Selling units and apartments
To find out about GST and income tax when selling individual units or apartments, rather than the whole retirement village, see Operating a retirement village.
Sale of share or units in an entity
If you sell a retirement village through the disposal of shares or units (financial supplies) in an entity that owns the retirement village, you:
- don't pay GST on those financial supplies
- can't generally claim GST credits for the GST included in the price you paid for anything you acquired to make those supplies.
In special cases you may be entitled to claim GST credits for acquisitions that you use to make a financial supply if any of the following applies:
- You do not exceed the financial acquisition threshold.
- Your acquisition relates to an amount you borrowed and used to make a non-input-taxed supply.
- Your acquisition qualifies as a reduced credit acquisition (you will be entitled to a reduced input tax credit).
You can also see our rulings about GST on supplies and acquisitions to work out if you can or can't claim GST credits.
Sale as a going concern
No GST is payable on the sale of a going concern if it meets specific conditions. However, the purchaser may have an increasing adjustment for GST if they plan to make any supplies through the village that are neither taxable nor GST-free.
We have useful:
- guidance on GST-free supply of a going concern
- guidance on loan lease arrangements
- rulings about GST adjustments for change in creditable purpose
- guidance on GST and buying or selling.
Disposal of a retirement village
The supply of a retirement village consists of the supply of:
- real property rights
- other things that go to make up the retirement village enterprise.
GST when you dispose of a retirement village
When you sell a retirement village, your GST situation depends on:
- whether you're selling new residential premises, existing residential premises, serviced apartments, commercial operations or a combination of these
- your type of lease arrangement with residents, if any
- whether you're a charitable retirement village.
GST when selling only existing residential property
Existing residential property is residential property that is not new residential property. To the extent you are supplying existing residential premises, there will be no GST on the sale and no GST credits on any of the expenses incurred on the sale.
GST when selling a mixture of supplies
If there is a mixture of supplies made, such as new residential premises, commercial operations and existing residential premises, then some GST may be payable. An apportionment may be required to calculate both the GST payable and GST credits available.
GST and loan-lease arrangements
For loan-lease arrangements, you hold a number of ingoing contributions that are due for repayment to residents when a lease is terminated. On the sale of the retirement village, you as the seller receive a benefit by being relieved of your obligation to repay any on-going contributions from the residents. This benefit should be recognised in any apportionment of GST payable or GST credits claimed. We refer to this benefit as the repayment benefit. We detail the apportionment methodology you must use including the repayment benefit in our guidance on loan lease arrangements.
Income tax when you dispose of a retirement village
In most cases, selling a retirement village is the realisation of capital assets of the owner for income tax purposes. This may include the sale of:
- the operating village business and its goodwill
- land and buildings
- plant and equipment.
Each of the assets is likely to have different income tax treatments.
If you acquired a retirement village before 19 April 2000 (or it was under construction as at 19 April 2000), you may be allowed continued reliance of an old ruling TR 1994/24 to bring forward deductions for acquiring or developing the village.
If you dispose of a retirement and you used this reliance on TR 1994/24, the entire proceeds from the disposal of the village are ordinary income rather than the proceeds on the sale of a capital asset. Our main ruling about income tax and retirement villages has information on the transitional rules.