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[daphne diaphanous]

Our SP has a $25 K government audit insurance. Could someone enlighten me as to why it would be necessary please?

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[Whale]

DD – that option covers your Owners Corporation’s (O/C) costs of professional services such as those provided by a accountant if it is audited by the ATO or some other Government Instrumentality.

There have been a few recent posts about the costs of Strata Insurance, and yours is an example of whether an O/C that’s covered by the “Principle of Mutuality”, where the ATO has ruled that no tax is payable because its only income comprises owners’ contributions to funds (admin and sinking) that are then controlled by it for the purpose of managing and maintaining the Plan, could reduce its Insurance Premium by opting-out of that and indeed any other optional cover/s that it simply doesn’t need.

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[daphne diaphanous]

Thank you Whale. Our main income is the interest on our smallish sinking fund in a term investment, which is well below $1,000 per annum. There are also occasional small sums earned from the interest on delayed levy payments. There may be more earned from our quarterly admin fund account, but I haven’t seen any in the accounts presented by the SM. As far as we can tell all the strata income is ploughed back into the admin fund. Mind you, we do pay some tax, possibly around $300 or less, part of it being PAYG. So, in these circumstances, we shouldn’t be needing the audit insurance.

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