Lyla Lindsey
In Australia, water and sewerage are considered essential services and are therefore exempt from Goods and Services Tax (GST). This means that water rates charged by government bodies are not subject to GST. However, there are certain scenarios where GST may be applicable. For example, in the case of commercial properties, tenants may be required to pay GST on water rates if the landlord passes on the cost of rates to them. Additionally, certain supplies and services related to water usage, such as plumbing services or the supply of water fittings, may be subject to GST. Understanding the application of GST to water rates can be complex, and specific circumstances can influence the tax obligations.
| Characteristics | Values |
|---|---|
| GST on water rates in Australia | GST is not charged on water and sewerage bills as they are considered essential |
| GST on power bills | GST is charged on power bills |
| Commercial properties | Landlords do not pay GST on council rates but tenants do if the rates are passed on to them |
| Water bill components | Water bills include water usage charges and service charges for water, wastewater, and drainage services |
| Water bill frequency | Water bills are typically sent every 2 months |
| Price increases | Water use and service charges increased by 2.5% from 1 July 2024 |
| Pricing structure | Water use charges are based on a tiered pricing system to encourage careful water use |
| GST-free services | Removal of waste matter from residential premises not connected to sewers is GST-free |
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What You'll Learn
Water rates from government bodies are exempt from GST
However, it is important to note that this exemption does not extend to all water-related charges. For example, consulting services that provide advice on flow rates, design and operation of irrigation systems, and the supply of related equipment are not considered supplies of water and are therefore subject to GST. Similarly, commercial property leases may include water charges that are subject to GST, depending on the specific circumstances.
In Australia, water bills are typically issued by government-owned entities such as the Water Corporation, which provides water and wastewater services. These entities are subject to the aforementioned legislation preventing the imposition of GST on government bodies. As a result, the water rates they charge are exempt from GST.
Water rates and pricing are set by the state government and are typically reviewed annually as part of the state budget process. Water use charges may be based on a tiered pricing system to encourage the careful use of water. Additionally, there may be fixed annual service charges for water, wastewater, and drainage services.
It is worth noting that while water rates from government bodies are GST-free, other water-related services may still incur GST. For example, the removal of waste matter from residential premises that are not connected to a sewer system is generally GST-free. However, any chemicals or additives purchased in relation to biosystem servicing are subject to GST.
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GST-free water supply trading
In Australia, water and sewerage services are considered essential and are therefore not subject to Goods and Services Tax (GST). This is in contrast to power bills, which are subject to GST.
Legislation prevents the Federal government from imposing taxes and levies on other government bodies, both state and local. As water and sewerage services are typically provided by the council, which is a government body, they are GST-free.
The Australian Taxation Office (ATO) has provided specific rulings on GST and water supply trading. If a recipient of a GST-free supply of water trades that right, for example, by supplying it to a third party, that supply is also GST-free. Water rights may be for a specified period or a specified quantity of water from a designated source.
The ATO also states that the supply of a service that enables the discharge of wastewater, including water containing human waste, into a network of sewer pipes connected to the recipient's premises, is a sewerage service and is GST-free. Additionally, the removal of waste matter from residential premises that are not connected to a sewerage system is also GST-free.
The draining of stormwater, the emptying of septic tanks, and sewerage and sewerage-like services are also exempt from GST in Australia.
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Landlords and tenants under commercial property leases
In Australia, if you lease premises, you may be liable for GST and entitled to GST credits. As a landlord, you must include the full amount of rent you earn in your income tax return. You can claim deductions for expenses related to the property, such as management and maintenance, including interest on loans.
If you are a commercial landlord, you must include the reimbursement of your expenses in the lease agreement. For example, if you pay local authority rates, you can recoup GST payable on these from your tenant. However, if your tenant pays these charges directly, this payment will be considered part of the consideration for the supply of the premises, and Division 81 of the GST Act will not apply.
If you are a tenant renting a commercial property as your business premises, the rent is deductible, and you may be able to claim GST credits on purchases related to renting the property.
It is important to note that water rates from a government body are not subject to GST in Australia. This is because legislation prevents the federal government from imposing taxes and levies on other government bodies, both state and local.
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Water and sewerage considered essential services
In Australia, water and sewerage services are considered essential services. This means that they are exempt from Goods and Services Tax (GST).
Legislation prevents the federal government from imposing taxes and levies on other government bodies, including state and local bodies. As water and sewerage services are typically provided by local government bodies, they cannot attract GST and, therefore, cannot be charged GST.
This is in contrast to power bills, which are subject to GST. This has led to some confusion and speculation as to why water and sewerage are considered essential services, while power is not. It seems counterintuitive as more homes are serviced by the power grid than by reticulated water and sewer services.
However, it is important to note that the definition of "essential services" can vary across different states in Australia. For example, the Essential Services Commission Act 2001 (Vic) defines an essential service as a service that includes the supply of goods, without which the safety, health, or welfare of the community or a section of the community would be endangered or seriously prejudiced. Similarly, the Essential Services Act 1981 (SA) defines an essential service as a service that is necessary to protect the community from disruption. In the context of a state of emergency, the State Transport Act 1938 (Qld) includes water, fuel, light, and other necessities as essential services.
Overall, the classification of water and sewerage as essential services in Australia is based on the recognition that access to these services is crucial for the health, safety, and welfare of the community.
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Consulting services relating to water application
Water rates in Australia are not subject to GST because legislation prevents the federal government from imposing taxes and levies on other government bodies, including state and local bodies. Water rates are typically charged by government bodies, and therefore cannot attract GST.
Water Solutions Pty Ltd offers consulting services that cover various aspects of water engineering and water resources management. Their services include dam design and safety, water supply, river engineering, flood study and mitigation, and water quality control.
FTI Consulting assists government and private sector clients in addressing market challenges and developing effective water policies. Their team has experience in government, regulatory bodies, academia, and executive leadership in water businesses. They offer tailored solutions to their clients by leveraging their diverse backgrounds and expertise in both Australian and international contexts.
Hydro Consulting Services, recognised for operating on Ngunnawal Country in Canberra, has developed XP-RAFTS models to determine the design Average Recurrence Interval (ARI) flood events and assess impacts for 20-year, 50-year, and 100-year ARIs using HecRAS models. They have also worked on projects related to groundwater exploration, drilling supervision, and hydraulic assessments for infrastructure projects.
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Frequently asked questions
Water and sewerage bills are exempt from GST as the Federal government cannot impose taxes on other government bodies. However, commercial properties that pass on rates to tenants may be subject to GST.
Water and sewerage are considered essential services, and the Federal government cannot impose taxes on state or local government bodies that provide these services.
Water bills in Australia may include service charges for wastewater and drainage services. These are fixed annual charges that apply even if you own vacant land. Water use charges are also based on a tiered pricing system to encourage careful water usage.
