Private ruling: GST treatment of on-supplies of water
Date of advice: 3 December 2025
Published: 27 January 2026
Ruling period: From X Date to Y Date
Date scheme commenced: Z Date

Ruling: Q1: Does GST apply to water charges invoiced by the Principal Body Corporate to the Subsidiary Body Corporate? | A1: Yes. | Q2: Does GST apply to water charges invoiced by the Subsidiary Body Corporate to individual lot owners? | A2: Yes

Relevant facts and circumstances: This private ruling is based on the facts and circumstances set out below. If your facts and circumstances differ, this ruling has no effect and you cannot rely on it. You are a subsidiary body corporate (SBC) within a layered community titles scheme located in XXX. The layered scheme comprises a principal body corporate (PBC) and multiple subsidiary schemes, including you. Both you and the PBC are registered for GST. Each layer is a separate legal entity for GST purposes. A utility provider (the Provider) supplies water to the PBC under its account. The Provider reads a head meter that measures water consumption for the entire development, which includes all subsidiary schemes. The Provider issues a single account addressed solely to the PBC and does not issue accounts to any SBC or individual lot owners. The PBC is the legal recipient of the supply for GST purposes. The Provider treats this supply as GST-free under section 38-285 of the GST Act. The PBC pays the Provider's account and then allocates the total charge across the subsidiary schemes by reference to measured usage and any relevant apportionment method adopted under the governance framework. The PBC issues recharges to each subsidiary scheme. No margin is added beyond any permitted rendering or administration costs. Within each subsidiary scheme, lots are individually metered. You read the meters and issue charges to the lot owners for their metered consumption. The lot owner charges are calculated from the measured usage and the amounts recharged to you by the PBC. No margin is applied. Many lot owners are private individuals and are not entitled to input tax credits. The Community Management Statement (CMS) for the layered scheme empowers the PBC to acquire and supply utilities for the precinct, requires or contemplates separate metering, caps charges to cost plus the costs of rendering the service, and states that the occupier is liable for the utility charge. The CMS contains by-laws that authorise the PBC to acquire and on-supply utilities. These by-laws confirm that the PBC acquires utility services in its own right and is entitled to recover both the direct cost and associated administrative expenses from the occupiers. In practice, the water network is supplied by the Provider. Lot owners or the SBCs cannot practically select a different water supplier. There is no formal written agency agreement between the PBC and the subsidiary schemes for the acquisition of water, nor between you and the lot owners. The provider's invoice is addressed to and recoverable from the PBC. There is no disclosure on the Provider's invoice that the PBC acts 'as agent for' any subsidiary scheme or lot owner. Historically, neither the PBC nor you charged GST on the recharges. After an auditor's query, both entities began adding GST to water recharges.

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 9-20 | A New Tax System (Goods and Services Tax) Act 1999 subsection 38 I | A New Tax System (Goods and Services Tax) Act 1999 subsection 38-285 | State related Body Corporate Act detailed referenced by author.

Reasons for decision: Summary: GST applies to the water charges invoiced by the Principal Body Corporate (PBC) to the Subsidiary Body Corporate (SBC). Although the Provider's supply of water to the PBC is GST-free under section 38-285, the PBC's on-charge to the SBC is not GST-free. The PBC is not acting as an agent of the SBC, nor is it merely passing on a disbursement. Instead, the PBC is supplying administrative and utility access services in the course of its enterprise, and the recharge constitutes consideration for those services. The on-charge is a taxable supply under section 9-5 and is not GST-free or input taxed. GST should be applied to the water charges invoiced by the PBC to the SBC. | Detailed Reasoning - Detailed reasoning: The question to be determined is whether GST should apply to water charges invoiced by the Principal Body Corporate (PBC) to you, the Subsidiary Body Corporate (SBC). You are a subsidiary body corporate within a layered community titles scheme. The Principal Body Corporate (PBC) receives a bulk water supply from the Provider. The council invoices the PBC directly for that water, which is a GST-free supply under section 38-285. The PBC, using its powers under the Community Management Statement (CMS) and a state based Body Corporate Act, pays the Provider's bill and then recharges a portion of that cost to you based on metered usage or apportionment. Although the Provider's supply to the PBC is GST-free, that does not mean the PBC's on-charge to you is also GST-free. The relevant question is whether the on-charge is a taxable supply within the meaning of section 9-5. Under section 9-5, GST is payable on a taxable supply if: a. you make the supply for consideration; and b. the supply is made in the course or furtherance of an enterprise that you carry on; and c. the supply is connected with the indirect tax zone; 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. Each of the four threshold elements is satisfied: • The PBC makes a supply by administering and providing access to utility infrastructure and issuing water recharges under its CMS obligations. In GST terms, this constitutes a supply of administrative services and utility access - not a mere pass-through or reimbursement of a third-party cost. • The payment you make to the PBC is consideration for that supply, because it is made in connection with, and in response to, the PBC's provision of administrative and utility services. • The supply is made in the course or furtherance of an enterprise carried on by the PBC. Even if the PBC operates on a cost-recovery or not-for-profit basis, its structured and recurring administrative activities qualify as an enterprise under section 9-20 of the GST Act. • The PBC is registered for GST, and the supply is clearly connected with the indirect tax zone (Australia). This conclusion is