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By: Darrell Price, Heather Gouveia
01 Sep 2026 6 min read
In our discussions with operators, four themes consistently emerge: the challenge of developing villages, increasing regulatory pressure, tax uncertainty and whether existing group structures are still fit for purpose.
While each presents its own challenges, they share a common theme – how can operators make decisions today that remain sustainable as their villages, businesses and obligations evolve?
Demand for retirement living remains strong and many operators are looking to expand their portfolios. However, bringing new villages to market is becoming increasingly challenging. Land shortages, rising construction costs and lengthy council approval processes are putting pressure on project feasibility and increasing development risk.
The impact of softer residential property markets in some regions is adding further pressure. Many retirement village business models rely on a careful balance between development margins, future Deferred Management Fee (DMF) income and ongoing operational returns. Where median house prices are flat or declining, that margin for buyers can compress quickly, leaving less room to absorb construction cost increases or project delays.
For operators, this makes getting feasibility modelling right increasingly important. Small variations in construction costs, approval timings, occupancy assumptions or future sales values can have a significant impact on project returns.
As new villages become more expensive to deliver, the financial consequences of underestimating future operating costs – and the ability to recover those costs through village fund charges – are becoming more significant.
The sector is facing increasing regulatory scrutiny surrounding village financial management. Recent changes to Queensland's retirement village framework have substantially expanded reporting, disclosure and budgeting requirements, particularly in relation to General Services Charges Funds (GSCF), Maintenance Reserve Funds (MRF) and Capital Replacement Funds (CRF). Operators are now expected to provide greater detail, transparency and justification behind budget assumptions.
The greater concern is not the additional reporting itself, but the risk of getting budgets wrong and the legislative restrictions that may apply when changes are needed. Initial budgets established during the development and registration phase can therefore have consequences that extend for decades – and once residents enter a village, the ability to recover unforeseen costs or substantially increase charges may be restricted.
As a result, operators are asking a simple but important question: are our villages funded sustainably for the long term?
As resident contract offerings evolve, so too do the tax outcomes. Differences in the treatment of resident contributions, upfront payments and DMFs can have a significant impact on cash flow, yet the nuances of the underlying tax rules can be misunderstood, creating uncertainty and concern. The treatment of capital appreciation payments and exit entitlements can also have material implications. Once embedded within a structure, these issues can be costly and complex to unwind if the correct treatment is not being applied.
Getting GST right is another consideration, and given the potential compounding effect across GST transactions, regular reviews can help identify issues before they become more difficult to address.
Many operators have spent years operating in relatively low tax environments due to capital works deductions, depreciation and accumulated tax losses. As villages mature and DMF balances grow, operators are increasingly focused on a different question: what will our future tax bill look like, and are we prepared for it?
For operators, the challenge is less about today's tax position and more about understanding tomorrow's cash flow, including the after-tax cash position in the event of a sale. The structure of a sale transaction can have a material impact on the tax outcome.
Many operators have accumulated significant tax losses across their group structures. Where ownership is held through trust structures, proposed tax changes have raised concerns. The recent Federal Budget announcements and proposed changes to the CGT discount and the taxation of trusts add complexity to structuring decisions, particularly when considering the outcome for future divestment.
There’s also a broader question around whether existing structures remain fit for purpose. Many structures were designed when circumstances, ownership objectives and tax rules were very different. What was once an efficient structure can become increasingly cumbersome as groups grow, introduce new investors, transition ownership between generations or generate larger and more consistent profits. This can reduce flexibility and result in higher effective tax rates than originally anticipated.
With proposed budget changes adding further uncertainty, now is an opportunity for operators to reassess whether their structures remain fit for purpose – not only from a tax perspective, but also by reviewing current resident contracts to ensure they continue to support the longer-term objectives of the business.
The common thread across the sector is the search for certainty in an increasingly complex operating environment.
Development feasibility, operational fund budgeting, taxation implications, structuring and funding may be considered separately, but they’re closely connected. Decisions made during development can influence future operating costs and profitability, which can ultimately shape future tax outcomes and the flexibility of the wider group.
For operators, planning ahead means understanding how these intertwine and considering not just whether a decision works today, but whether it will continue to work as the business and its obligations evolve.
We work with operators across the retirement village lifecycle, from development feasibility studies, financial modelling and initial operational fund budgeting through to annual compliance, tax advisory and strategic structure reviews. By bringing these perspectives together, we help operators understand the longer-term implications of decisions made today and plan with greater confidence for what lies ahead.
Get in touch to discuss how these issues apply to your business and how we can support you in navigating them.
Article contributed to by Steph McManus, Senior Manager - Private Business Tax & Advisory
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