Capital Gain

Capital Gain (or Loss)
A contract with a 'capital gain' provision may afford some protection from inflationary effects over time.
Note:- Contracts with a capital 'gain' provision usually include a capital 'loss' provision.

WARNING - Some contracts calculate the Capital Contribution (aka the deferred fee) not on the initial entry price but on the eventual selling price.

This 'selling price' type contract will have an even larger impact on capital over time, eg: A deferred fee set at say 25% of an entry price of $500,000.00 produces a payment required of $125,000.00. For those village residents with a long period of occupancy and an exit price style contract, 25% of an exit price of say $800,000.00 produces a 'deferred fee' payment of $200,000.00, an extra $75,000.00.

This equates to a hidden deferred fee rate of 40.0% on the original $300,000.00 in-going paid.

There can be a vast difference in the capital value position of a retiree on leaving a retirement
village depending on - 1. whether the contract of occupancy grants any share of capital gains
to the resident and 2. even if granted whether any capital gains were achieved.

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Function of Government

The role of government is to create an environment for commerce to function whilst at the same time protecting retirees and particularly vulnerable retirees from both financial and emotional harm emanating from that function.

The Victorian Retirement Villages Act 1986 provides the environment for commerce to function but fails to fully protect retirees from financial and emotional harm as a result of it.

The Victorian legislative definition of a retirement village in demanding the payment of an 'in-going' amount without the transfer of property ownership is a major contributor to that financial and emotional harm suffered by retirees.

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