@scotlandx said:
…On the subject of who owns the common property, there is a very fine distinction. The individual owners don’t own it, the Owners Corporation (a legal entity) owns it and effectively holds it on trust for the benefit of the owners as a whole. While this may seem like splitting hairs it does make a difference. …
You are right but to split the hair even further: It depends what state or territory you are in whether the Owners Corporation holds the common property as ‘agent’ for the individual members or ‘on trust’ for the individual owners. If the OC derives non-mutual income from the common property, say by renting out a parking space, the tax office regards it differently depending on whether the state legislation defines the relationship as agent or trustee.
Where it is ‘trust’ the OC should declare the income and pay the 30% corporate tax rate. Owners simply see their levies reduced a little as a consequence of the OC having some extra income and not needing to levy as much. All is simple.
Where it is ‘agent’ the OC is supposed to prepare a statement to issue to each owner so that they can declare their share of the income divided up according to unit entitlements. Owners still get their levies reduced because the OC has other income but this time it is the individual owners who have to declare their little fraction on their tax returns. Some owners might find they have pensions reduced, others are likely to be on different marginal tax rates. It is unlikely the benefit will be spread equally among owners. This applies even though the OC just reduces levies rather than actually issuing a little cheque to each owner.
Unfortunately, it is ‘agent’ in most places.
All this was relevant to our OC because we wanted to put in a PV (solar electric) system that would off-set the OC’s electricity costs. Our gross feed-in tariff is regarded as income whereas a net tariff would not have been. We gave a copy of our tax ruling to the review of the ACT’s Unit Titles Act and the result was a change in the legislation that allows us to pass a resolution to hold sustainability equipment ‘in trust’ for the owners even though common property is otherwise held as ‘agent’ by default. Without this legislative change the use of OC funds would not have led to returns to all owners in the same proportion to their previous contributions to the OC’s funds, there would have been considerable nuisance value to every owner’s tax affairs, and it might have been harder to convince owners to go ahead with the proposal.
If the OC gets income from unconventional sources you should check tax ruling IT2505 and perhaps get a private ruling. I have explained all this further in
https://tinyurl.com/9yufydw