Private ruling: Entitlement to input tax credits
Published: January 2015

Ruling: Q1: Will your supplies of accommodation be GST-free pursuant to section 38-260 of the A New Tax System (Goods and Services Tax) Act 1999? | A1: Yes

Relevant facts and circumstances: You are an endorsed charity which is not registered for GST. You plan to register for GST prior to commencing the third stage. You own and operate a residential complex. You lease the land on which you have built the villas from a local government entity. A condition of this lease is that the land will be used to supply low cost housing to 'needy elderly pensioners'. In accordance with this requirement, you lease the villas to persons who are aged 65 or more. The lease agreements with the residents do not specify a minimum age for residents. However, in practice the units are only let to aged pensioners. The lease agreements will be updated to reflect this. The rent is set with reference to the Centrelink Rent Assistance schedule. There are xx units in the complex, with construction to commence shortly on another xx units. The xx units will be located on the same site as the existing xx. Facilities are currently limited to a barbeque area. The construction of the extra units will also include a community room for all residents to use. You only supply accommodation. You do not supply residential care within the meaning of the Aged Care Act (1997) .

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 38-260 | A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision: Summary: Note: In this ruling, unless otherwise stated, • all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) • all reference materials referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au • all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act Under section 38-260, a supply of accommodation in a retirement village, by an endorsed charity that operates the retirement village is GST-free. You are an endorsed charity which supplies accommodation to aged pensioners in the residential complex. If the residential complex is a retirement village, your supplies of that accommodation will be GST-free. Under section 195-1, premises are a retirement village if: 1. the premises are residential premises; and 2. accommodation in the premises is intended to be for persons who are at least 55 years old, or who are a certain age that is more than 55 years; and 3. the premises include communal facilities for use by the residents of the premises; Retirement villages do not include: • premises used, or intended to be used, for the provision of residential care (within the meaning of the Aged Care Act (1997 ) by an approved provider (within the meaning of that Act); • commercial residential premises. The units in the residential complex are residential premises intended to be for persons who are at least 65 years old. Paragraph 19 of Goods and Services Tax Ruling GSTR 2007/1: Goods and services tax: when retirement village premises include communal facilities for use by the residents of the premises (GSTR 2007/1) explains that retirement village residential premises include communal facilities when: • the communal facilities are physical; and • the communal facilities are within, attached to or connected to the residential building(s), or constructed on the surrounding land that actually or substantially contributes to the enjoyment of the building(s) or to the fulfilment of its purposes as a residence. Paragraph 23 of GSTR 2007/1 explains that, in a retirement village context, communal facilities would ordinarily include a library, a dining room, a recreation room, a chapel, an equipped gymnasium and outdoor recreational and leisure facilities such as a tennis court, a swimming pool or a barbeque area. The communal facilities requirement is satisfied where one or more of these communal facilities are within, attached to, or connected to the residential building(s), or constructed on the surrounding land that actually or substantially contributes to the enjoyment of the building(s) or to the fulfilment of its purposes as a residence. As your complex contains a barbeque area constructed on the surrounding land that actually or substantially contributes to the enjoyment of the residences, you satisfy the communal facilities requirement. Therefore, the residential complex meets the definition of a retirement village in section 195-1. Accordingly, your supplies of accommodation are GST-free supplies. Provided you meet the requirements of section 11-5, including that you become registered for GST, you will be entitled to input tax credits on the construction of the new units.