Panicing seniors who reside in these types of dwellings didn’t seem to be an issue for the Government and the ATO - but we have advice from the CPSA, that its not time to panic - yet.
The facts: GST in parks
GST is not new in residential parks and some park residents already have a GST component in their rent. Since the introduction of the GST over 12 years ago park owners have been able to choose whether or not to pay GST and, if they opt to pay, they can attempt to recover some or all of their costs through rent increases. However, any such rent increase has to be dealt with in the same way as any other rent increase: the park owner has to issue a valid 60 day notice and the resident can challenge the increase in the Tribunal if they consider it to be excessive.
As early as 2001, GST was raised as an issue in a rent increase case at the Residential Tribunal (now the Consumer, Trader and Tenancy Tribunal). In Brown v Randy River Heath & Beauty Aid Co. Pty Limited trading as Middle Rock Village Park under the heading of GST Member Toose said that the GST Act “clearly gives the park owner an option whether or not toapply the GST (Section 87-25 of the GST Act). This Tribunal has no power toforce the park owner to apply or not to apply the GST. The decision to applythe GST or not is clearly a financial one that has been undertaken by the park owner. The park owner (as is it’s right to do so) has elected to apply the GST”.
Nothing in the 30 October 2013 Draft Ruling changes this. If a park owner has to start paying GST as a result of the Ruling, then any attempt to recover the costs through rent has to be dealt with as a rent increase in the manner prescribed in the Residential Parks Act 1998 and residents have the right to challenge the increase if they consider it to be excessive.
Will residents face a bill?
The decision on whether the Ruling will be retrospective has not yet been made and will not be made until the final Ruling. Even if the Ruling is to be applied retrospectively residents will not be issued with a bill because it is the park owner who is liable to pay GST, not residents.
Section 36(2) of the Residential Parks Act 1998 provides that “it is a term of every residential tenancy agreement that the park owner will pay all other rates, taxes or charges payable in connection with the residential premises”.Therefore, if a debt is created because the Ruling applies retrospectively thedebt will belong to (and have to be paid by) the park owner.
Again, we refer to the above case of Brown v Randy River Heath & Beauty Aid Co. Pty Limited trading as Middle Rock Village Park where theMember also talked about liability for the GST and said “in electing to applythe GST the park owner has become liable for GST; the park owner is thetaxable supplier. Costs associated with the GST are not applied in a waywhich purports to impose liability for the GST on the recipient of the supply, ie.the resident”.
Will all parks be affected by the Draft Ruling?
The Draft Ruling differentiates between “caravan parks” and “moveable home estates”. PAVS spoke to a GST specialist at the ATO who confirmed that the intention of the Ruling is that caravan parks with tourist operations will not be affected as they are considered to be commercial premises. Parks and villages that provide only long-term accommodation, or long-term accommodation and occasional or ad-hoc holiday accommodation are the only parks affected.
If you live in a park or village that is likely to be affected by the Draft Ruling our message is still “don’t panic”. You will not immediately face a 10% rent increase and you will not face a bill. As we have outlined above, any rent increase must follow the process prescribed by the Residential Parks Act where the new GST liability will be only one of the factors that the Tribunal will consider in a rent increase challenge. Plus, remember - the park owner is liable for GST, not you.
Currently the Ruling is a Draft and has been issued for consultation. PAVS and CPSA are seeking legal advice about the potential impact of the Draft Ruling and we will be sending a well-informed and considered submission to the ATO.
We also encourage residents to send in a submission by the closing date of 29 November 2013 to:
Mr Steven Iselin, ATO, PO Box 9977, Chermside QLD 4032