If you live in an apartment, or town house you probably have a body corporate. Many of your clients’ apartment type rental properties are probably also in a body corporate. The property owner may tell you the body corporate is a faceless entity with unnecessarily high fees to monitor dog barking. In fact, they are a committee of owners working together to ensure everything in the common areas works as intended.

The fact that the body corporate is a committee of the owners makes many assume that it is a look-through entity. However, for GST purposes the body corporate is a separate person, whether or not it is GST-registered. The body corporate makes supplies in its own right to the owners.

A body corporate may generally choose whether or not to register for GST. This is because the supplies made to members do not count towards the $60,000 threshold. Some do choose to register most commonly in the belief that it will make the GST position easier for GST registered unit holders. 

Where a unit titled body corporate becomes GST registered it is necessary to account for GST on supplies. Due to the unique nature of the body corporate entity, there are some which may be more difficult to characterise. The newly-released Interpretation Statement Goods and Services Tax – Unit title bodies corporate sets out the GST treatment of:

• Goods and services a body corporate acquires before registration
• Services that a member supplies to the body corporate
• The  supply of manager’s accommodation by a body corporate
• A body corporate’s payments of ground rent, and levies it charges to members for ground rent, and
• One-off receipts.

The one-off receipts are of particular interest. Where there is an amount received under an insurance claim, the receipt will be subject to GST under section 5(13) of the GST Act. However, a settlement payment will not be subject to GST.

The Interpretation Statement also considers the treatment of amounts received from the Ministry of Business, Innovation and Employment (MBIE) under the Leaky Homes Financial Assistance Package (FAP). The statement concludes that, although they may appear to be settlement payments, they are in the nature of a “grant or subsidy” paid by the Crown. This means that if the body corporate is GST-registered, the receipt of a FAP payment will be subject to GST under section 5(6D) of the GST Act.

While this may appear to put a GST-registered body corporate at a disadvantage, it should be noted that the GST-registered body corporate is able to claim GST input tax on expenses. FAP payments are generally used for remediation work. If the body corporate is not registered, it will have to pay GST on the costs of work done to fix the property. If the body corporate is GST-registered, it will be able to claim back GST on the costs of building work, so the net result should be the same.

Another area of interest in the statement is the supply of manager’s accommodation. The GST treatment of that supply will depend on whether the manager has “quiet enjoyment”. We continue to believe that this term is difficult to understand; however the statement does a good job of explaining when the manager may have quiet enjoyment (or not).

Overall, the statement provides a useful guide for body corporates who need to navigate the world of GST.