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Edited version of your private ruling
Authorisation Number: 1012596153089
Ruling
Subject: Sewerage connection charges
Question
Do you make a taxable supply when you connect resident's properties to the sewer system?
Advice/Answers
No
Relevant facts
You are registered for GST.
You decided to extend the sewer at a specified location. You proposed to spend in the order of $xxx for the project.
Once the sewer lines are installed at the specified location, each residence will be within a certain distance of your sewer. You require each ratepayer whose property lies within that distance of your sewer to connect to the sewer.
Residents have the options of:
• Paying the sum of $xx to you so that you may connect those properties to the sewer system; or
• Engaging a private contractor to make the connection.
For technical reasons, a special pump must be installed on or near each property in order to make the required connection. You or the private contractors perform the following tasks:
• Site establishment
• Installation of concrete ballast to tanks
• Transport of tanks to site
• Installation of inlet pipe work and shaft to surface
• Installation of outlet pipe work
• Excavation and installation of pump station and backfill
• Installation of control panel
• Trenching and pipe laying from tank to boundary
• Connection of boundary kit
• Erosion and sedimentation control
• Site restoration
• Cost of pump station
Apart from the trenching and pipe laying from the tank to boundary, the work required is the same for each property. The connection to the property is close to the property boundary.
If you perform the work, the tank, pump and extensions to the sewer main will immediately become part of your sewer infrastructure and you will own and maintain the tank, pump and extensions to the sewer main.
If a private contractor performs the work, you will take ownership of the new infrastructure one year after the work has been completed.
Where the ratepayer does not seek an approval to connect to the new sewer under specific legislation, you will issue the appropriate order under specific legislation and proceed to carry out the works necessary to make the requisite connection.
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 subsection 38-290(1)
Reasons for decision
• unless otherwise stated, all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)
• all reference materials, published by the Australian Taxation Office (ATO), that are referred to are available on the ATO website www.ato.gov.au
Under subsection 38-290(1), a supply of sewerage services is GST-free.
Paragraph 39 of 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 (GSTR 2000/25) states:
39. The supply of a service that enables an end recipient to discharge waste water, including water containing human waste, into a network of sewer pipes connected to the recipient's premises is the supply of a sewerage service. The discharge may be of either domestic or commercial trade waste origin. The carriage of the discharge through the network to a treatment plant, and the treatment of the sewage, are also sewerage services. The supply commences at the point where an end recipient's pipes connect with or feed into the supplier's network. This is the point of supply to end recipients. The system for the supply of sewerage services to end recipients may be the responsibility of more than one supplier. For example, a supplier of bulk sewage removal services may supply those services to another supplier who makes retail supplies of sewerage services to end recipients.
In addition Appendix 2 of GSTR 2000/25 contains a list of sewerage and sewerage-like services that are GST-free under Subdivision 38-I. Item 4 of Appendix 2 includes sewer connection charges for works conducted between the border of the recipient's property and the existing sewer line of the supplier, when charged to the recipient of the sewerage service.
The table to paragraph 20 of Class Ruling CR 2013/39: Goods and services tax: the GST treatment of fees and charges imposed by NSW councils in relation to water, sewerage and drainage supplies (CR 2013/39) details the GST treatment of various fees and charges imposed by NSW councils under various provisions, including section 68 of the LGA.
The table lists a fee for connection to Council's sewer system as GST free pursuant to section 38-290. The table also lists additional fees for work undertaken in order to make the connection as GST-free. You do not supply any sewer system connection services for the transfer of sewage to the point where it is accepted into your sewer system. All of the work that you undertake relates to connecting the property owner to your sewer system to enable the carriage of the discharge through your network to a treatment plant.
As your supply is a supply of sewerage services for the purposes of section 38-290 of the GST Act, this is a GST free supply. Therefore you do not make a taxable supply when you connect the resident's properties to the sewer system.