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Our SP is in NSW. Years ago our Strata Plan Executive Comm decided to put some money into an Investment Account and back then it would have been earning a ‘good’ interest rate. Over the past decade+ these interest rates have been tumbling and as at today in said account the rate is 0.0500 pa.
Because having this account earning interest our SP has been paying a tax accountant (via the Strata Mgr – which is now in house with the SM) do a tax return for our strata plan lets say $280.00 per year to do this, plus the interest is taxed by the ATO which at this year is not much as one can imagine. Our SPlan investment account has lets say over 30k in this account.
So our SP has paid for over 10 yrs plus say average 250 x 10 = $2500.00 approx to do tax yearly return and the ATO – tax on the ‘interest” and this year it was a payment to the ATO of $180.00 which would have been probably the same for the past 10 years = 1800.00.
At no stage in the AGM’s, did the Strata Mgr say do we still wish to keep this account open. Kinda makes one wonder why. And yes maybe other and current owners should have realised this was costing money but we didn’t and most owners don’t look that hard at the accounts.
So the lesson here is if you are in a Strata Plan with an investment account unless you have a lot of money and a great interest rate that’s fine – but if not – it’s suggested you ask your strata manager for the sums and see if it’s worth keeping such an account. Our ‘investment’ account is about to be closed.
For your info.
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We had a similar situation in our ACT Strata Plan. If the interest earned – Account fees – Tax is not positive there is not point in having an investment account.
From the simple numbers you have presented you should be marginally positive. If the $180 is tax at 30%, that suggests your gross income should be something like $850 – $250 (Tax agent fee) = Net income $600 – Tax $180, for a net benefit to the scheme of $420.
The other item I have tried unsuccessfully to do in our scheme is to have our committee self prepare our simple tax return using the ATO short form for Strata Schemes as on the ATO website here.
https://www.ato.gov.au/Forms/Strata-title-body-corporate-tax-return-and-instructions-2021/
But I have not managed to convince them. Note using this would depend on the size and complexity of your scheme. I think it works for small schemes with interest only income. If you have other income sources, employees/building managers or are GST registered you would I think need an account.
If the $180 is tax at 30%, that suggests your gross income should be something like $850 – $250 (Tax agent fee) = Net income $600 – Tax $180, for a net benefit to the scheme of $420.
At the risk of being pedantic, the net benefit is to the owners, distributed for tax declaration purposes according to unit entiutlements. That’s why many schemes, for so many years, have put their money in non-interest bearing accounts.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
If the $180 is tax at 30%, that suggests your gross income should be something like $850 – $250 (Tax agent fee) = Net income $600 – Tax $180, for a net benefit to the scheme of $420.
At the risk of being pedantic, the net benefit is to the owners, distributed for tax declaration purposes according to unit entitlements. That’s why many schemes, for so many years, have put their money in non-interest bearing accounts.
Would that only occur if it was actually distributed – and if it was it would be like a franked dividend, with franking credits for the tax already paid available as well. CAn’t the scheme just keep the dividend, and use it for general expenses
I see there is a long ATO Ruling on taxation of Strata Schemes. From my amateur reading it seems to suggest that interest income is OK to treat this way, but if the scheme makes income from common property (eg renting the roof space for a mobile phone tower) then that needs to be distributed to owners. Are there any tax accountants or lawyers out there in flatchat land who can comment? Or Jimmy maybe it could be a topic with the right guest for a future podcast?
I see there is a long ATO Ruling on taxation of Strata Schemes. From my amateur reading it seems to suggest that interest income is OK to treat this way, but if the scheme makes income from common property (eg renting the roof space for a mobile phone tower) then that needs to be distributed to owners.
Income is income (interest counts but levies don’t). Have a look here.
By the way, your link to a Google search didn’t work and was removed. You have to post the web address of the page you found, not the address of the Google search that found it.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
I see there is a long ATO Ruling on taxation of Strata Schemes. From my amateur reading it seems to suggest that interest income is OK to treat this way, but if the scheme makes income from common property (eg renting the roof space for a mobile phone tower) then that needs to be distributed to owners.
Income is income (interest counts but levies don’t). Have a look here.
By the way, your link to a Google search didn’t work and was removed. You have to post the web address of the page you found, not the address of the Google search that found it.
