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Edited version of your private ruling
Authorisation Number: 1012439570695
Ruling
Subject: GST and special levy
Question 1
Is the Special Levy that was raised to cover a specific cost subject to GST?
Answer
Yes.
Relevant facts and circumstances
You are the strata managers acting for the Owner's Corporation.
· the Owners' Corporation was advised of the need to raise a Special Levy to cover a specific cost;
· your company remitted 1/11 of the Special Levy amount as GST to the ATO under the understanding the Special Levy raised to cover the (GST) cost of the building attracts GST in the same way as the normal quarterly levy does. You understand that this amount will also be claimed back as an input tax credit.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 9-5
Reasons for decision
Summary
GST is payable on all levies raised, irrespective of how the funds are later spent.
Detailed reasoning
Section 9-5 of the GST Act states that if a supply is (a) for consideration, (b) in the course or furtherance of an enterprise, (c) connected with Australia, and (d) the entity is registered or required to be registered, the supply is a taxable supply. Input taxed supplies and GST-free supplies are not taxable supplies.
The supply a body corporate makes to its members is the entry into an obligation to maintain and manage the complex in a sound condition. This comes within the definition of supply contained in the GST Act. The supplies do not qualify as either GST-free or input taxed supplies under the provisions of the GST Act. The supplies made by a body corporate body corporate are done in return for the consideration of strata levies.
In summary, a body corporate is considered to be an entity that is carrying on an enterprise which makes supplies for consideration. The entity is required to be registered when it meets the registration turnover threshold, but may elect to be registered if under the threshold.
In the situation you outline, a Special Levy was raised in order to cover a specific cost incurred. It does not matter why a levy was raised; the supply made by the body corporate back to its members in return for the levy is always the entry into an obligation. The fact that a body corporate decides to spend levies on particular outgoings does not change the GST treatment of the raising of a levy in the first instance - the treatment remains the same irrespective of the purpose the levy was raised for.
You remitted GST on the Special Levy the same as you would for a quarterly levy, this was the correct GST treatment.