• Skip to content
  • Skip to navigation

Grant Thornton Australia

Grant Thornton uses cookies to monitor the performance of this website and improve user experience.

If you are happy to accept cookies from this site, please check the box.

To find out more about cookies, what they are and how we use them, please see our privacy notice, which also provides information on how to delete cookies from your hard drive.

How to be COVIDSafe when visiting Grant Thornton offices. Find out how

Global site
  • Global site
  • Algeria
  • Botswana
  • Cameroon
  • Egypt
  • Ethiopia
  • Gabon
  • Guinea
  • Kenya
  • Libya
  • Malawi
  • Mauritius
  • Morocco
  • Nigeria
  • Namibia
  • Senegal
  • South Africa
  • Togo
  • Tunisia
  • Uganda
  • Zambia
  • Zimbabwe
  • Anguilla
  • Antigua
  • Argentina
  • Aruba, Bonaire, Curacao and St. Maarten
  • Bahamas
  • Barbados
  • Bolivia
  • Brazil
  • British Virgin Islands
  • Canada LLP
  • Canada RCGT
  • Cayman Islands
  • Chile
  • Colombia
  • Costa Rica
  • Dominica
  • Ecuador
  • El Salvador
  • Grenada
  • Guatemala
  • Honduras
  • Mexico
  • Montserrat
  • Nicaragua
  • Panama
  • Paraguay
  • Peru
  • Puerto Rico
  • St Kitts
  • St Lucia
  • St Vincent and the Grenadines
  • Trinidad & Tobago
  • United States
  • Uruguay
  • Venezuela
  • Turks & Caicos
  • Afghanistan
  • Australia
  • Bangladesh
  • Cambodia
  • China
  • Hong Kong
  • India
  • Indonesia
  • Japan
  • Korea
  • Malaysia
  • Mongolia
  • Myanmar
  • New Zealand
  • Pakistan
  • Philippines
  • Singapore
  • Taiwan
  • Thailand
  • Vietnam
  • Albania
  • Armenia
  • Austria
  • Azerbaijan
  • Belarus
  • Belgium
  • Bosnia and Herzegovina
  • Bulgaria
  • Channel Islands
  • Croatia
  • Cyprus
  • Czech Republic
  • Denmark
  • Estonia
  • Finland
  • France
  • Georgia
  • Germany
  • Gibraltar
  • Greece
  • Hungary
  • Iceland
  • Ireland
  • Isle of Man
  • Israel
  • Italy - Bernoni
  • Italy - Ria
  • Kazakhstan
  • Kosovo
  • Kyrgyzstan
  • Latvia
  • Liechtenstein
  • Lithuania
  • Luxembourg
  • Macedonia
  • Malta
  • Moldova
  • Monaco
  • Netherlands
  • Northern Ireland
  • Norway
  • Poland
  • Portugal
  • Romania
  • Russia
  • Serbia
  • Slovak Republic
  • Slovenia
  • Spain
  • Sweden
  • Switzerland
  • Tajikistan
  • Turkey
  • Ukraine
  • UK
  • Uzbekistan
  • Bahrain
  • Egypt
  • Jordan
  • Kuwait
  • Oman
  • Qatar
  • Saudi Arabia
  • United Arab Emirates
  • Yemen
  • Lebanon
Grant Thorton Logo

