Retirement living submission on deferred tax liabilities
The Property Council’s Retirement Living Tax Committee has made a submission to Federal Treasury, to ensure more certainty on the matter of deferred tax liabilities for village operators.
In the previous three Federal Budgets, Government announced a number of changes to the tax consolidation rules with the aim of ensuring integrity of the system.
Exposure draft legislation was released in mid-September for public consultation and contained six measures designed to remove anomalous tax outcomes that arise under the tax cost setting rules when an entity leaves or joins a tax consolidated group.
The draft legislation provides that retirement village residence contracts and service contracts are excluded from the proposed deductible liability changes. This carve out was the result of successful advocacy by the Retirement Living Tax Committee and ensures village operators do not pay tax twice on resident loan liabilities when a village is acquired by a consolidated group.
The draft legislation also intends to ensure that deferred tax liabilities (DTLs) are disregarded. We suggest changes to the wording in the proposed legislation to overcome issues relating to DTLs not previously included in an entry Allocable Cost Amount (ACA) calculation, DTL increases, and compliance costs.