Edited version of private advice

Authorisation Number: 1052382441921

Date of advice: 08 April 2025

Ruling

Subject: GST

Question 1

Is a strata entity making a taxable supply under section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) for which it receives consideration in the form of reimbursement of expenses incurred in the course of operating the body corporate for a residential complex?

Answer 1

Yes

Question 2

Is a strata entity making a taxable supply under section 9-5 of the GST Act for which it receives consideration in the form of reimbursement of GST-free expenses such as water incurred in the course of operating the body corporate for a residential complex?

Answer 2

Yes

Question 3

Is a strata entity making a taxable supply under section 9-5 of the GST Act for which it receives consideration in the form of non-compulsory payments in the course of operating the body corporate for a residential complex?

Answer 3

Yes

This ruling applies for the following period:

XX Month 20XX to XX Month 20XX

Relevant facts and circumstances

A strata (You) operates to manage a building as a body corporate entity.

You are registered for GST.

The apartment building is located in Australia.

You have an admin fund and a maintenance fund where your costs that are incurred are aggregated and then effectively divided amongst all the unit owners (hereafter referred to as owners)

Part of the expenses that are incurred relate to items such as water rates which are not subject to GST.

Water bills are issued by the water utility provider directly to you and do not contain GST.

Relevant legislative provisions

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

A New Tax System (Goods and Services Tax) Act 1999 section 9-10

A New Tax System (Goods and Services Tax) Act 1999 section 9-20

A New Tax System (Goods and Services Tax) Act 1999 section 81-5

A New Tax System (Goods and Services Tax) Act 1999 section 81-10

A New Tax System (Goods and Services Tax) Act 1999 section 81-15

A New Tax System (Goods and Services Tax) Act 1999 section 184-1

A New Tax System (Goods and Services Tax) Act 1999 section 195-1

Reasons for decision

GST is payable on any taxable supply 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.

In your case, you are carrying on an enterprise in Australia, you are registered for GST and your supply is neither GST-free nor input taxed under any provisions of the GST Act. Therefore, your supplies are taxable supplies and you are liable to pay the GST on the levies if the supplies you make are linked to the consideration you receive.

We will therefore look at the supplies you make and the consideration you receive.

Supply for consideration

The existence of a 'supply' is an essential element in determining whether a transaction is a taxable supply under section 9-5 of the GST Act.

As a body corporate, you are an entity separate from the owners. The supply you make to the owners is by providing services to the owners. This comes within the definition of supply under section 9-10 which discusses the meaning of the word 'supply' for GST purposes.

Paragraph 9-10(2)(g) provides that a supply includes:

an entry into, or release from, an obligation:

                i.         to do anything; or

              ii.         to refrain from an act; or

             iii.         to tolerate an act or situation.

You charge a levy to the owners to cover expenses incurred in carrying on the enterprise of the body corporate. The payments from the owners to you are consideration for supplies you make to the owners.

Based on the information you have provided, you incur in your own right the expenditures for council and water rates, electricity and maintenance services amongst other things. That is, the supply is made to the body corporate entity not to the owners.

Some of these supplies to you may not be subject to GST in so far as they relate to the transaction between the supplier of the services and you. This is because they are GST-free or they are a 'tax, fee or charge' that is listed in the Treasurers Determination and covered by Division 81 of the GST Act[1].

These services are supplied to you to enable you to perform your obligations to the owners. The amount you pay to the service provider in relation to these expenditures is a business cost similar to other acquisitions that you make.

When you on-charge the above expenditures to the owners, GST is payable by you on any amount paid by the owners. This applies whether the amount is separately itemised or included as part of the overall levy. This is because the amount received to cover the above expenditures is part of the consideration for the performance of your obligations to the owners. As a general principle, the on-charging of a GST-free acquisition or an Australian 'tax, fee, or charge' that is listed in the Treasurers Determination will not be covered by Division 81 and will be subject to GST. This is because the GST-free acquisition or the 'tax, fee, or charge' that is on-charged by you to the owners is no longer a GST-free acquisition or a 'tax, fee, or charge'.

The fact that the cost may be identified on your invoice as a GST-free item or as a 'tax, fee, or charge' does not alter the fact that it is an on-charged business cost to you, the supplier. The recipient of the supply (the owner) is not paying for a GST-free item or a 'tax, fee, or charge' to you, rather the recipient is paying you for the supply of services that you make to them.

As a consequence, you are making a taxable supply when you on-charge to your owners items that are not subject to GST because they are GST-free or are in terms of Division 81 and are listed in the current Treasurers Determination. This may include such items as water rates and council rates.

Conclusion

A body corporate is considered by the Commissioner of Taxation to be an entity that is carrying on an enterprise which makes supplies for consideration.

Therefore, as the payments made by the owners to you are consideration for a supply and there are no provisions of the GST Act that apply to make the supply GST-free or input taxed, you are liable to remit GST as all of the other requirements for a taxable supply under section 9-5 are met.

[1]Under subsection 81-5(2) of the GST Act the payment of any Australian tax, fee or charge that is specified, by legislative instrument, by the Treasurer, or the discharging of a liability to make such a payment, is not the provision of consideration. Consequently, the payment is not consideration for a taxable, GST-free or input taxed supply.