Strata companies are considered public companies for tax purposes, which means they have specific rules and duties outlined by the Australian Tax Office.
Luke Downie, Head of Strata and Business Development at Realmark Strata, recognises the importance of Strata owners being aware of their tax obligations.
"Understanding your tax responsibilities is crucial for strata owners to navigate the financial aspects of their properties effectively,” he said.
"At Realmark Strata, our dedicated team is committed to providing comprehensive support and guidance to strata owners, helping them navigate the complexities of tax matters.”
So, what should you know?
Filing Tax Returns
The primary tax obligation for strata companies is to file a tax return for any fiscal year in which they earn assessable income.
However, strata companies that solely receive amounts subject to the "principle of mutuality" are exempt from filing a tax return, as these amounts are not considered assessable income.
According to the principle of mutuality, income collected from members within the strata community, such as levies or arrears, is not taxable. This is because the Australian Taxation Office (ATO) recognises money paid by owners to the strata company essentially amounts to owners paying themselves.
Assessable income for strata companies includes interest earned on investments, laundry collections, and income from providing status certificate reports (Section 43 income).
Registration for Goods and Services tax
Strata companies have the option to register for Goods and Services Tax (GST), regardless of their income or expenditure level. However, they may choose not to register if they wish to avoid additional reporting requirements.
Registration for GST becomes mandatory for strata companies when their annual turnover exceeds $150,000 or if they expect to spend over $150,000 within a 12-month period.
Once registered for GST, strata companies must account for any GST received, including levies, and can claim back any GST paid to suppliers.
Strata companies must maintain their GST registration if their income and expenditure remain at or above the $150,000 threshold.
If their income and expenditure drop below this limit and 12 months have passed since registration, the strata company can choose to deregister.
Understanding tax reporting responsibilities and ensuring compliance with regulations are vital for strata companies.
Failure to file a tax return or submit a "Return Not Necessary" notification when applicable can lead to penalties imposed by the ATO.
It is always recommended to consult with the ATO or seek professional advice to ensure compliance with the latest regulations and obligations.
For more information and tax time advice for strata property owners, please contact:
Luke Downie – Head of Realmark Strata
ldownie@realmark.com.au
Disclaimer: This information is general in nature. Realmark does not provide financial advice. Clients seeking financial advice will be referred to a qualified financial planner.