This month, we helped a body corporate that came unstuck with GST after they took on the responsibility for charging lot owners for water usage. The body corporate was registered for GST. The reason for taking on the responsibility was so that a fairer allocation of the charges could be made to lot owners based on sub water meters that the body corporate had installed. The complication is that when the water authority invoices a client directly, the water usage charges are GST-free.
The BCCM Act (s196) makes provision for what the body corporate must do when utility services are not separately metered to lot owners and there are usage related charges. In the default arrangement, a lot owner is liable to the utility service provider for a share of the total amount payable for the provision of the utility service to scheme land. The share is proportionate to the contribution schedule lot entitlement for the lot. The service provider makes the calculation and charges the lot owner directly via water or council rates. The body corporate is not charged. However, the body corporate may, by arrangement with the utility service provider, take on liability for owners or occupiers of the lots for the utility service supplied for the benefit of owners or occupiers.
ATO Private ruling Authorisation number 1012745835152 describes a scenario that is exactly the same as the situation we reviewed. You can read this ruling by going to the ATO website and finding the webpage – Register of Private Binding Rulings. You will need to confirm your agreement on this web page before you can access this ruling. You can not access the ruling by a direct google.
The requester for the ruling was a body corporate that was registered for GST. The body corporate was paying the water rates for all lots and was receiving a GST free invoice from the water authority. The ATO identified that GST is payable on all the members contributions and that separating out a water levy charge to lot owners does not remove the obligation to charge GST. The ruling explains more fully the reasoning of the tax office which we do not repeat here as it gets a little dry!