Edited version of private advice

Authorisation Number: 1052216968648

Date of advice: 30 January 2024

Ruling

Subject: GST - free supply of sewerage services

Question

Is the supply of sewerage services by a Principal Body Corporate to lot owners GST-free?

Answer

Yes.

This ruling applies for the following period:

8 December 20YY to 7 December 20YY

The scheme commenced on:

8 December 20YY

Relevant facts and circumstances

A residential estate in State A ('the estate') is structured as a layered body corporate scheme.

The entity is the Principal Body Corporate (PBC) of the scheme. (All references hereunder to 'the PBC' are to the entity.) The layered body corporate scheme for the estate also involves several Subsidiary Bodies Corporate (SBCs) in addition to the PBC.

The PBC is the registered provider of sewerage services to the estate. Sewerage services are provided to common areas within the estate and to lot owners within all but one of the SBCs. (All references hereunder to 'the SBCs' and 'an SBC' are to the above entities, collectively and individually.)

Sewerage services are not provided to the lot owners of the remaining SBC because of topography. Those lot owners are required to provide their own septic systems.

Pursuant to section 158 of State A's Body Corporate and Community Management Act 1997 ('the BCCM Act') and section 210 of its accompanying Body Corporate and Community Management (Standard Module) Regulation 2020 ('the BCCM Reg'), the PBC is able to supply utility services to lot owners.

The estate is outside of the local government area sewerage network. In accordance with its Development Approval, the estate, via the PBC, was required to provide sewerage services to all lot owners connected to that service, and all lot owners of the SBCs were required to connect to the PBC sewerage network.

Accordingly, the PBC is the Licensed Authority and Network Utility Operator of the community wastewater management system ('CWMS') on the common property of the PBC that provides sewage collection and treatment, and effluent dispersal for facilities on the PBC common property and for the scheme land for the SBCs.

A CWMS Service Agreement ('Service Agreement') was entered into for the above purpose by the PBC and the SBCs on 8 December 20YY and is effective for a term of ten years. Under the terms of the Service Agreement, among other things:

a)            The PBC agreed to operate the CWMS during the term of the Service Agreement.

b)            The parties agreed to pay the CWMS capital and operational costs in the proportions as calculated and shown in Schedule 1 [sic] to the Service Agreement.

c)            In each financial year, the SBCs must pay the PBC their respective proportions of the capital and non-capital CWMS costs incurred by the PBC.

d)            Schedule A of the Service Agreement states that the apportionment of CWMS "will be by Equivalent Persons (EP) and the [local government area's] Water and Wastewater Demand Table. In the absence of the ability to effectively meter wastewater outflows from each lot, this widely accepted and utilised methodology is specific to water and wastewater infrastructure. The following tables show the load allocation for each lot within the [estate], as of the date of this agreement."

e)            Table 1 of Schedule A summarises the load allocations split between the SBCs and the PBC common property.

f)             Table 2 of Schedule A details those allocations, which includes the EP contributions attributable to the residential dwellings within each SBC.

The PBC is unable to invoice each lot owner of each of the SBCs for the provision of sewerage services because:

a)            pursuant to the BCCM Act and BCCM Reg, the PBC cannot directly interact with lot owners; and

b)            the SBCs retain all contact and other details of lot owners.

Accordingly, each SBC is invoiced by the PBC for its respective share of sewerage services attributable to low owners. It is then up to each SBC to seek reimbursement from each respective low owner. The invoicing of lot owners is separate from the levies normally imposed on lot owners by the SBCs.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 section 9-15

A New Tax System (Goods and Services Tax) Act 1999 subsection 38-290(1)

Reasons for decision

All section references hereunder are to the A New Tax System (Goods and Services Tax) Act 1999 ('the GST Act') unless otherwise stated.

Subsection 38-290(1) states, in full:

A supply of sewerage services is GST-free.

What is a sewerage service?

The term 'sewerage services' is not defined in the GST Act, and hence it takes its ordinary meaning.

Our view of that ordinary meaning was expressed in Goods and Services Tax Ruling GSTR 2000/25 - GST-free supplies of water, sewerage and sewerage-like services, storm water draining services and emptying of a septic tank (GSTR 2000/25). At paragraph [37] of GSTR 2000/25, we state:

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 estate is outside of the local government area's sewerage network. In accordance with its Development Approval, the estate, via the PBC, was required to provide sewerage services to all lot owners connected to that service, and all lot owners of the SBCs were required to connect to the PBC sewerage network.

Accordingly, the PBC is the Licensed Authority and Network Utility Operator of the community wastewater management system ('CWMS') on the common property of the PBC that provides sewage collection and treatment, and effluent dispersal for facilities on the PBC common property and for the scheme land for the SBCs.

Under the terms of the CWMS Service Agreement, the PBC is operating the CWMS. Accordingly, it is our view that, for the purposes of subsection 38-290(1), the PBC is supplying sewerage services.

Irrelevance of consideration for a supply of sewerage service

Also in our view, it does not matter that the PBC does not invoice or receive payment for the supply of the sewerage services directly from the recipients of that supply, being the lot owners. This is because subsection 38-290(1) is silent on the issue of consideration and thus is focused on treating a supply as being GST-free on the sole ground it is a supply of sewerage services. No other factors need to be present or applied.

Moreover, and for the sake of completeness, even if that were not the case, we note that, in determining whether a payment is consideration for a supply, subsection 9-15(2) provides that it does not matter whether the payment was made by the recipient of the supply (or some other entity), which, in the current case, would be the SBCs.

Conclusion

Given the Facts and Circumstances outlined above, it is clear the PBC is supplying sewerage services which qualifies for GST-free treatment pursuant to subsection 38-290(1).