Edited version of private advice

Authorisation Number: 1052437677519

Date of advice: 20 August 2025

Ruling

Subject: GST and water

Question

Is the payment received by the Entity from the Members for the use of water at each apartment consideration for a GST-free supply of water under section 38-285 of the A New Tax System (Goods and Services Tax Act) 1999 (GST Act) and therefore not subject to GST?

Answer

Yes, the payment received by the Entity from the Members for the use of water at each apartment is consideration for a GST-free supply of water under section 38-285 of the GST Act by the Entity and is therefore not subject to GST.

This ruling applies for the following periods:

1 MM 2024 to 30 MM 2028

The scheme commenced on:

1 MM 2024

Relevant facts and circumstances

The Entity manages a complex comprising a number of Lots.

The Entity is registered for GST.

The Entity procures water for supply to the Members. The Entity then on-charges the Members for the use of water by each Lot.

There is a Management Agreement between a Manager and the Entity. Under the Management Agreement, the Manager as an agent on behalf of the Entity procures water supply for the Members.

Water usage to the Lots is metered through a single water meter on the exterior of the property.

Water is supplied to the property by a Water Provider. An account is issued to the Entity who is liable to pay for all water consumed on the property.

The Water Provider reads the external main meter and issues an account to the Manager. This is for all water consumed on the property. The Manager receives invoices as an agent on behalf of the Entity. The Manager pays for the total consumption of water from the Entity's bank account which the Manager operates on behalf of the Entity. No GST is charged on the supply of water.

Water supplied by the Water Provider to the Entity is on-supplied to each Member whose Lots are individually fitted with both cold and hot water sub-meters to record consumption. The Entity then seeks payment from the Members for the use of water at each Lot by have the Manager seek such payment on their behalf.

The Manager engages a third-party utility company to provide periodic sub-meter readings to determine the specific amount of water consumed at each Lot.

The Entity invoices the Members for the amount of water consumed based on the sub-meter reading at the same rate that was charged to it by the Water Provider.

The Entity bears the commercial risk where a Member defaults on payment for the water.

The Manager charges a service fee for administrative services provided. This is for the Manager's time in raising an invoice to each Member.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 section 9-10

A New Tax System (Goodsand Services Tax) Act 1999 section 9-15

A New Tax System (Goods and Services Tax) Act 1999 section 38-285

Reasons for decision

Under section 38-285 of the A New Tax System (Goods and Service Tax) Act (GST Act), a supply of water is GST-free. However, a supply of water is not GST-free under Subdivision 38-I of the GST Act if it is supplied in a container, or transferred into a container, that has a capacity of less than 100 litres.

Goods and Services Tax Ruling GSTR 2000/25 Goods and services tax: GST-free supplies of water, sewerage and sewerage-like services, storm water draining services and emptying of a septic tank explains the Commissioner's view on the supply of water, sewerage services and services consisting of the emptying of a septic tank or the draining of storm water.

According to paragraphs 20 and 21 of GSTR 2000/25, 'a supply of water' in section 38-285, refers to the delivery or the making available of water, as goods, to a recipient's premises. A 'supply of water' is the provision of tangible personal property - goods. In other words, the supply of water means the change in ownership or control and transfer of physical possession of water from a supplier to a recipient.

Paragraph 22 of GSTR 2000/25 provides that in an urban environment, the delivery of water may occur through reticulated pipes that provide a continuously available supply of water at adequate pressure.

Paragraph 23 of GSTR 2000/25 states:

A supply of water to an end recipient through reticulated pipes is made at that part of the recipient's premises where the supplier's responsibility for the supply ceases. This is the point of supply to end recipients. In an urban environment, a supplier's responsibility for the supply of water usually ceases at the water meter, a property boundary or a point close to a property boundary...

Application to this case

There is a single Water meter for the entire complex. There is no formal written agreement between the Entity and Water Provider regarding the supply of water to the complex. The Entity is liable to pay the Water Provider for the charges. There is no GST on the supply of the water.

The Entity may obtain the supply of Utilities for the Scheme from the relevant provider. The Entity has arranged access to water from the Water Provider. A separate sub-meter has been installed in each Lot for the purpose of determining the water consumption by that Lot. The Manager (on behalf of the Entity) undertakes the reading of each Lots sub-meters to determine the amount of water consumed. The Manager bills each Lot for the amount of water consumed at the same rate to that charged to it by the Water Provider.

While it is possible for entities to make acquisitions as an agent on behalf of a principal party, the circumstances in this case do not support the conclusion that the Entity acquires the water as an agent of the Members. There are no terms of arrangement expressly or impliedly between the Entity and Members, and neither are there in the Scheme, that provide for the Entity acting in an agent capacity in respect of the acquisition of utility services. In this case, water supplied by the Water Provider to the Entity is on-supplied to each Member whose Lots are individually fitted with both cold and hot water sub-meters to record consumption. The Entity is liable to pay the Water Provider for the charges. The Entity then seeks payment from the Members for the use of water at each apartment by having the Manager seek such payment on its behalf from each Member.

According to the principle in paragraphs 22 and 23 of GSTR 2000/25, there is a supply of water by the Water Provider to the Entity where the Water Provider delivers the water to the Entity, and this is measured at the water meter at the complex boundary. It is considered that the Entity obtains the ownership of the water supplied by Water Provider at the point of the single meter for the entire complex.

In looking at the above steps undertaken by the Entity as part of the management agreement, the Entity is delivering the water it receives from the Water Provider to the Members for which it charges a fee. The delivery of the water to Members is measured by sub-meters and charged accordingly. The charge for the supply of the water is also separately itemised in the invoicing. All of this leads to the conclusion that the delivery of the water (which is a supply according to the meaning of supply as contained in section 9-10 of the GST Act) is separately identifiable and not incidental or ancillary to the supply of any services otherwise made by the Entity to Members. As such, it is considered that the Entity's delivery of water to the Members is a separate supply of water. Further, pursuant to section 9-15 of the GST Act, the payment received by the Entity from the Members for the use of water is the consideration for this supply of water as there is a sufficient nexus between the payment and the supply of the water.

As the Entity's supply of water to the Members satisfies the requirements of section 38-285 of the GST Act, the supply is GST-free. Therefore, the payment received by the Entity from the Members for the use of water is not subject to GST as it is consideration for a GST-free supply.