I finally understand how our building water charging works. I am fairly sure it is the same for most buildings like ours.
Cold water is individually metered to each apartment. You pay the water company.
Fire testing water is separately metered and the fire testing company pays for that. We pay them to test the equipment, so indirectly we pay.
But this is the one that I did not understand. There is another water meter. The body corporate pays for the water that comes into the building and goes to the boilers and according to the size of your apartment, you pay proportionally in your body corp fees. The $12,000 annual water bill for the building charged to the body corporate is explained as it is the buildings minimal water use and everyone's hot water. The water is heated and sent on to residents and it goes through an individual meter. The gas company reads the meter and calculates your proportion of gas usage for the heating of you water and charges you accordingly.
While there is no incentive to reduce your use of hot water because it matters not how much water you use, you are paying for the heating of it, so that is why you would not be wasteful with hot water.
The Victorian Civil and Administrative Tribunal has ruled that the hot water charge cannot be passed on to tenants, but I am not sure if that means the gas charge cannot be passed on.