consistent with the Commissioner's view in Goods and Services Tax Determination GSTD 2000/10 Goods and services tax: are outgoings payable by a tenant under a commercial property lease part of the consideration for the supply of the premises? (GSTD 2000/10) regarding the GST treatment of outgoings under leases. That determination confirms that when a supplier (such as a landlord) acquires inputs like water, council rates, or land tax, the GST treatment of an onward charge to a tenant does not depend on the GST character of the original supply. Instead, the key question is whether the outgoing forms part of the consideration for the supplier's own taxable supply. Paragraph 7 of GSTD 2000/10 explains that a payment of outgoings by a tenant under a lease is not treated as a separate supply that inherits the character of the original third-party input. Rather, the outgoing becomes part of the consideration for the landlord's supply of premises: 7. If a single supply is made under the lease the payment of outgoings by the tenant is not a payment for a supply that has the same character as the supply made by a third party to the landlord. The payment is made by the tenant for the supply by the landlord of the premises and not for the particular supply made to the landlord to which the outgoings relates. Therefore if the landlord is making a taxable supply, it will not matter whether the outgoing, when incurred by the landlord, was a taxable supply to the landlord. For example, the landlord's cost of acquiring a GST-free supply in order to supply the premises becomes a business cost of the landlord. This has implications where the supply made to the landlord is not subject to GST (e.g., because of Division 81 of the GST Act) or is a GST-free supply (e.g., because of Subdivision 38-I of the GST Act). Paragraph 8 goes further, clarifying that Division 81 does not apply to the tenant's reimbursement of charges such as council rates or land tax - even if the original charge was not subject to GST when incurred by the landlord. The reimbursement is a payment for the landlord's own supply and does not retain the original GST-free or Division 81 character: 8. Payment by the landlord of local council rates, land tax or other charges may not be subject to GST because of the operation of Division 81. If the tenant is required under the terms of the lease to reimburse the landlord's expenditure of an Australian tax or an Australian fee or charge5 under Division 81 of the GST Act, this is not the payment of an Australian tax or an Australian fee or charge by the tenant. Division 81 of the GST Act does not apply to the tenant's reimbursement of the rates, land tax or other charges. These principles apply by analogy. the PBC's recovery of water costs is not a reimbursement of the Provider's GST-free water supply under section 38-285, nor a pass-through of the GST-free or division 81 status of upstream charge. The PBC acquires the water in its own right and on-charges it to the SBC under the authority of the CMS. This on-charge forms part of the PBC's own taxable supply of utility services and administration, rather than a disbursement made on behalf of others. You contended that the on-charge may instead constitute a reimbursement for a third-party supply, or alternatively, reflect an agency arrangement involving both the PBC and the taxpayer acting on behalf of individual lot owners - either of which would mean GST is not applicable. The Commissioner has set out the key legal distinctions relevant to these scenarios in GSTR 2000/37. Paragraphs 48-49 of Goods and Services Tax Ruling GSTR 2000/37 Goods and services tax: agency relationships and the application of the law (GSTR 2000/37) explain: 48. Agents may incur expenses on a client matter both as an agent of the client and as a principal in the ordinary course of providing their services to the client. For example, in most cases, even though agreements between solicitors and clients may not use the term agent or agency, it is clear that the clients have authorised the solicitors to act on their behalf in the particular matter. When the solicitor acts as an agent for the client, the general law of agency applies so that the solicitor is 'standing in the shoes' of the client. 49. If a disbursement is made by a solicitor and incurred in the solicitor's capacity as a paying agent for a particular client, then no GST is payable by the solicitor on the subsequent reimbursement by the client. This is because the goods or services to which the disbursement relates are supplied to the client, not to the solicitor, by a third party. Also, the reimbursement forms no part of the consideration payable by the client for the supply of services by the solicitor. However, if goods or services are supplied to the solicitor to enable the solicitor to perform services supplied to the client, GST is payable by the solicitor on any reimbursement by the client of expenses incurred on those goods or services, whether the reimbursement is separately itemised or included as part of the solicitor's overall fee. This is because the reimbursement is part of the consideration payable by the client for services supplied by the solicitor. | Detailed Reasoning - Example 10: 54. A law firm acting for a client charges the client for costs incurred in providing a legal service and receives a fee for its professional services. The firm acts as a paying agent for the client with respect to the outgoings which the client is legally obliged to pay (such as the payment of land taxes and court costs) for supplies made to it. However, an agency relationship generally does not apply to those circumstances where the law firm provides a legal service for a client, pays for taxable supplies on its own behalf and then charges the client for those expenses (such as photocopying and telephone calls). Applying this to you, the PBC's on-charge is not a reimbursement within an agency framework. In particular: • The PBC is the sole entity billed by the Provider and is legally liable for the water account; • The Provider does not treat you as its customer; • There is no express or implied agency agreement between you and the PBC in relation to water acquisition; • There is no disclosure by the PBC to the Provider that it acts as agent for you; • You do not have an enforceable right to receive water directly from the Provider. Therefore, the PBC does not 