident's contribution is deposited into the entity's maintenance reserve fund (MRF), where the entity does not issue an invoice for the supply?

Decision
No, the entity does not attribute the GST payable on a taxable supply of maintenance services under subsection 29-5(1) of the GST Act, to the tax period in which the resident's contribution is deposited into the entity's trust account. As the entity does not issue an invoice for the supply, the entity attributes the GST payable to the tax period when it withdraws any amount from the MRF as consideration for the supply of maintenance services.

Facts
The entity is an operator of a Queensland retirement village that accounts for GST on a non-cash basis. A 'MRF' is a trust fund established under section 97 of the Retirement Villages Act 1999 (Qld) (Retirement Villages Act) for maintaining and repairing the retirement village's capital items. Residents of the retirement village make contributions towards this fund. The contributions form part of the recurrent charges paid by these residents. Section 97 of the Retirement Villages Act requires that the entity must hold amounts standing to the credit of the fund on trust solely for the benefit of the residents. The monies in the MRF must not be used for a purpose other than those outlined in subsection 97(3) of the Retirement Villages Act. The supplies of services involved in maintaining and repairing the retirement village's capital items are made by the entity to the residents of the retirement village. The trust does not make any supplies of maintenance services to the entity or the residents. To the extent that amounts withdrawn from the MRF are related to a taxable supply applied to maintain facilities or outlets such as a hairdressing salon, beauty parlour, retirement village bus, restaurant or communal area that are used for commercial activities, the amounts represent consideration for taxable supplies. The entity does not issue an invoice for the supply of the maintenance services.

Reasons for decision
Summary: Subsection 29-5(1) of the GST Act sets out the attribution requirements for an entity that accounts on a non-cash basis. This provision states that: The GST payable by an entity on a taxable supply is attributable to: As the entity does not issue an invoice for the supply, it is necessary to determine when the entity has received consideration for the supply. When a resident's contribution is deposited into the MRF, the entity holds the amount on trust for the resident. At this point in time, because the entity does not have access to the monies, the resident is not providing consideration for maintenance services. The Retirement Villages Act determines when the entity is entitled to withdraw funds from the MRF for maintaining the village. When the entity maintains the capital items of the village, in accordance with the purposes set out in subsection 97(3) of the Retirement Villages Act, it is entitled to withdraw funds from the MRF to pay for the provision of those services. It is at this point that the entity is receiving consideration for its supply. Therefore, the entity does not attribute the GST payable on a taxable supply under subsection 29-5(1) of the GST Act to the tax period in which the resident's contribution is deposited into the MRF. As the entity does not issue an invoice for the supply, the entity attributes the GST payable for the taxable supply of maintenance services to the tax period when it withdraws any amount from the MRF as consideration for the supply of maintenance services. For instance, if the entity made a supply to residents of maintenance services at a price of $1,100, but only withdrew $900 from an MRF as part payment, the GST payable on the services which is attributable to that tax period is $100 (one-eleventh of $1,100).

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 subsection 29-5(1)
Related ATO interpretative decisions: ATO ID 2003/422
Subject references: Goods and services tax GST tax periods Attribution rules Non cash basis GST property and construction GST retirement villages