Common GST categories
Water and sewerage
Water and sewerage services supplied through the mains network, such as water supply, sewerage and drainage, are GST-free in Australia, while some other water supplies are treated differently.
Water and sewerage is a GST-free category in the GST law. Water supplied through the mains by a water supply authority and the associated sewerage and drainage services are generally GST-free, which keeps the cost of basic household services lower. Customers will normally see water and sewerage charges on their council or utility bills without GST added.
The rule is designed around essential services provided as part of a public or regulated network. It generally covers the supply of water, the collection and treatment of sewage, and the provision of stormwater drainage. Supplies of water for irrigation can also be GST-free in certain circumstances, depending on the nature of the supply and who supplies it.
Not every water-related supply is covered. Water sold in bottles or other packaged form is treated differently, and some other services connected with water, like plumbing, installing water tanks or maintaining pools, are ordinary taxable supplies. A plumber who fixes your tap charges GST on labour and materials, even though the water coming out of the tap is supplied GST-free.
For a business, water and sewerage costs are generally GST-free purchases, so there is no GST to claim on those bills. This matters when you set up your accounting software, because water charges must be coded as GST-free rather than GST-inclusive. Mixed bills, for example where a utility charges for water along with taxable items like service fees, need each part to be coded correctly.
Property owners should know that council rates are not the same as water and sewerage charges. Council rates are administered by local councils and vary by location. While part of a combined bill might relate to water or sewerage, other parts might be rates or fees with a different GST treatment. Read your bill carefully before coding it.
A common misunderstanding is that all water costs for a business, such as a water cooler service or bottled water delivery, are GST-free. They often are not. Check the invoice and look for a GST amount. If GST is shown, the supply is taxable and the credit is claimable with a valid tax invoice. This is general information only, so confirm your situation with the ATO or a registered tax professional.
Worked example
A cafe receives a quarterly water and sewerage bill of $660 with no GST shown, and a $220 invoice including GST for a bottled water delivery service. The water bill is GST-free so no credit arises. The delivery invoice includes GST of $220 / 11 = $20, which the cafe can claim as a credit with a valid tax invoice.
Practical tips
- Code mains water and sewerage bills as GST-free in your accounting software, and check each line of a combined utility bill.
- Look for a GST amount on water-related invoices from private suppliers, since only some water supplies are GST-free.
- If you are billed by a private water carrier or a body corporate, ask for a breakdown, because the GST treatment can differ from a utility bill.