'stand in your shoes' for the purposes of acquiring water. The on-charge is incurred and passed on in the course of supplying the PBC's own services. This situation closely mirrors Example 10, in which the law firm provides its own services (not acting as agent) and incurs expenses on its own behalf that form part of the taxable supply. The final limb of section 9-5 provides that a supply is not a taxable supply to the extent that it is GST-free or input taxed. That exception does not apply here. The original supply of water by the Provider to the PBC is GST-free under section 38-285 of the GST Act, which forms part of Subdivision 38-I (covering water, sewerage and drainage services). However, that GST-free status does not extend to the PBC's onward charge to you. As explained in 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), only a supply made by a recognised water supplier, or a supply of a right to receive GST-free water from such a supplier, qualifies for GST-free treatment under Subdivision 38-I. Here: • The PBC is not a recognised water supplier for the purposes of Subdivision 38-I; • The on-charge does not confer on you any right to receive GST-free water from the Provider; • Instead, the on-charge reflects the PBC's internal recovery for its own administrative and scheme-level services, and is not a separate supply of water. Accordingly, the PBC's supply to you is not GST-free. The exclusion in the final part of section 9-5 does not apply, and GST is payable on the supply. | Summary: GST applies to the water charges invoiced by you, the Subsidiary Body Corporate (SBC), to individual lot owners. Although the original water supply from the Provider to the Principal Body Corporate (PBC) is GST-free, your on-charges to lot owners are not. These charges represent consideration for administrative and utility-related services you provide in operating meters, managing infrastructure, and facilitating water access within the scheme. You are not acting as an agent of the lot owners, and the charges are not reimbursements for a third-party supply. All criteria for a taxable supply under section 9-5 are met, and no GST-free or input-taxed exceptions apply. You are supplying services in the course of your enterprise, and the GST-free status of the Provider's supply does not extend to your internal recovery charges. Therefore, GST applies to the water charges you invoice to lot owners. | Detailed Reasoning - Detailed reasoning: The question to be determined is whether GST should apply to water charges invoiced by you, the Subsidiary Body Corporate (SBC), to lot owners. This question concerns the GST treatment of your on-charges to individual lot owners for metered water use. The legal reasoning in Question 1 applies with necessary adaptations, as the statutory framework and analysis under section 9-5 are materially the same. As explained above, GST is payable on a taxable supply under section 9-5 Applying section 9-5 to the distinct facts under this question: • Supply: You make a supply to lot owners through the meters, raising and collecting usage-based charges, and facilitating access to the scheme's internal water infrastructure. These are administrative and utility-related services provided under your obligations as the subsidiary body corporate. • Consideration: The charges paid by owners are directly linked to your performance of these functions. They are not voluntary or gratuitous; they are paid in exchange for your services and therefore there is a direct link between your services and the consideration provided by the lot owners. • Enterprise: Subsection 9-20(1) defines an enterprise as an activity, or series of activities, done in certain forms, including 'on a regular or continuous basis, in the form of a lease, licence or other grant of an interest in property' (paragraph 9-20(1)(c)). Your activities as a Subsidiary Body Corporate fall within this definition. You administer common property and utilities under the Community Management Statement and the state based Body Corporate Act. These activities are organised, ongoing, and involve granting rights and obligations relating to property and services on a continuous basis. Operating on a cost-recovery basis does not prevent these activities from being an enterprise for GST purposes. • Connected with the indirect tax zone: The supply is made in Australia. • GST registration: You are registered. • Not GST-free or input taxed: As explained in above, the water itself is GST-free when supplied by the Provider, but that GST-free treatment does not extend to your internal administrative charge. Nor does your supply fall within any input taxed category. The GST-free exception under Subdivision 38-I does not apply. You do not supply water as a recognised utility provider, nor do you acquire it directly from one. The original supply of water is made by the Provider to the principal body corporate. You merely on-supply access to water within your scheme, as part of your administrative functions. These are your own supplies and not a passthrough of a GST-free supply. Similarly, as explained in question one and in GSTR 2000/37, your charges do not qualify as reimbursements under an agency arrangement. You do not act as agent for the lot owners in acquiring water. There is no disclosure to the supplier, no authorisation from lot owners to bind them, and no contractual nexus between the owners and the Provider. The water is acquired upstream by the principal body corporate, neither you nor the owners, and is on-charged to you and then to the owners as part of broader administrative services. These are your own supplies, not disbursements paid on behalf of the owners. This is consistent with paragraphs 48 and 49 of GSTR 2000/37, which distinguish between: • disbursements made by a solicitor as a true agent for a client, and • expenses incurred in the course of providing a service. Also relevant is Example 10, which confirms that where a supplier incurs costs on its own behalf in delivering services (such as a law firm charging for photocopying), the recovery of those costs' forms part of the consideration for the firm's own supply - even if no margin is added. The same analysis applies to your charges. Accordingly, you are not acting as agent for the lot owners and the charges are not reimbursements. They are taxable supplies under section 9-5 and no exception applies. GST will apply.