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Good Morning All,
Our AGM is coming up and in the proposed budget is a charge for income tax preparation – yet again.
The charge for income tax preparation is an issue that is constantly discussed and resolved each year. Our strata plan’s only income are strata levies – thus IT 2505 or whatever the current ruling/requirement is, exempts us from the need to submit a tax return. Thus we do not need to submit a return. In the past we have been successful in obtaining a refund of all tax preparation charges paid, due to advice obtained in this forum.
This year we have been advised, when the charge was again questioned, that it is the responsibility of the owners to apply to the ATO for an exemption.
Is this correct? As we have had previous charges returned I cannot imagine that our strata manage has been generous enough to refund all previous payments from their own pocket.
Any advice would be appreciated.
Regards,
Dudley
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Hi Dudley,
You are only required to report income that is non-mutual income, such as interest earned on a bank account. Since your only income is Strata Levies, this is considered mutual income, therefore not reportable to the Tax Office and no tax need be paid.
Link to explanation of non-mutual income – https://www.ato.gov.au/law/view/document? DocID=TXR/TR20153/NAT/ATO/00001
This is a tax ruling showing what a strata corporate body should include as income. Just for your information.
As for the requirement to lodge a return each year, you can order a paper copy from the tax office – you can use the online ordering service, ring up or go into a tax office store front and ask for a paper copy of the 2016 Strata Tax Return. Link – https://www.ato.gov.au/forms/strata-title-body-corporate-tax-return-and-instructions-2016/?page=1#How_to_obtain_this_publication.
What I would do (to sort it out once and for all), is get a copy of the form, find the ABN of the Strata Company – (Google search “ABN Lookup”), get the TFN for the Strata (you may need to ask the Strata Manager) and fill out the return as all zeroes. On the front page of the form it will ask you “Final Tax Return”, put a Y for Yes in this box. When and if you situation changes and you have mutual income, you can then lodge a tax return if required. Until this happens the Tax Office will assume you have no requirement to lodge a tax return and you will not need to or be hassled by the Tax Office to lodge a return. Make sure you make a copy of the form. The Tax Office may send you out a statement of income tax account, it will simply show the return as lodged with no tax due.
I understand you may need to talk to the EC or OC about this but it is the best and easiest option, rather than every year going through the hopes with the strata manager.
I work as a Tax Accountant and we prepare Strata Tax Return for a strata that requires a return to be lodged each year. However it really is only 5 minutes work. If you strata manager is outsourcing this job to an accounting firm they maybe changing you hundreds of dollars for something that takes minutes.
Hope this helps
Missy is spot on in saying that “they maybe changing you hundreds of dollars for something that takes minutes.”
Our strata has a small amount of interest so we must lodge a tax return. For tax purposes we are a company and need to lodge by the following January (I think). I prepare and lodge our strata’s return. Besides the front page I only really have to fill out 1 label in the return.
As for the need to lodge returns at all, from my knowledge Missy is also correct.
I know of a few stratas who put their money in non interest accounts on the basis that while the strata may earn $200 in interest accountants charge $250 to prepare and lodge a return!
The only other point I would note is that income includes charges to outsiders eg prospective purchasers for inspection of book etc.
Hi Dudley,
If the Strata Manager has had Tax Returns lodged in the past surely a copy can easily be supplied to the owners? If not I would ask for a copy (under the Tax Act you are required to keep copies of documents and Tax Returns for 5 years). There should not be a charge or supplying documents you should have been given a copy for. My understanding (and anyone feel free to correct me) is that the EC is simply a smaller group of the OC who make the final decisions in the best interests of the Strata, they are not special or different in any way. This would fall under the same category under the strata act or being able to request documents from the Strata Manager relating to the Strata Act.
If a Tax Agent has been used under the Tax Act the Tax Agent is required to provide a copy of the return to the person. If a registered Tax Agent has not been used and the Manager is trying to pull the wool over your eyes and they have prepared the return (ie charging extra) then not getting an owner to sign the Tax Return before lodging the return or providing a copy is could be considered a breach of the act. You are part of the Strata and therefore technically required to be given a copy of the return. You may not be able to ring the Tax Agent directly as they may not have you listed as a person related to this strata. It would breach privacy rules for the Tax Agent.
The Strata Name could unfortunately be a few different ways with the Tax Office. This will all depend on the person who registered the Strata Plan in the first place. It could be “The Owners of Strata Plan xxxx” It could be “(Strata Name) Plan (plan Number). Just put Strata Plan (name of strata plan) into the ABN LookUp Site and it should find it. It has the location State and Postcode, so this will help narrow the search.
I would first call/email the Strata Manager and ask for a copy of the last Tax Return lodged. If they advise they do not have a copy advise them that they are required to keep copies of returns for 5 years under the Tax Act. This might shock them into some action if can throw the law back at them. It may also give you some reasons to kick them out if the other owners agree – that they are not good at keeping records. If they can not provide a copy I would be asking some hard questions as to why. There simply is no reason why you can not have a copy of the Tax Return as an owner.
I would fill out as much as you can, and bring to the AGM (if you do not get any additional information from the Strata Manager first) surely the other owners would not complain at the idea of a person doing free work for them. I would not. Advise them this will sort out the need to visit this issue each year. Push the point of saving money, and their time. People are always going to invest in things that benefit them/make their life easier.
Sorry to ramble, but I felt that it was important to give you all the information.
Hope this helps. Happy to answer any further queries.
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