Edited version of your written advice

Authorisation Number: 1012818920864

Ruling

Subject: GST and the supply of utilities to residents

Question

Will you, Entity A be liable for GST pursuant to section 9-5 when:

• a resident pays their bill directly to the Water Authority or

• a resident enters into an arrangement for you to pay their water bill on their behalf.

Answer

No

Relevant facts and circumstances

You are registered for GST. Your members are residents of a Retirement Village (the RV).

Residents of the RV enter into a loan deed and a lease agreement with the RV owner.

Under the lease agreement, residents are required to enter into a service agreement with you.

First Schedule to Service Agreement

Rates and Charges

The Association must at all times during the currency of this agreement pay so much of the Municipal, Water and Sewerage rates and charges (excluding water charges which are charged by usage and where the supply of the water to the Residents Unit is separately metered) payable in respect of the Residents' Unit as the Resident would be required to pay if he were a pensioner entitled to the usual rebate given to pensioners in respect of such rates and charges;

The Association must at all times during the currency of this agreement pay the Municipal, Water and Sewerage rates and charges payable in respect of the Common Property, including any buildings erected on it.

Third Schedule to the Service agreement

The resident must pay on or before the respective due dates in each year that part of the municipal, water and sewerage rates and charges payable in respect of the Resident's units which are not payable by the Association.

There are two water meters on the property through which the water is supplied to the RV and the residents by the Water Authority.

In the past you have billed residents in the following way:

• You provided the Water Authority with the names of the residents of each unit and the proportion of total water usage for which they are liable

• The Water Authority prepared a spreadsheet detailing the charges allocated to each unit

• You incorporated this amount into the periodic maintenance fee invoiced to the resident and

• You added GST to this charge.

You propose to modify the billing process as follows:

• The Water Authority will bill the residents directly for:

• Their own consumption and a proportionate usage of water used for the common areas

• Service charges and

• Waterways and drainage charges

• Some residents will pay their bill directly to the Water Authority

• Some residents will enter into an arrangement for you to pay the bill on their behalf.

• You will open a separate bank account solely to collect monies from those residents, for the specific purpose of paying the amount invoiced to them.

• When due, you will pay the individual invoice amount to the supplier.

• You will not charge these residents for this payment service.

• The association will no longer include an amount for water in their periodic maintenance fee invoiced to each resident

You supplied a copy of a current invoice between the Water Authority and one of the residents of the RV. There were 3 charges on the bill:

• Water and sewerage usage

• A Service charge for water and sewerage (less a pensioner concession) and

• A Waterways and Drainage Charge

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-40

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

Reasons for decision

In this reasoning, unless otherwise stated,

• all legislative references are to the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)

• all reference materials referred to are available on the Australian Taxation Office (ATO) website www.ato.gov.au

• all legislative terms of the GST Act marked with an asterisk are defined in section 195-1 of the GST Act

Section 9-40 provides that you are liable for GST on the taxable supplies that you make.

Section 9-5 provides that:

You make a taxable supply if:

(a) you make the supply for consideration

(b) the supply is made in the course or furtherance of an enterprise that you carry on

(c) the supply is connected with Australia and

(d) you are registered, or required to be registered. 

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

Paragraph (a) requires that:

• you make the supply, and

• you receive consideration for making that supply.

The water and other services are provided by the Water Authority.

On the facts provided, you will supply a service, to the participating residents, of paying their water account. However, you will not charge or receive any amount (consideration) for providing this service.

For non-participating residents, you will neither provide a service, nor receive any consideration.

Therefore, in relation to both the participating residents and the non-participating residents, you will not satisfy the requirements of paragraph (a). Accordingly you will not make a taxable supply.