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"The introduction of the GST in July 2000 brought about changes to strata taxation making it somewhat more complex than ever before. However, everyone should be very used to the whole GST concept by now. But, if you're new to strata and Owners Corporations and Executive Committees, the summary below will give you an idea as to what you need to look out for and do - if anything. Just remember...this is not tax advice nor is it complete information...it's just an overview. There's also some links to a few relevant web pages that could help."
TAXATION AND THE GST
GST
The GST commenced on 1 July, 2000. From that time onwards there was an increase in the administration and accounting paperwork for all Owners Corporations around the country.
Strata Managing Agents engaged by schemes under full management usually consult with strata specialist accounting and auditing firms for all taxation matters to ensure everything is correct and 'by the book'. Self-managed schemes don't have this luxury and so should seek advice from specialists in this 'taxing' area (sorry - couldn't help myself).
If the increased administrative and accounting work becomes too much, the Owners Corporation of a self-managed scheme may seriously consider using a professional strata managing agent to administer all their taxation affairs. Such complex taxation issues really should not be left to the part-time, 'friend-of-a-friend' accountant.
There are many traps the Owners Corporation has to address when dealing with GST and ABN requirements including:
- whether or not they're required to register for GST if total levy and other income is below the base limit set by the ATO
- what to do if your scheme is not registered for GST and a special levy or some other unusual financial spike during the tax year tips the scheme's income over the base limit
- whether or not to apply for an ABN
- what if the scheme is mixed-use or commercial or a community?
- whether registration is the preferred option for both the ABN and the GST
- when owners can claim input tax credits and on what
- how to deal with suppliers who do NOT have an ABN - ie applying withholding tax rules
- how to deal with suppliers who are NOT even registered for GST
- how to lodge Business Activity Statements
- how often to lodge Business Activity Statements
- general GST and record keeping requirements
- many other issues too complex to list here
Register or not....
If the annual earnings (including levies) of a strata scheme are likely to be under $75k (which is the base limit in 2008), there is no requirement to register for GST, although the scheme may do so voluntarily. If a scheme chooses NOT to register for GST the scheme cannot charge GST (to any entity from which income is received - eg levies) nor is the scheme able to claim the GST paid on any expenses the scheme has incurred.
IMPORTANT
Registration for GST is compulsory if the scheme's annual earnings are anticipated to be over $75k (the base limit as at 2008).
ABN or not....
An ABN is a number the Australian Taxation Office allocates to a business entity (such as a strata scheme) to deal with the ATO, and with other business entities (such as contractors). It's not compulsory to have an ABN, but a business entity (such as a strata scheme) will need an ABN
- to allow it to register for GST
- to avoid having amounts withheld from any payments made to that business entity
IMPORTANT
All businesses are required to withhold 46.5% of any payments they make to another business unless an ABN is quoted. The 46.5% is the prescribed withholding rate as at 2008.
All schemes have the option of applying for an Australian Business Number (ABN) but must do so if registering for GST. A strata scheme with an ABN and registered for GST:
- must include GST in the levy amounts received from the owners
- must pay any GST collected to the tax office by quarterly Business Activity Statements (BAS) for each period
- can claim input tax credits for GST included in expenses such as electricity, management fees, cleaning, gardening, repairs and maintenance services, etc to help offset any GST collected
- must withhold the prescribed amount from any payments made to a business not quoting an ABN
- will have some control over the scheme's tax transactions
An unregistered scheme:
- cannot charge GST
- must still pay the GST on expenses incurred from all other registered businesses it deals with such as contractors, utility companies, etc
- cannot obtain input tax credits for any GST amounts paid out in expenses
- has very little control over the scheme's tax transactions
The bottom-line for owners in a strata scheme registered for GST is that 10% GST definitely applies to all levies raised by the Owners Corporation.
TIP - Every Owners Corporation should look carefully at all their suppliers and discover whether or not they have an ABN and whether or not they are registered for GST. The end result of this investigation will determine exactly how the Owners Corporation deals with them.
TAXATION
Taxation implications for a strata scheme usually involve:
- income tax
- GST
- withholding tax
- non-mutual income (such as income in the form of payments from companies for the erecting and use of transmission towers or advertising on buildings)
TIP - Make sure you talk to an accountant experienced in the intricacies of strata scheme finances and taxation as it can be a veritable minefield if you don't get the right advice.
Some ATO links
As the taxation and GST issues affecting an Owners Corporation are very complex and if you are not engaging a strata specialist accountant, it would be advisable to spend quite some time reading up on the subject - especially if your scheme is 'self-managed'. If you have a strata manager looking after your affairs you don't have as much to be concerned about. Things can get even more complex if your scheme is commercial or mixed-use.
It's interesting to note that neither the NSW Strata Schemes Management Act 1996 or the NSW Strata Schemes Management Regulation 2005 have anything of note on the subject of taxation and there seems to be very little other information around except for what's on the ATO website. Hopefully, the ones listed below may prove to be a good starting point.
Australian Tax Office links
- ATO Issues register for Owners Corporations & Strata Managers
There's lots of great info here but it can be a bit overwhelming to begin with.
Just look through the index table s-l-o-w-l-y and really read the headings.
This section covers almost everything concerning tax for strata and owners corporations.- ABN essentials
- GST essentials
- Activity Statement essentials
- Strata title body corporate tax return and instructions 2009
- Strata title body corporate tax return and instructions 2008
- Strata title body corporate tax return and instructions 2007
- Taxation for businesses
Concentrate on the main index on the left hand side. Tax Topics A-Z is a great place to start. You can access it by clicking the "+" sign and hovering over the sections.- Australian Taxation Office homepage - if you need more. Try using the search box (unless of course you know where you are going) but make sure you put " before and after your search term. (e.g. "bodies corporate" or "owners corporation") This will help cut down on irrelevant findings. Good luck.
Strata Title Terms and Jargon
If you need to know the meaning of one or more of the common terms mentioned above then have a look at the Strata Terms and Jargon Information page.
DISCLAIMER: All information on this website is of a general nature and is intended as a guide only. Readers should check all information obtained from this website for accuracy from other sources and seek professional legal advice before taking any action based on any information obtained from this website. Information on this website should not be substituted for proper legal advice. The owners of this website will not be held responsible for any action taken as a consequence of same.
EXTERNAL SOURCES: The owners of this website do not make any warranty or representations regarding the information, products, services provided by or qualifications of any external sources listed on this website. Readers should make their own appropriate enquiries regarding accuracy, qualifications, licences, etc. The owners of this website will not be responsible or liable in any way for any representations made by any external sources listed on this website.
IMPORTANT NOTE: This website deals with strata matters in NSW, Australia only. Legislation varies in different states and territories and in other countries. For information pertaining to places outside of NSW, Australia please refer to the appropriate legislation for your region.
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