Wednesday, 19th June 2019

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Mr Bob Dubolina
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Last seen: 8 years 19 weeks ago
Joined: 08/09/2010

Hi, I need to apply for a Section 109 certificate for my property as I am refinancing. Our agent has a clause in their agreement where they can retain 109 fees (fair as they do the work to prepare them). However, I want to know what is the correct amount to pay them for the 109. As the building is unregistered for GST do I pay the agent $104.00 only or because the agent is preparing the 109 and is registered for GST do I pay them $114.40.

Thanks
Bob

Daniel Russell ...
Daniel Russell - Chambers Russell Lawyers's picture
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Last seen: 4 years 50 weeks ago
Joined: 07/07/2010

A certificate under section 109 is given by the owners corporation (section 109(1) of the Strata Schemes Management Act 1996).

Accordingly the relevant fee at item 10 in Schedule 1 of the Strata Schemes Management Regulation 2010 falls into the category of "Fees payable to the owners corporation".

The Treasurer's Determination under Division 81 of the A New Tax System (Goods and Services Tax Act) 1999, which lists statutory fees that are not subject to the GST, does not include the fee payable under section 109.

Accordingly the GST applies to such a fee, which is clearly then consideration for a taxable supply.

In accordance with GST Ruling 2000/37, where a supply is made by a principal through an agent, in accordance with the ordinary legal understanding of the principal-agent relationship, the supply is made by the principal and the principal is the party with the potential responsibility to remit GST.

In my view it is clear in the above circumstances that the 109 certificate is supplied by the owners corporation through the managing agent as its agent, and the fee is payable to the owners corporation as consideration for that supply.

Accordingly in your example, as the owners corporation is not registered for GST, it should not charge you GST on the supply and it is not liable to remit GST.

The managing agent is arguably simultaneously supplying a service to the owners corporation, however the consideration for that supply will be determined in accordance with the agency agreement (which may or may not incorporate separate arrangements in respect of section 109 certificates) and (if the agent is registered for GST) the agent will be liable to remit GST and (if entitled to under the agency agreement) may charge it to the owners corporation under a tax invoice.

In your example, when you say "our agent has a clause in their agreement where they can retain 109 fees", it appears that the consideration for the supply by the agent to the owners corporation of services in respect of the supply of 109 certificates is effectively the equivalent of the statutory fee. Accordingly when the agent "retains" the fee, the agent is receiving consideration for a taxable supply to the owners corporation. If registered for GST, the agent will be liable to remit GST on this supply.

Regards,
Daniel Russell
Mills Oakley Lawyers
[email protected]

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Mr Bob Dubolina
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Last seen: 8 years 19 weeks ago
Joined: 08/09/2010

Thanks Daniel, for your advice. Taking this advice, GST unregistered strata plans where the Section 109 is paid into the plan then back out to the agent, will lose $10.40 each time a 109 is prepared. This is due to the plan only receiving $104.00 but the agent charging the plan $114.40 for the preparation. In our complex the agent is satisfied to only charge us the $104.00 meaning that he misses out as he only keeps $94.54 and has to remit $9.45 to the ATO.

jmcg
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Last seen: 7 years 50 weeks ago
Joined: 02/07/2011

if there is outstanding issue listed on 109 certificate can I withdraw the sales contract as I don't want to liable for the vendor's liability

Daniel Russell ...
Daniel Russell - Chambers Russell Lawyers's picture
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Last seen: 4 years 50 weeks ago
Joined: 07/07/2010

Hi jmcg,

Whether or not you can or should rescind a contract of sale is a question which you should pose to a lawyer.

The standard Law Society precedent has provisions to deal with outstanding levies.

Best regards,
Daniel Russell
Mills Oakley Lawyers
[email protected]

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tabby
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Last seen: 3 years 34 weeks ago
Joined: 24/06/2011

Hi jmcg

I don't think you would be able to get out of a contract of sale because those searches should have been done before you signed the contract. Did your lawyer advise you to get a strata search done. All lawyers and conveyancers should advise buyers purchasing an apartment to get a strata search done.