• Legal database
Legal database

ATO Interpretative Decision

ATO ID 2001/650

Goods and Services Tax

GST and a special levy charged by a body corporate
FOI status: may be released
  • This ATO ID has been amended to improve clarity
    This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

This ATOID provides you with the following level of protection:

If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.

Issue

Is the entity, a body corporate for a residential unit complex, making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), when it charges a special levy to its members?

Decision

Yes, the entity is making a taxable supply under section 9-5 of the GST Act when it charges a special levy to its members.

Facts

The entity is a body corporate that administers, manages and controls the common property and assets of a residential unit complex in Australia for the benefit of its members. The entity is obliged to make a variety of supplies in the course of administering the common property and assets (that is, maintenance and servicing) of the residential unit complex. The members contribute to an administration and/or sinking fund in order for the entity to perform its obligations and to carry out the activities. These supplies by the entity to its members satisfy the requirements of a taxable supply under section 9-5 of the GST Act (see also the decision of BJ McCabe SM in Re Body Corporate, Villa Edgewater CTS 23092 and Federal Commissioner of Taxation 2004 ATC 2056; (2004) 55 ATR 1162; [2004] AATA 425).

A public liability judgment was issued against the entity, which cannot be recovered from any insurance company. In order to pay this judgment debt, the entity charges each member a special levy in addition to its ordinary administration and/or sinking fund levy.

The entity is registered for goods and services tax (GST).

Reasons for Decision

Under section 9-5 of the GST Act, an entity makes a taxable supply if:

•
it makes a supply for consideration; and
•
the supply is made in the course or furtherance of an enterprise it
•
carries on; and
•
the supply is connected with Australia; and
•
the entity is registered or required to be registered for GST.

In determining whether a transaction is a taxable supply, it is necessary to determine whether the transaction falls within the meaning of 'supply' set out in section 9-10 of the GST Act.

Paragraph 9-10(2)(b) of the GST Act provides that the expression 'supply' includes 'a supply of services' and paragraph 9-10(2)(g) of the GST Act provides that 'supply' includes 'an entry into... an obligation... to do anything'.

A body corporate is obliged to perform a variety of activities in the course of administering the common property and assets of a complex for the benefit of its members. These activities are 'services' within the meaning of 'supply'.

Although the term 'services' is undefined, it clearly comprehends the performance of obligations imposed on the entity to manage the affairs of the residential unit complex, including affairs in relation to a public liability judgment.

The special levy is an additional amount of consideration paid by members for the services provided by the entity, even though the additional consideration is applied to the fulfilment of the entity's obligation in relation to the public liability judgment.

The entity is registered for GST and the supply satisfies the other positive limbs of section 9-5 of the GST Act. Furthermore, the supply is neither GST-free under Division 38 of the GST Act nor input taxed under Division 40 of the GST Act. Therefore, the entity is making a taxable supply under section 9-5 of the GST Act when it charges a special levy to its members.

[Note: A public liability judgment would not generally be subject to GST. However, when the body corporate passes this expense on to the members (in the form of a special levy), the public liability judgment loses the characteristics of a judgment payment. The body corporate members are providing consideration for the body corporate's supply to them. They are not providing consideration for the public liability judgment.]

Amendment History

Date of Amendment Part Comment
13 June 2008 Issue Clarification added
Facts and Reasons for decision Substantially rewritten
References Case reference added

Date of decision:  7 June 2001

Legislative References:
A New Tax System (Goods and Services Tax) Act 1999
   section 9-5
   section 9-10
   paragraph 9-10(2)(b)
   subparagraph 9-10(2)(g)(i)
   Division 38
   Division 40

Case References:
Re Body Corporate, Villa Edgewater CTS 23092 and Federal Commissioner of Taxation
   2004 ATC 2056
   (2004) 55 ATR 1162
   [2004] AATA 425

Keywords
Goods and services tax
GST property and construction
GST body corporates
GST supplies and acquisitions
GST supply
Taxable supply

Siebel/TDMS Reference Number:  CW212822

Business Line:  Indirect Tax

Date of publication:  29 November 2001
Date reviewed:  13 June 2008

ISSN: 1445-2782

history
  Date: Version:
  29 November 2001 Original statement
You are here 13 June 2008 Updated statement

Back to top