Are strata companies really providing any 'taxable supply' for GST purposes?
Contributions from owners to a strata body are considered a taxable supply for GST purposes.
The Technical Response:
In 2004, it was held in a court decision (the ‘Villa Edgewater Case’) that a strata company carries on an enterprise (ie: business) when it levies owners and carries out maintenance on common property. As it is operating an enterprise, any taxable supplies made by a strata company are subject to GST rules. If registered (or required to be), then GST needs to be added to all taxable supplies made by a strata company.
Paragraph 9-10(2)(b) of the GST Act provides that the expression 'supply' includes 'a supply of services' and paragraph 9-10(2)(g) of the GST Act states that 'supply' also includes 'an entry into... an obligation... to do anything'.
A strata company is obliged to perform a variety of activities in the course of administering the common property and assets of a complex for the benefit of its owners and these activities are deemed 'services' within the meaning of 'supply' in ATO Interpretive Decision 2001/650. Although the term 'services' is not expressly defined, it clearly comprehends the performance of obligations imposed on the strata company to manage the affairs of the building, including affairs in relation to the reserve fund. Contributions from owners therefore are considered 'taxable supplies'.
In addition to the above, Ascend have also received ATO responses to Private Binding Ruling (PBR) applications in the past that have confirmed that contributions don't necessarilly need to be in line with unit entitlement, nor payable by all members to be deemed as subject to GST. In short, if an owner makes a contribution to a strata company, it is generally considered a taxable supply for GST purposes in the majority of situations.
For more information, please contact the Ascend office via your strata manager.
The above content is of a general nature and should not be relied upon as professional advice. Ascend encourages readers to seek advice from suitably qualified professionals in relation to their specific circumstances and not to rely solely on the information provided above. Please contact our office for more information.
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