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Edited version of your written advice
Authorisation Number: 1012745835152
Ruling
Subject: Goods and services tax (GST) and body corporate levies
Question
Can you levy your expenditure in two parts - one levy to your members for water usage at the GST-free rate and one levy to your members for all other expenditure?
Answer
No, you cannot levy your expenditure in two parts - one levy to your members for water usage at the GST-free rate and one levy to your members for all other expenditure.
This is because you are making a single taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) to the members. The taxable supply is an entry into an obligation to maintain the complex in a sound condition, and the consideration for this taxable supply is the levies payable by the members which includes the water levy.
Relevant facts and circumstances
You are a body corporate for a strata title complex and are registered for GST.
You advised that you issue levies to your members in accordance with certain legislation. These levies are generated based on expenditure incurred by you.
Part of this expenditure is water rates payable to the water authority. Whilst the water rate is charged GST-free to you, they form part of the total expenditure incurred by you which is levied on your members at the GST inclusive rate.
Currently, members within the body corporate are paying GST on their water supply which is inconsistent since residences outside your complex have their water charged at the GST-free rate from the water authority.
You are seeking advice as to whether or not you can levy your expenditure in parts - one levy to your members for water usage at the GST-free rate and one levy for the other expenditure. You provided an example with figures.
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 subsection 38-285(1)
A New Tax System (Goods and Services Tax) Act 1999 Division 81
Reasons for decision
Based on the information you provided, your supply to your members is the entry into an obligation to maintain and manage the complex in a sound condition and the consideration for this supply is the levies generated based on the expenditure incurred by you and payable by the members.
The goods and services you acquire are separate supplies to the supply you make to your members as you acquired these supplies, which include GST-free supplies, in order to discharge your obligation.
In this instance the water levy you charge would form part of the expenditure incurred by you in carrying on your enterprise of supplying to the members an obligation to maintain and manage the complex in sound condition and therefore it is part of the levies payable by the members to you for this single supply that you are making to them.
Accordingly, the status of your supply to your members is not affected by whether your acquisitions are GST-free. GST will be payable on the total contribution received from your members which includes the water levy.
GST status of your supply
GST is payable on a taxable supply. You make a taxable supply under section 9-5 of the GST Act if:
a) you make the supply for consideration; and
a) the supply is made in the course or furtherance of an enterprise that you carry on; and
b) the supply is connected with Australia; and
c) you are registered or required to be registered for GST.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
All of the above requirements must be satisfied for a supply to be a taxable supply under section 9-5 of the GST Act.
From the information received your supply satisfies all the requirements in section 9-5 of the GST Act as:
• your supply to the members is the entry into an obligation to maintain the complex in a sound condition and the consideration for your supply is the levies payable by the member;
• the supply is made through an enterprise that you are carrying on;
• the supply is connected with Australia as the supply is made through an enterprise that you carry on in Australia;
• you are registered for GST; and
• your supply is not a supply which is GST-free on input taxed under the GST law.
Accordingly your supply to the members is a taxable supply and you will liable for GST on the total levies received from the members.
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