Grant Thornton Logo Grant Thornton Logo

Contact us
  • Insights
  • Services
  • Industries
  • Meet our people
  • Careers
  • News centre
  • Locations
  • About us
  • Audit
  • Tax
  • Private Advisory
  • Financial Advisory
  • Grant Thornton Consulting
  • Asia
Audit Home
  • Audit methodology
  • Audit technology
  • Financial reporting advisory
Tax Home
  • Corporate tax
  • Employee equity reward schemes
  • Fringe benefits tax
  • Global mobility services
  • GST & indirect tax
  • International tax
  • Payroll assurance
  • Research & development
  • Tax compliance
  • Tax governance & risk management
  • Tax in mergers & acquisitions
  • Tax lawyers
  • Transfer pricing
Private Advisory Home
  • Family Business Consulting
  • Family office services
  • Private wealth
  • Superannuation
Financial Advisory Home
  • Corporate finance
  • Debt advisory
  • Forensic consulting
  • Payments advisory
  • Restructuring advisory
Grant Thornton Consulting Home
  • Business risk
  • Human capital
  • Performance improvement
  • Strategy & growth
  • Technology consulting
  • GNC Group Consulting
Asia Home
  • China practice
  • India practice
  • Japan practice
  • Agribusiness, food & beverage
  • Automotive dealers
  • Education
  • Energy & resources
  • Financial services
  • Health & aged care
  • Life sciences
  • Manufacturing
  • Not for Profit
  • Professional services
  • Public sector
  • Real estate & construction
  • Retail & consumer products
  • Technology & media
Agribusiness, food & beverage Home
Bite Size Dealtracker Food, Beverage & Agribusiness industry insights
Key insights for the Australian Food, Beverage & Agribusiness industry.
Financial services Home
  • Banking
  • Fintech
  • Private Health Insurance
  • Superannuation
  • Asset management
  • BEAR FAQs
  • Open banking
Royal Commission wrap up Top 10 things for Financial Services providers
Eleven months on from the first round of hearings for the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Commissioner Hayne’s final report has been released.
Health & aged care Home
Aged Care Royal Commission Perspectives on the Future of Ageing
Transitions in ageing are not consistent and systematic as they are described by our ageing systems. Sometimes they are incremental, sometimes accidental, sometimes monumental, and they are always personal. We can create something better.
Life sciences Home
Biotechnology Industry Position survey Australia's biotechnology industry drives economic growth
The 2019 Biotechnology Industry Position survey conducted by Ausbiotech and supported by Grant Thornton has revealed that new technologies across regenerative medicine and medicinal cannabis are disrupting the industry, and Australia's global strength in clinical trials continues to drive contributions to the economic and social fabric of the country.
Manufacturing Home
mid-sized business report Manufacturing is critical to our economy – how can we support the sector?
Although the knock-on effects of the Australian automotive industry exiting our country are yet to be fully understood, the industry is evolving, and manufacturing continues to be a major employer and critical to our overall economy.
Not for Profit Home
NATIONAL OUTCOMES MEASUREMENT PROGRAM A practical framework
Royal Commissions and federal budgets are critical things for Nonprofit human service providers to be thinking about at this point in time.
Real estate & construction Home
mid-sized business report Supporting affordable housing requires planning, certainty – and tax reform
There is a lot of noise around the property sector at the moment – and it’s not all positive. Prices are down – but this shouldn’t be a surprise when some markets (namely Sydney & Melbourne) saw unprecedented hikes in recent years.
Retail & consumer products Home
GNC Group Consulting The Technology Trap: Online innovation in retail
I recently attended the NRF Retail Big Show in New York, an overwhelming smorgasbord of retail technology and new store concepts.
Technology & media Home
  • Telecommunications
Scaling-up for Growth From start-up to scale-up
Navigating the complexities of growth and maintaining previous success is a challenge for all mid-size businesses.
  • Working at Grant Thornton
  • Student opportunities
  • Experienced careers
  • Contact us
Working at Grant Thornton Home
  • Flexibility
  • Your career and development
  • Diversity and inclusion
  • In the community
  • What we offer you
Student opportunities Home
  • Graduates
  • Vacationer Program
  • The application process
  • FAQs
  • Student application tips and tricks
Experienced careers Home
  • Client spotlight
  • Grant Thornton Australia | Audit, Tax and Advisory
  • Client alerts
  • 2016
  • Calculating the GST you can claim: Tribunal decision affecting retirement villages

Calculating the GST you can claim: Tribunal decision affecting retirement villages

11 Nov 2016
  • Calculating the GST you can claim: Tribunal decision affecting retirement villages

Those looking to apply an outputs-based method to recover input tax credits will have kept a keen eye on the outcome of RSPG v Commissioner of Taxation [2016] AATA 687 concerning the recovery of input tax credits from the construction of a retirement village.

The taxpayer, which was a for-profit entity operating a retirement village, contended that it was entitled to recover 91% of the input tax credits relating to the construction of the retirement village based on the Commissioner’s apportionment formula in GSTR 2011/1.

