GST & Owners Corporations: breaking down the basics.

What is GST?

GST stands for Goods and Services Tax and is a 10% tax added to most prices in Australia.

What does it mean to be a GST registered entity?

A GST registered entity must obtain tax invoices for purchases, and issue invoices with 10% GST included. This GST amount received must be accounted for in a separate account, to be provided to the Australian Taxation Office (ATO).

They must also lodge Business Activity Statements (BAS) for either payment or reimbursement of GST. Lodgment can occur quarterly (most common), monthly and annually.

When does an Owners Corporation (OC) become a GST registered entity?

An OC is considered a not-for-profit entity for GST purposes.

This means if their annual GST turnover is (or is anticipated to be) over $150,000, they must register for GST.

For an OC, annual GST turnover typically is the combination of all levies collected, plus any external sources of income such as bank interest, or revenue from leases. Your OC’s
budget is a great indicator if you should register for GST.

You have 21 days to register once you pass this threshold, or you may face penalties and interest. This is why we recommend registering once your budget is set, as there is no harm in registering early, and you avoid the risk of fees.

Your Owners Corporation Accountant will advise your OC if the threshold will or is likely to be passed.

What must an OC collect GST on?

The main source of ‘revenue’ for an Owners Corporation is the levies it issues. Once an OC is GST registered, GST must be collected from these levies.

This means 10% of all levies collected is set aside and paid to the ATO, usually on a quarterly basis.

A GST registered OC must also add GST to any invoices it issues, such as collecting payment for leasing of the common property or issuing Owners Corporation Certificates or copies of the records, for example.

Can an OC claim back the GST it pays on goods & services?

Yes. For all invoices paid which include GST, the OC can claim this back from the ATO. When you lodge your BAS statement, if you’ve paid more than you owe, you will receive a GST refund.

What is a Business Activity Statement (BAS)?

The BAS declares how much GST you’ve collected, and how much you’ve paid within the period. The ATO then uses this information to determine your GST bill or refund. This is why your budget won’t necessarily increase once you are GST registered – while you must set aside 10% of levies, you will also claim back 10% on a variety of expenses which you could not before.

BAS lodgement is an additional service which your OC Accountant can provide.

What about a tax return?

While OCs are considered not-for-profit entities for GST purposes, for income tax purposes they are considered a company. This means they are taxed at 30% for all assessable income, and there is no tax-free threshold.

An OC that earns one dollar or more of assessable income must:

  • Have a tax file number
  • Lodge an annual income tax return

What is ‘assessable’ income?

While levies are considered for GST purposes, they are not considered for income tax.

Assessable income is also known as ‘non-mutual’ income and it basically refers to any money that comes from outside the OC (not from its members)

This is based on the Mutuality Principle that an entity cannot derive income from itself.

Therefore, levies, which are paid by members of the OC, to the OC, are considered ‘mutual’ and are not assessable.

Assessable income includes:

  • Income from leasing common property
  • Interest from investments
  • Fees for issuing OC Certificates and copies of the register & records
  • Sale or rentals of common property or personal property
  • Fees for servicing lots

Please note that the information provided in this text is for general informational purposes only and should not be construed as financial advice. Readers are encouraged to seek professional financial advice tailored to their specific circumstances before making any financial decisions.