GST Q&A – GSTR 2000/25: GST on water supply services
Generally, a supply of water is GST-free. However, the GST treatment of charges on specific water supply services provided by your organisation should be considered closely and may depend on the agreement in place between your organisation and the property owner. This Q&A explores the application of GSTR 2000/25 and CR 2013/39 to water supply services.
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My question relates to the application of GST to certain water supply services provided by our organisation (the Council) which is a single purpose water supply authority.
We note that GSTR 2000/25 operates to generally make any supply of water services prior to the point of supply (POS) GST free. Generally, the POS is the metering point to the property. For our purposes, the infrastructure to the POS is the property of the Council and anything beyond that point is the property and responsibility of the owner of the premises being supplied (the Property Owner).
The Council levies the following charges in making new connections to properties:
- Cost of service connection from the water main to the POS on the property;
- A development servicing charge (developer contribution) which covers the cost of providing access to the water network including future infrastructure upgrades;
- On some occasions, applicants for new water connections are asked to contribute to an extension of the supply main to facilitate the connection. This is requested because the water service is unable to be connected from an existing main; and
- The Council is also sometimes requested to relocate both water services and water mains (e.g. sometimes other councils wish to realign roads and request the main be relocated).
Are these situations covered by GSTR 2000/25 and therefore GST free?
Is it reasonable to take the view that water supply works of any kind undertaken prior to the POS should always be considered as being GST free or does each situation need to be evaluated in relation to the type of services being provided?
As a GST-registered entity, any supplies made by the Council would by default be taxable supplies unless a specific GST exemption applies (i.e. the supply is GST-free, input taxed or outside scope).
Generally, a supply of water is GST-free (per s. 38-285 of the GST Act). However, the GST treatment of the charges you have referred to may depend on the specific terms of the arrangement agreed between Council and the Property Owner.
As you have recognised, GSTR 2000/25 provides guidance on when the supply of water is GST free. Of particular relevance to the Council is the section titled ‘Fees charged for supplies’ (starting from paragraph 61) and Appendix 2. The ruling aims to provide guidance for suppliers to determine whether or not the supply is subject to GST.
We also note that CR 2013/39 would also be useful to the Council. CR 2013/39 addresses the GST treatment of fees and charges imposed by NSW councils in relation to water. The ruling provides a table outlining various types of fees and charges and the relevant GST treatment. We have reproduced below some items that may be of use in response to your questions. While the ruling only provides support to the specific class of taxpayers referred to in the ruling (i.e. NSW Councils), it acts a useful guide to other taxpayers. In this regard, care needs to be taken to align the facts and terms of your transactions to the relevant items if relying on the ruling.
|Fees and Charges||Description||GST Treatment|
|Fee for connection to Council’s sewer or water system||Connection to Council’s sewer or water system under the Water Management Act. Also includes reconnection.||GST-free – Section 38-290 or 38-285 Paragraph 24 and item 4 Sewerage Appendix 2 of GSTR 2000/25|
|Fee for connection to Council’s sewer or water system – additional fee to lift pavers or do other work in order to make the connection or disconnection||Additional fee necessary to undertake a successful connection or disconnection||GST-free – Section 38-290 or 38-285 Paragraph 24 and item 4 Sewerage Appendix 2 of GSTR 2000/25|
|Developer Contribution under section 64 of LGA||Developer charges in relation to water sewerage or drainage works||Exempt – Paragraph 81-15.01(1)(f) of the GST Regulations|
|Developer Contribution under section 306 of the Water Act||Councils require a Developer to contribute to the existing a future water infrastructure||Exempt – Paragraph 81-15.01(1)(f) of the GST Regulations|
|Carry out water supply work||Water supply work means the construction, alteration, extension, disconnection, removal, flushing, cleansing, maintenance, repair, renewal or clearing of any pipes or fittings of any water service communicating or intended to communicate, directly or indirectly, with any water main of a council, but does not include changing a washer.||GST-free – Section 38-285 Paragraph 24 and Appendix 2 Water of GSTR 2000/25|
A more detailed response to each of your questions would require advice that considers your specific facts/circumstances. We are happy to provide you with specific advice or a broader review of all of your water-related charges, however, this falls outside the scope of the Q&A service.
Disclaimer: This article is based upon information available as at the time of publishing and may be subject to change.