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Edited version of your private ruling
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Ruling
Subject: Fees received for an owner's corporation certificate
Question 1
Is the income received from unit owners for the purchase of Owners' Corporation Certificates assessable income?
Answer
No
Question 2
Is the income received from non-unit owners for the purchase of Owners' Corporation Certificates assessable income?
Answer
Yes
This ruling applies for the following periods
Year ended 30 June 2012
Year ending 30 June 2013
The scheme commenced on
1 July 2011
Relevant facts
The Body Corporate manages a number of units.
The Body Corporate charges a fee for supplying an Owner's Corporation Certificate.
Owners Corporation Certificates contain information such as current fees, insurance cover and maintenance works carried out. The certificate also contains details of any proposed works, fee increases and any potential or existing legal claims affecting the property.
Fees for the certificates have been received by the Body Corporate from owners of units and from potential buyers of units.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 6-5
Reasons for decision
Summary
It is considered that the mutuality principle applies with respect to the receipts from the sale of owner's corporation certificates to unit owners and therefore these receipts would not constitute assessable income. However where fees are paid by non-unit holders the income is assessable.
Detailed reasoning
Subsection 6-5(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.
The Commissioner's view on the assessability of money received by a body corporate is set out in Taxation Ruling IT 2505.
Paragraph 12 states in the discharge of its administrative and management functions, the body corporate may derive assessable income. Interest, dividends or other income derived by the body corporate from the investment of moneys held in its funds represents assessable income of the body corporate unless specifically exempted by the Income Tax Assessment Act. Furthermore, as the body corporate is obliged to make available for inspection to an applicant, whether a proprietor, a mortgagee or their authorised representative, all records held by it, including the books of account, all insurance policies, the strata roll, the strata plan and the minutes of meetings, access fees charged would constitute assessable income except where they are received from a proprietor. Rental fees derived from the use of other personal property, e.g., a washing machine, or profits on the sale of personal property constitute assessable income of the body corporate to the extent provided generally by the Assessment Act.
Owners Corporation Certificates contain information such as current fees, insurance cover and maintenance works carried out. The certificate also contains details of any proposed works, fee increases and any potential or existing legal claims affecting the property.
If a unit holder is considering selling their unit part of their obligations under State legislation is that an Owners Corporation Certificate must be supplied as part of a Vendor's Statement. The Owners Corporation supplies the certificate to unit-holders for a fee. This fee is paid to the Owners Corporation.
The Owners Corporation has received income in the form of fees for Owners Corporation Certificates. When the income received is from a proprietor (unit holder) it is mutual income and is not assessable. However when the certificate is paid for by a potential purchaser the income is not received from a proprietor but a non-unit holder and therefore the fee is assessable income under section 6-5 of the ITAA 1997 (the mutuality principle does not apply).
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