ATO ID 2003/422: GST and 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 cash basis, attribute the GST payable on a taxable supply of maintenance services under subsection 29-5(2) of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to the tax period in which the resident's contribution is deposited into the entity's maintenance reserve fund (MRF)?

Decision
No, the entity does not attribute the GST payable on a taxable supply of maintenance services under subsection 29-5(2) of the GST Act, to the tax period in which the resident's contribution is deposited into the entity's MRF. The entity attributes the GST payable to the tax periods in which it withdraws amounts from the MRF for the provision of the maintenance services. The amount of GST that the entity attributes to the tax periods will be 1/11th of the amount received (that is, withdrawn from the MRF)

Facts
The entity is an operator of a Queensland retirement village that accounts for GST on a 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 also 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 To the extent that amounts withdrawn from the MRF are related to a taxable supply such as a hairdressing salon, beauty parlour, retirement village bus, restaurant or communal area that are used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.

Reasons for decision
Summary: Subsection 29-5(2) of the GST Act sets out the attribution requirements for an entity that accounts on a cash basis. This provision states that: Therefore, it needs to be determined when the entity has received consideration for its supply of services. When a resident's contribution is deposited into the MRF the entity holds the amount on trust for the residents. 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 outlined 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 to the tax period in which the resident's contribution is deposited into the MRF. Rather the entity attributes the GST payable to the tax periods in which it withdraws the payment from the MRF for the taxable supply of maintenance services as this is when the consideration is received. The amount of GST that the entity attributes to the tax periods is 1/11th of the amount received (that is, withdrawn from the MRF). For instance, if the entity withdrew $990 from an MRF as part payment for the supply of maintenance services totalling $1,100 in a tax period, the GST payable on the services which is attributable to that tax period is $90 (one-eleventh of $990).

Legislative references: A New Tax System (Goods and Services Tax) Act 1999 subsection 29-5(2)
Related ATO interpretative decisions: ATO ID 2003/423
Subject references: Goods and services tax GST tax periods Attribution rules Cash basis GST property and construction GST retirement villages