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Edited version of your private ruling
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Ruling
Subject: Strata title owners assessable on income from common property
Question
Is your share of the rental income from common property associated with your strata titled property assessable to you?
Answer
Yes.
This ruling applies for the following period
Year ended 30 June 2012
The scheme commenced on
1 July 2011
Relevant facts
You own a strata titled property.
Parts of the common property of your building produce income from rent.
You have received a statement from your strata managing agent that your portion of the income from this rental activity is assessable to you.
You have not received any credit for the strata levies payable by you.
You are unable to receive any deductions for the strata levies which you pay.
Relevant legislative provisions
Income Tax Assessment Act 1997 Subsection 6-5(4).
Reasons for decision
Income Tax Ruling IT 2505 discusses bodies corporate constituted under strata title legislation.
Strata title schemes in each State or Territory are governed by specific legislation, for example Strata Schemes (Freehold Development) Act 1973 No 68 (formerly Strata Titles Act 1973 (NSW) and Strata Titles (Freehold Development) Act 1973).
A body corporate is constituted by the proprietors but is a separate legal entity with specified powers, including to control manage and administer the common property.
Common property is that part of a strata plan not comprised in any proprietor's lot. The ownership of the common property varies under different State Acts and Territorial Ordinances. In NSW (where the unit is located) the ownership is vested in the body corporate as agent for the tenants in common in proportions equal to their lot entitlements (paragraph 4 IT 2505).
Section 20 of the Strata Schemes (Freehold Development) Act 1973 No 68
Body corporate to hold common property as agent for proprietors
The estate or interest of a body corporate in common property vested in it or acquired by it shall be held by the body corporate as agent:
· where the same person or persons is or are the proprietor or proprietors of all of the lots the subject of the strata scheme concerned - for that proprietor or those proprietors, or
· where different persons are proprietors of each or two or more of the lots the subject of the strata scheme concerned - for those proprietors as tenants in common in shares proportional to the unit entitlements of their respective lots.
The assessability of moneys received in respect of the common property, for example, fees derived from the letting of shops situated on the ground floor of a block of apartments where the ground floor forms part of the common property, varies according to the relevant State strata title legislation. In NSW the income derived from the use of the property constitutes assessable income of the individual proprietors (paragraph 17 IT 2505).
This is considered to be so even in those States where the strata title legislation prevents a proprietor from ever taking physical receipt (other than on winding up) of the moneys, and where the moneys are paid directly into one of the body corporate funds. In these cases, proprietors are considered to receive a benefit in that the amount needed to be levied on the proprietors by the body corporate as contributions to the administrative or other fund would be reduced by the rental income applied directly to the fund.
In your situation you are assessable under subsection 6-5(4) of the Income Tax Assessment Act 1997 (ITAA1997) on your share of the amount received in respect of the common property.
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