Sorry about the link – but its the same ruling as in your post. And there are some interesting quirks in it. eg Paragraph 31 – fees for strata role inspections are not income when done by an owner, but are if by a non-owner. And 37 on Strata scheme owned items. Seems to say that if the scheme has say a shared laundry, with scheme owned coin operated machines, then when owners use them, the money paid is not income, but when others (eg renters) do then it is. Would be an interesting exercise allocating that income out.
Further I am not sure I agree with your “Income is Income” In para 36 the ruling says “…Any interest, dividends or interest income derived by the strata title body from the investment of moneys held in its fund represents assessable income of the strata title body …”. Then in paragraphs 39-45 in talks about income from common property, and gives the phone tower example.
So to me the the upshot is “its complex” – and that is I suppose why tax accountants and lawyers exist and are paid for their services and advice.
I’m happy to go with what strata lawyers and tax expert Tony Cordato said in that article:
“Apartment owners are ‘mutual owners’ of the strata title body and own the common property mutually. As a result, strata levies are not treated as assessable income of the strata title body for income tax purposes.
“However, income from common property is treated, not as mutual income of the strata title body, but as assessable income of the individual owners.”
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
I’m happy to go with what strata lawyers and tax expert Tony Cordato said in that article:
“Apartment owners are ‘mutual owners’ of the strata title body and own the common property mutually. As a result, strata levies are not treated as assessable income of the strata title body for income tax purposes.
“However, income from common property is treated, not as mutual income of the strata title body, but as assessable income of the individual owners.”
Agreed – that is income from common property. But as far as I can see he did not say anything about interest income from owners corp funds .
…as far as I can see he did not say anything about interest income from owners corp funds .
That may be because it’s pretty obvious. Have a look at this ATO form, section 6, where it asks the owners corps accountant or treasurer to include “the amount of interest received or credited during the income year.” That figure is then added to the total assessable income for the year. It’s taxable income – end of story (and of discussion).
To get back to the original question, how much money would a strata scheme need to have sitting in the bank to make accruing interest at current rates worth paying an accountant to lodge a tax return and then calculate the income apportioned to each owner?
A lot more than most schemes have, would be my answer.
The opinions offered in these Forum posts and replies are not intended to be taken as legal advice. Readers with serious issues should consult experienced strata lawyers.
Not financial advice – at current interest rates (<1%) you’d need a fair bit of money to make it worthwhile. Have any owners here ever considered investing their funds in say an ETF or Bond? Curious to hear what committees think of this.
Just some points that Taps originally started with.
- Paying for having Tax returns done. Strata Plans are all required to lodge Tax returns, so investment account or not. you still lodge one. So no savings on having the return done regardless of having or not having an investment account, as inhouse tax returns are usually a set fee.
- Interest and Tax. You only pay tax on what you earn, so unless you have a concern for your personal tax return being adversely affected I see no issue with paying 30% tax on a Profit made. Its still 70% return to the OC on the interest. Today its not much but its money the OC would not get if in a no interest account.
Paying for having Tax returns done. Strata Plans are all required to lodge Tax returns, so investment account or not. you still lodge one. So no savings on having the return done regardless of having or not having an investment account, as inhouse tax returns are usually a set fee.
“Strata Plans are all required to lodge Tax returns”
That is not true. Read the response from JodiH here: ATO community forum: tax return for strata group.
I am in charge of a self-managed strata plan. Our only income is levy income. I called the ATO and told them that we only have levy income. They marked our file so that we no longer have to submit tax returns. I had to put this request in writing.
This all started when I noticed that the strata manager was paying a taxation agent $130 every year to submit a tax return with zero income. We’d been paying $130 p.a. for an unnecessary tax return for over 20 years. I also noticed that the tax agent’s surname was the same as one of the staff at the strata manager’s office … one of many reasons we decided to become self-managed.
The instructions for the ATO form state:
INSTRUCTIONS AND TAX RETURN 2021
Strata title bodies corporate are treated as public companies under the tax law and must lodge a tax return for any year in which they derive assessable income. If your body corporate only derives amounts that are subject to the principle of mutuality [such as levies] then you do not need to lodge a tax return. These amounts are not assessable income.
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