The method used by the taxpayer was an outputs-based method and was based on the following formula:

Total value of economic benefits reasonably expected to be obtained from making input taxed supplies


Total value of economic benefits reasonably expected to be obtained in respect of the arrangement

The Tribunal agreed with the decision of the Commissioner to disallow a claim on the basis that the taxpayer’s application of an apportionment formula contained in GSTR 2011/1 was inappropriate and thus the methodology applied was not considered fair and reasonable.

The Tribunal considered the following components of the method specifically and concluded as follows:

  • Interest free loan:  The taxpayer had contended that the economic benefit of the interest free loan was only for one month, because residents could leave the village upon providing one month’s notice. The Tribunal instead agreed with the Commissioner that the benefit of the loan was for the duration of the resident’s occupation of the unit, and that this was an average period of 12 years. Accordingly, the value attributed to the interest free loan should have been longer than one month and this was not reflected within the apportionment methodology.
  • Rent and license fee:  The taxpayer had spread the rent and license fee over a period of 50 years. Based on the evidence provided, it is unlikely that an over-55 resident would occupy the unit for a period of 50 years. The Tribunal therefore contended that the taxpayer’s assumption was incorrect.
  • Exit fee:  The taxpayer had contended that these payments were deferred service payments (and subject to GST). The Tribunal took the opposing view, deciding that the payments were not exit fees but instead end of lease payments which were consideration for an input taxed supply of residential units.  
  • License fee:  This one-off license fee, paid by the resident for access to common areas in the retirement village, was considered a taxable supply. The Commissioner had agreed with the taxpayer that this was a taxable supply, but contended that the taxpayer had erred in only including the license fee in the denominator (and not in the numerator) of the apportionment method on the basis that the license related to the residential premises in a real and substantial way. The Tribunal agreed with the Commissioner’s view that the taxpayer’s approach was distortive, and that it had resulted in a higher recovery percentage for the taxpayer than was fair and reasonable.
  • Commercial residential premises:  The taxpayer had argued that the retirement village was similar to a hostel or boarding house and therefore, in its entirety, was commercial residential premises. However, the taxpayer did not provide any further evidence to support this argument. The Tribunal did not agree with the taxpayers view and found that a retirement village was not sufficiently similar to a hostel or boarding house and should not be considered commercial residential premises.

How will this affect your organisation?

The decision, whilst in no way contrary to the content in GSTR 2011/1, reminds us of the importance of understanding the nature of the supplies made by retirement village operators and including these correctly and fairly in the apportionment methodology applied to determine the extent that GST on costs (such as construction and ongoing maintenance) can be claimed as input tax credits. The decision also broadly affirms the ATO’s views on the nature of supplies made by those operating retirement villages (such as deferred management fees) that are often the subject of debate.

We would recommend that those in the retirement village sector who apply an apportionment methodology to determine the level of GST credits that can be claimed consider this case and take the opportunity to review their current methodologies for accuracy, compliance with GSTR 2011/1, and overall reasonableness. 

Next article: Transfer duty and land tax reforms affecting foreign property investors.

For more information, contact:

Tony Windle
Tony Windle
Partner & National Head of Indirect Tax Brisbane
Email address https://au.linkedin.com/in/tonywindlegt Tony Windle VCard
View full profile
Sian Sinclair
Sian Sinclair
Partner & National Head of Real Estate &... Brisbane
Email address https://au.linkedin.com/pub/sian-sinclair/14/9b0/9b5 Sian Sinclair VCard
View full profile
  • Follow us on youtube
  • Follow us on linkedin
  • Follow us on twitter
  • Follow us on facebook
Connectclose
  • Contact us
  • Locations
  • Meet our people
  • Subscribe
  • Staff portal
Aboutclose
  • About us
  • Careers
  • News centre
  • Client alerts
  • Grant Thornton Foundation
  • Grant Thornton Affinity
Legalclose
  • Privacy
  • Compliance and ethics
  • Disclaimer
  • Site map

© 2021 Grant Thornton Australia Limited – All rights reserved

    • EN
    • Contact us