Jurisdiction - Australia
Australia – Living Choice Australian Limited v Commissioner Of Taxation [2014] AATA 168.

9 April, 2014


Legal News & Analysis – Asia Pacific – Australia – Tax


The Tribunal in Living Choice Australian Limited v Commissioner of Taxation [2014] AATA 168 has affirmed the Commissioner’s decision that the input tax credit entitlement of a retirement village operator during a relevant period and based on certain acquisitions was 13 per cent. However, it has remitted the matter back to the Commissioner for further consideration.


The taxpayer was a member of a GST-registered group that operated retirement villages. The taxpayer itself principally developed, operated and managed retirement villages that provided independent living units (ILUs). One of the retirement villages was chosen as a representative member of the 6 retirement villages (Glenhaven). In addition to the ILUs, Glenhaven contained a country club comprising of a gymnasium, bowling green and swimming pool.

By way of a private ruling in January 2008, the Commissioner confirmed that the acquisitions made in the construction of the ILUs had no creditable purpose because they related to the supply of input taxed residential premises. With respect to the country club facilities, the Commissioner confirmed that the creditable purpose of acquisitions relating directly to the construction of the country club was not 100%. This was on the basis that the country club was considered to be a communal recreational facility and therefore would form part of the supply of residential premises.

The taxpayer claimed input tax credits for creditable acquisitions relating to the retirement villages. Following an audit, the ATO disallowed the input tax credits on the basis that they related to input taxed supplies. The taxpayer provided various supporting documenting including a number of input tax credit apportionment methodologies calculating the extent of the creditable purpose between 59-74%. The taxpayer’s objection was allowed in part with the Commissioner allowing the input tax credit claim based on a creditable purpose of 13% for the relevant periods. The taxpayer appealed to the Tribunal.

The issue before the Tribunal was the extent to which acquisitions made by the taxpayer, in relation to the development, construction and operation of various retirement villages, were related to the making of input taxed supplies. The Green Acres Model from the Retirement Villages Industry Partnership was accepted as a fair and reasonable methodology to determine the taxpayer’s “extent of creditable purpose” for the purposes of section 11-30 of the GST Act.

The taxpayer contended that the “residential premises” supplied to each resident was limited to the following:

a) the ILU occupied by the tenant as a residence; and
b) those additional facilities and services which were necessary for the convenient use and occupation of the ILU by the resident as a place of residence (paths, driveways and immediate gardens).

In contrast, the Commissioner contended that the crucial question was the proper characterisation of the supplies made by the taxpayer. The Commissioner argued that the “base” question in analysing section 11-15(2) of the GST Act is determining the extent to which an acquisition is related to the making of supplies that would be input taxed and the character of what the taxpayer is supplying. The Commissioner argued that having regard to the lease, the additional facilities and services were supplied as incidental to the supply of residential services.


Considering the evidence put forward by the taxpayer and applying GST Ruling GSTR 2012/4 (GST Treatment of fees and charges payable on exit by residents of a retirement village operated on a leasehold or licence basis), the Tribunal found that the expression “residential premises” included:


a) the premise by way of lease or licence (that is, the ILU); and
b) facilities or services that are integral, ancillary or incidental to the lease.
In determining whether certain expenses were apportionable under (b), the Tribunal chose to consider only 5 of the expenses listed.

Accordingly, the Tribunal concluded that the Commissioner’s determination of the taxpayer’s input tax credit entitlement of 13% for the relevant period was, on the basis of the evidence, correct. However, due to the limited hearing, the Tribunal found it necessary for all of the expenses listed in the 2011 Glenhaven profit and loss statement to be considered by both parties having regarding to the apportionment methodology in the Green Acres Model. Accordingly, the Tribunal remitted the matter to the Commissioner for further consideration.


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For further information, please contact:


Geoffrey Mann, Partner, Ashurst
[email protected]


Jadie Teoh, Ashurst
[email protected]


Kristina Popova, Ashurst

[email protected]


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