GST on Strata Levy used in part to pay interest by Body Corp

Question

I’m an investment owner in a NSW residential strata building that is registered for GST.

We’re about to undertake a major repairs to the common property, and have arranged a strata loan (at the body Corp level) which is be repaid with interest over a number of years, drawn from the owners levies.

GST is normally payable on the 100% of levies raised.

Because part of the levy is used to pay interest (which normally does not attract GST) is this to be taken into account when preparing the quarterly BAS – that is to say the GST would be calculated only on the non-interest portion of the levy?

Would it make a difference, or help clarify, if a Special Levy was raised, specifically to deal with only the loan repayment, and or interest payments.

Answer

True GST is not payable on interest but the body corporate is not lending its members money. It is simply recovering its costs by means of a body corporate levy whether it be specifically for the interest or not. There is no carve out, you are still making a supply that is subject to GST – a body corporate levy, because you are registered for GST.
Specific guidance from the ATO on the application of the GST system to body corporate entities can be found at the link below:

https://www.ato.gov.au/printfriendly.aspx?url=/Business/Bus/Property-and-Construction-Industry-Partnership—issues-register—section-01—bodies-corporate-owners-corporations-and-strata-managers/

Section 1.1.6 specifically states:

“Where a body corporate is registered or required to be registered, it must pay to the ATO the GST on any taxable supplies that the entity makes. This includes levies charged to members. The amount of GST is equal to 10% of the value of the supply. The value of the supply is 10/11 of the price. GST to be paid to the ATO is 1/11 of the price.”

. .
Have a question about tax you need answered?

. Ask your own tax question here for only $79.95