The ruling confirms that a strata title body is treated as a company for income tax purposes. However, it will not be treated as a non-profit company, even if it includes non-profit clauses in its by-laws.
The ruling provides guidance on the application of the mutuality principle to contributions made by owners to the strata title body. The ATO confirms that just because an amount is received from an owner does not necessarily mean it will be subject to the mutuality principle.
For example, if an owner pays their strata levies late and is required to pay interest to the strata title body this should be subject to the mutuality principle and should not be taxable. However, if an owner breaches the by-laws and is required to pay a penalty this would not be subject to the mutuality principle and should be taxable.
The ATO also confirms its views on the treatment of a range of other issues, such as where the strata title body charges owners and tenants for the use of assets held by the strata title body such as washing machines and car parking spaces. The ATO also provides guidance on the deductibility of expenses including capital works.
For further information on the draft Taxation Ruling TR 2015/D1, please refer to the Australian Taxation Office website at TR 2015/D1
Please contact Shane Ball [email : firstname.lastname@example.org ] Licensed Strata Manager and Managing Director at PRECISION STRATA for assistance with your strata title management needs.