On 3 November 2001, the ATO issued Taxpayer Alert TA 2010/7 entitled "GST - Retirement Village operators who on-sell services to residents in an attempt to claim greater input tax credits".
The Taxpayer Alert describes an arrangement in which a retirement village operator increases its claims for input tax credits (or for decreasing adjustments) by assuming the role of a service supplier, such as an electricity retailer. By buying services and on-supplying them to retirement village residents living in independent living units, the retirement village operator contends that it is making a taxable supply, separate from its input taxed supply of residential accommodation.
The ATO considers that an arrangement of the type described above gives rise to a number of taxation issues, including whether:
- the anti-avoidance provisions of Division 165 of the GST Act may apply to the arrangement or to any part of it;
- any entity involved in the arrangement may be a promoter of a tax exploitation scheme for the purposes of Division 290 of Schedule 1 to the Taxation Administration Act 1953.
In media release No 2010/35, issued 3 November 2010, the Commissioner, Michael D’Ascenzo, warned retirement village operators that the ATO is currently reviewing these type of arrangements.