Retirement villages and dutiable value

Sale of a retirement village

This information applies to the sale of an entire retirement village with residents in place. 

It does not apply to the sale of individual retirement village interests between individual residents. It applies to transactions where:

• the retirement village is transferred as part of an ongoing business, commonly referred as a going concern
• the retirement village operates on a loan lease, lease premium or loan licence arrangement
• the retirement village owner is the registered proprietor and beneficial owner of the retirement village land (freehold).

Dutiable value of retirement village land

The transfer of retirement village land is a dutiable transaction. 

The dutiable value of property is the greater of the:

• consideration (if any), which could be either monetary or non-monetary, and
• the unencumbered value of the dutiable property.

In working out the dutiable value, a number of factors may be relevant, such as the value of the ingoing contribution and/or statutory charge.

Ingoing contribution

A retirement village resident often must make a lump sum payment to the retirement village operator. This payment is an ingoing contribution and is refunded when the resident exits the retirement village. 

This right to a refund is commonly referred to as a refund obligation. 

Statutory charge

The retirement village regime in Victoria creates a statutory charge over the retirement village land. This charge on the land secures the refund obligation.  

When a purchaser buys a whole retirement village as part of an ongoing business, the purchaser takes on the seller’s refund obligation. The purchaser also buys the retirement village land subject to the statutory charge.        

Impact of refund obligations and statutory charge on dutiable value

The refund obligations and the statutory charge affect the dutiable value of retirement village land. 

In an ongoing operation, the consideration paid for the land includes the:

• money paid for the retirement village land
• non-monetary consideration arising from the purchaser assuming the seller’s refund obligation
• non-monetary consideration arising from the statutory charge.

Usually, it is the value of the refund obligation and/or statutory charge that should be taken into account, not its dollar amount. 

Valuation of refund obligations and statutory charge

The value of the refund obligation and/or statutory charge is assessed separately in each case. 

Factors to consider include:

• conditions attached to the refund obligation
• whether those conditions are usually met in practice.

For example, the refund of the ingoing contribution may depend on another person moving into the retirement village and paying an ingoing contribution. In these cases, the refund obligation is met using the money paid by the incoming resident. This may affect the value attributed to the refund obligation or statutory charge.

If the retirement village is expected to continue as a going concern, the value of the refund obligation and statutory charge can be nil or nominal. An expert valuer should determine whether the value is nil or nominal.

For this reason, you should submit a valuation as supporting information for a transfer of retirement village land. The valuation should set out the value of the refund obligation and statutory charge.