GST - Unit title bodies corporate
IRD have released Interpretation statement 23/08 explaining the consequences of a unit title body corporate registering for GST and the treatment of transactions with its members and third parties.
The legal nature of UTBCs
Under the Unit Titles Act 2010 (UTA 2010) and GSTA a unit title body corporate (UTBC) is separate legal entity from its members. From a GST perspective, a UTBC is treated as making supplies to its members for consideration (in the form of levies). It also transacts with third parties receiving supplies and providing consideration. A UTBC can generally choose whether to register for GST. While it is undergoing a taxable activity, a UTBC will generally not be liable to register for GST. If it chooses to register, it must make a one-off output tax adjustment when it registers based on the money and investments it holds. A GST-registered UTBC needs to account for output tax on supplies to its members but can generally claim input tax deductions on transactions with third parties.
Apartment buildings (or unit title developments) typically consist of three main areas:
- Principal units
- Accessory units
- Common property
Each apartment will typically be a “unit”. Everything in a unit title development that is not within a unit is the common property. This could include the foyer or reception area, lifts, stairwells, and any external areas such as tennis courts or swimming pools. The common property is owned by the UTBC.
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