All operators of retirement villages must prepare and keep up to date an asset management plan that complies with the Retirement Villages Act 1999 and the Retirement Villages Regulation 2017.
What is an asset management plan?
An asset management plan documents the costs of purchase, and ongoing maintenance, repairs and replacement of a retirement village’s major items of capital, including shared major items of capital.
The plan must include the following content:
- an asset register of the village’s major items of capital, including information about the effective life of items of capital and
- a maintenance schedule of the village’s major items of capital, including information about capital replacement, and
- operators must also prepare a three-year report for capital maintenance extracted from the asset management plan to inform expenditure for the annual budget.
Read the Secretary guidelines to asset management plans
What is a major item of capital?
A major item of capital is an item of capital for which an operator is responsible, that
- has a purchase cost of $1,000 or more, or
- is part of a group of items of capital
- that are similar
- each of which has a purchase price of $1,000 or more and
- each of which has the same effective life and financial year of acquisition
- but does not include equipment that is a consumable used in the operation of an item of capital or in the day-to-day operation of the village.
Operators cannot charge residents for maintenance or repairs of a major item of capital if the item is not listed in the Asset Register.
What is an asset register?
An asset register is a list of major items of capital for which operators are responsible and for which residents pay maintenance.
Operators must record all new and existing major items of capital in the asset register, including those items they share with other villages or aged care businesses.
Operators should use the asset register to develop the maintenance schedule.
The asset register must include the information specified in the Regulation.
What is a maintenance schedule?
A maintenance schedule sets details for maintaining and replacing the major items of capital funded by recurrent charges or from the capital works fund.
This schedule includes items shared with other villages or aged care facilities.
The maintenance schedule is prepared from the asset register.
Operators must include certain information about their planned maintenance, repairs, and replacement activities (including estimated and actual costs) in the schedule.
The maintenance schedule must include the information specified in the Regulation.
The Government has introduced amendments to the Regulation to clarify some of the recording requirements for the asset register and maintenance schedule:
- operators can group of items of capital that are similar, with a purchase price of $1,000 or more, have the same effective life and were bought in the same financial year,
- make clear that the asset register is to be used for the maintenance schedule,
- if the information that identifies an item (brand model number and serial number) is not available, operators will not be penalised for not recording this information in the asset register
- removed the requirement to record the following information:
- an estimate of the costs of the proposed capital replacement, and
- if the building is under construction, an estimate of the costs of construction
- definitions of buildings and structures are now better aligned with the Act* (please note that gardens are not captured under the definition of an item of capital)
- operators should calculate effective life referencing this ruling TR 2020/3 - Income tax: effective life of depreciating assets.
What is a three-year report for capital maintenance?
Operators must include certain information about capital maintenance in the proposed annual budget.
Operators must prepare a report of three years of capital maintenance extracted from the maintenance schedule and include it in the proposed annual budget.
The report must include:
- in relation to the proposed maintenance and repairs of each item of capital:
- an estimate of the costs, dates and type of proposed maintenance, and
- an estimate of the costs and type of any proposed repairs.
- the amount of recurrent charges set aside in the capital works fund for capital maintenance.
Operators must:
- notify and make the three-year report available to residents and prospective residents, even when consent from the residents through the budget process is not needed
- include any proposals to replace or continue to maintain items of capital that are within one year of the end of their effective life or with accumulated costs of repairs that are greater than 90% of the purchase price at the time the 3-year report is prepared.
Interaction with the existing annual budget process
The three-year report informs the annual budget itemising the proposed maintenance costs for three years. Residents can provide or refuse their consent to expenditure in the proposed budget.
Keeping the asset management plan up to date
Operators must update the asset management plan, when:
- purchasing major items of capital,
- if the three-year report was amended and approved during the budget process,
- after each time undertaking maintenance or replacing a major item of capital,
- the total costs of capital maintenance estimated at the commencement of the plan are likely to increase by 25 percent or more (excluding CPI increases).
Who must have access to the asset management plan and the 3-year report?
Operators must make the most up to date version of the asset management plan, including the 3-year report available at the village or at a place of business in New South Wales, for inspection by a resident or prospective resident or a person acting on their behalf.
Operators must also make a hard copy or an electronic copy available 7 days after receiving a request from a resident or a prospective resident.
If operators are not required to provide residents with a proposed annual budget, then operators must notify residents there is a copy of the 3-year report available for inspection by residents and prospective residents at all reasonable times.
What are the new time frames for preparation of asset management plans?
Operators have more time to prepare an asset management plan. The requirement to prepare an asset management plan now begins after 1 July 2022
The financial year (FY) of the village’s operations determines when operators must prepare the first asset management plan. For villages working on an Australian FY, operators will need to prepare an asset management plan for the 2022/23 FY. For those with a FY starting after 1 July 2021 (for example, October 2021), operators will need to prepare a plan for the 2021/22 FY.
Penalties for not meeting this law will apply from 1 July 2022.
Independent assessment of asset management plans
The Government has introduced a requirement for an independent assessment to be done on the draft asset management plan you prepare:
- the assessment must be prepared by an independent quantity surveyor or the auditor of the village whose appointment was consented by the residents,
- it must confirm that the plan meets the requirement of the Regulation and be annexed to the proposed plan for residents’ comment,
- if you have already commenced preparation of an asset management plan on or before 29 August 2021 you are not required to obtain an independent assessment to the proposed plan to provide to residents until the following financial year.
Secretary guidelines for asset management plans
Section 189B of the Act enables the Secretary to issue guidelines to assist operators in complying with their obligations regarding asset management plans.
The purpose of these guidelines is to:
- explain what operators need to record in an asset management plan,
- outline operators’ asset management reporting obligations,
- explain how asset management will inform and link with the existing budget procedures under the legislation,
- suggest a template to assist operators when developing the asset management plan, and
- provide general guidance (not legal, financial or taxation advice).
The Tribunal may take these guidelines into account in determining whether there has been compliance with the Act (though will not be bound by the guidelines).
Asset management plan template
Download the Secretary's suggested retirement village asset management plan template.