Tax and the Strata Corporation: When a Return Is Required

Tax is one of the more misunderstood corners of running a strata corporation. The short version: the money owners pay in isn't taxable, and whether you lodge a return depends on the kind of income the corporation earns, not on who manages it.

Owner levies aren't taxable income

The ATO treats a strata title body corporate as a public company for tax purposes. But under the principle of mutuality, the levies and contributions owners pay into the corporation's funds are treated as owners paying themselves. You can't make a profit out of yourself, so those receipts are not assessable income. For most groups, that covers almost everything they take in.

The lodgement trigger is assessable income, not the management arrangement

A strata corporation must lodge a tax return for any year in which it derives assessable (non-mutual) income. If its only receipts for the year are owner levies and contributions, it doesn't need to lodge a return, though it should still notify the ATO (by a non-lodgement advice, or a nil return).

Worth being clear about a common misconception: whether the group is professionally managed makes no difference to this. A self-managed corporation and a professionally managed one face exactly the same test. The trigger is the income the corporation earns, not the arrangement it has for running its affairs.

What counts as assessable income

Assessable income is money the corporation earns from non-owners. The usual examples:

Interest earned on funds held in bank or investment accounts
Fees paid by prospective buyers for search or status certificates
Inspection or access fees charged to people who aren't proprietors
Takings from a coin-operated laundry the corporation owns

Even a single dollar of this kind of income means a return is required for that year.

Late-levy interest is not taxable

If a corporation charges an owner interest for paying levies late, that interest is a mutual receipt: it compensates the other owners for the shortfall to the common fund. Under Taxation Ruling TR 2015/3 it is not assessable income of the corporation. (For how to charge it in the first place, see Charging Interest on Overdue Contributions.)

Capital gains on common property belong to the owners

A gain or loss on a dealing with common property is not reported by the corporation. Each owner includes their share in their own return, in proportion to their unit entitlement.

Practical points

The corporation needs a Tax File Number, obtained through its public officer. An ABN is optional but recommended.
Every company has a public officer (Income Tax Assessment Act 1936, s 252), who is responsible for lodging the return and for the corporation's tax compliance.
A simplified Strata title body corporate tax return form covers most cases. The full company return is required in more complex situations (capital gains, franked dividends, carried-forward losses and the like).
Review the books each year to work out whether a return is needed. If it isn't, tell the ATO anyway rather than going silent.

This is a practical reference, not tax advice. For anything specific to your group, speak with an accountant who works with strata.

Get in touch

If you're not sure whether your corporation needs to lodge, or you'd like help getting its tax affairs in order, get in touch. Acacia Collective manages strata and community title groups across South Australia. Call us on 1300 792 255 or email hello@acaciacollective.com.au.