ATO ID 2001/636: GST and monthly maintenance fees in non-freehold and non-strata titled retirement villages
Date of decision: 21 August 2000
Business line: Indirect Tax

Issue
Does a monthly maintenance fee consisting of components that can be reasonably characterised as part of the rental charge, form part of the consideration for an input taxed supply under paragraph 40-35(1)(a) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when the entity, an owner-operator of a retirement village, leases an independent living unit to a resident?

Decision
Yes, the monthly maintenance fee consisting of components that can be reasonably characterised as part of the rental charge, does form part of the consideration for an input taxed supply under paragraph 40-35(1)(a) of the GST Act, when the entity leases an independent living unit to a resident.

Facts
The entity is an owner-operator of a non-freehold and non-strata titled retirement village. The entity is not an endorsed charitable institution or an endorsed trustee of a charitable fund. The entity leases an independent living unit to a resident of the retirement village. The resident is not receiving services referred to in paragraph 38-25(3)(c) of the GST Act being daily living activities assistance or nursing services as prescribed by that paragraph. The lease of the independent living unit to the resident is an input taxed supply of residential premises under paragraph 40-35(1)(a) of the GST Act. As part of the lease agreement between the entity and the resident, the resident pays a monthly maintenance fee to the entity. The monthly maintenance fee covers the entity's costs in relation to the upkeep of the communal paths, driveways, parks, swimming pools and gardens within the retirement village complex. The entity is registered for goods and services tax (GST).

Reasons for decision
Summary: Under paragraph 9-15(1)(a) of the GST Act, any payment in connection with the supply of anything is consideration. Under the lease the entity is responsible for the upkeep of the communal paths, driveways, parks, swimming pools and gardens of the retirement village. In return for this, it receives a monthly payment from the resident. Therefore, the entity is receiving consideration for a supply. As stated in the facts, the supply of the independent living unit by way of lease is an input taxed supply of residential premises. Accordingly, the issue is whether the payment of the monthly maintenance fee forms part of the consideration for the supply of residential premises. The extent to which resident's monthly maintenance fees are input taxed depends on whether the components of these fees can be reasonably characterised as part of a rental charge. Under section 195-1 of the GST Act, residential premises is defined to mean land or a building that: (regardless of the term of the occupation or intended occupation) and includes a floating home. The term 'residence' is central to the above definition. It is considered that the term 'residence' includes the building in which one resides and extends to include: Therefore, for retirement villages, residential premises include common areas such as paths, driveways, parks, swimming pools and gardens. Areas not included in residential premises within a complex include restaurants and associated dining areas where prepared meals are provided, hairdressing/beauty salon, pharmacy, medical room, nursing station, convenience stores and areas geographically situated away from the residence. Therefore, the monthly maintenance fee, which covers the entity's costs in relation to the upkeep of the communal paths, driveways, parks, swimming pools and gardens within the retirement village complex can be reasonably characterised as part of the rental charge. These services are incidental to the supply of the residential premises in the retirement village by way of lease to the resident. Accordingly, the monthly maintenance fee is consideration for an input taxed supply of residential premises under paragraph 40-35(1)(a) of the GST Act.

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-15(1)(a) paragraph 38-25(3)(c) section 38-250 section 38-260 section 40-35 paragraph 40-35(1)(a) section 195-1
Related ATO interpretative decisions: ATO ID 2009/103 | ATO ID 2009/104 | ATO ID 2001/634 | ATO ID 2001/635
Other references: Retirement Villages Industry Partnership - Issues Register - Issue 1
Subject references: Goods & Services Tax GST residential premises GST residential rents GST retirement villages Input taxed supplies