Tribunal rules on allocation of costs between villages

Aged care legal expert from Gadens Lawyers, Arthur Koumoukelis, has advised that with the continued growth and consolidation of the retirement village industry, it is inevitable that more and more operators will operate across state boundaries and multiple facilities. 

They will as a result, continue to incur costs that relate to the establishment of the portfolio but at the same time generate benefits for residents through economies of scale, branding, security and choice.

At the same time, residents have been concerned to ensure that only costs relating to their village may be passed on to them. These costs are typically in the nature of administration costs or imposts such as payroll tax. Both affect for profit and not for profit operators. 

These matters have given rise to much discussion between operators and residents particularly as reviews of the legislation have occurred as has been the case in New South Wales.

Most relevantly, up until now, there have been conflicting decisions in Queensland and New South Wales as to an operator’s entitlement to recover the impost of payroll tax from residents as part of the general services in their maintenance charges. Queensland cases say you can, New South Wales decision said you could not.

Both operators and residents have been waiting for clarification as to operation of the relevant Retirement Villages Act to explain the position and provide guidance.

On 21 May 2009, the New South Wales Consumer, Trader & Tenancy Tribunal handed down its decision in the matter of Australian Retirement Homes (No 2) Pty Ltd v Minkara Retirement Villages Resident Committee RV 08/41351, which has provided clarity for all parties as to the principles involved in incurring and allocating costs across numerous facilities. Gadens lawyers acted for the operator in the case.

That decision has brought the New South Wales position in line with the Queensland position to confirm that the impost of payroll tax that was included by the operator in its statement of proposed expenditure for the financial year ended 30 June 2009, could form part of the statement of proposed expenditure.

The principle that is relevant to both residents and operators is that it confirms the Retirement Villages Act and regulation is structured to ensure transparency and fairness to both in that the Act envisages a person may be the operator of more than one village and can apportion the expenditure between the villages as long as the method of calculation of apportionment is disclosed.

In the particular case, the Tribunal accepted that the obligation to pay payroll tax as a result of the corporate structure of the applicant to be an item that can be recurrent charge in respect of wages and salaries and part of the proposed expenditure.

Though the case dealt predominantly with payroll tax, it assists the industry to emphasise that the Act does work to confirm such costs can be passed on but in doing so, ensure transparency of information to residents as to the costs of living in the village.