It’s a Taxing Time for All

30 June is approaching and it’s the end of the financial year which means our minds turn to money.

It’s all talk of income (splitting or deferring it),  expenses (and advancing them), exemptions, deductions, capital gains (and losses) and accountants. OMG ...

But, what about strata and community title schemes ?  How does taxation work for them ?

I’m glad you asked because in today’s post I’ll explain the basics about strata tax and cover things in more detail in future posts.

Although a strata or community scheme is not a company it pays tax at the company rate (currently 30% but changing to 28% for organisations with annual turnover under $  million from 1 July 2010).

Tax is payable by schemes on their income.  But this is more complex than it seems and works differently in different parts of Australia.

Income for most schemes is limited to interest on its bank accounts and fees charged for owner certificates and other services. 

Levies from owners are not income of the scheme as they are mutual income of the owners – paid by the owners collectively for their collective use.

Most interestingly though is income schemes earn from the use of common property for things like renting car spaces and storerooms, licensing tables and chairs on common areas, payments for exclusive use rights and leasing rooftops to telcos.  This is considered to be the income of the owners (and not the scheme) where the common property is held on trust for them (for instance in New South Wales).  And, it’s considered to be earned by the owners proportionately according to their unit entitlements.

So, whilst the scheme receives the money, the owners are considered to earn part of it as their income and must declare it in their tax returns and pay tax according to their circumstances on it.

Against that income schemes can typically claim deductions for bank charges, manager charges to prepare the owner certificates and to provide other services and accounting charges.

In almost all cases schemes will pay very little if any income tax.

If the scheme has annual turnover exceeding $75,000 then it must also register for GST and lodge quarterly or monthly BAS depending on the turnover level.  This has recently been increased to $150,000 if they are non profit boides (which most strata schemes are).

If registered for GST schemes must charge and remit GST at 10% on all supplies which include levies made on owners and can claim input tax deductions for all it’s expenditures.

Generally since most schemes spend most of the money they collect in levies they will have input tax deductions that closely match the GST they collect and will also pay very little net GST.

The ATO published a public ruling (IT2505 – Income Tax: Bodies Corporate Constituted Under Strata Title Legislation) on taxation for strata and community schemes which is worth reading if you want to know more.  And, the ATO have a guide that answers a lot of the typical questions about GST issues called Issues Register - Section 01 - Bodies Corporate/Owners Corporations and Strata Managers.


So ... make sure the taxman is looked after this year by your strata scheme.




Francesco ...