Commissioner publishes Final Ruling on Retirement Villages; Technical Discussion Paper on GST treatment of recovered dishonoured payment costs

Yesterday the Commissioner published 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 ruling explains the GST treatment of amounts which a resident becomes liable to pay the operator of a retirement village when the resident’s interest in the village terminates (referred to as “exit payments”).  The ruling is limited to where the resident’s interest is a right to possession of residential premises under a lease or licence with a right to use the communal facilities of the village.

The ruling was previously issued as Draft GST Ruling GSTR 2012/D2: GST treatment of fees and charges payable on exit by residents of a retirement village operated on a leasehold or licence basis.  My post on that draft can be accessed here.  A post analysing the final ruling will be published over the next few days.

Also, on 1 August 2012 the Commissioner released Technical Discussion Paper TDP 2012/1 ‘GST treatment of recovered dishonoured payment costs’.  This is the first TDP dealing with GST that I am aware of, and the aim is to facilitate consultation between the ATO and the community as part of the process of developing a potential ATO view on the application of the GST law. The ATO is seeking comments on its views outlined in the TDP.

The TDP discusses the different possible GST treatments when a dishonour fee incurred by a supplier (after their customer’s payment for supply is dishonoured) is recovered from their customer.  It is noted that publicly available information indicates that Australian businesses are adopting different GST treatments when recovering dishonoured payment fees from their customers, with some appearing to be contrary to the current ATO view – found in GSTA TPP 065 which provides that recovery of dishonoured payment fees may be a financial supply.

The TDP does not consider the GST treatment of the dishonour fee imposed at first instance by a financial institution on a supplier (that is dealt with by the GST Act and GST Regulations).

The TDP is quite extensive, running to some 104 paragraphs, and it deals with questions including:

  • whether dishonour fees are consideration for an interest in a debt;
  • whether dishonour fees are consideration for an interest in credit;
  • whether dishonour fees are consideration for an indemnity interest;
  • whether the recoverable dishonour fees are for the provision of a stand alone facilitation service;
  • whether the recoverable dishonour fees are for a contractual breach;
  • whether the recoverable dishonour fees are additional consideration for an underlying supply.

Comments are sought by 29 August 2012.

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