Edited version of private advice

Authorisation Number: 1052399897951

Date of advice: 12 June 2025

Ruling

Subject: Community property - rental income

Question 1

Is the rental income received from leasing the community property in the Community Scheme assessable income of the Community Association?

Answer 1

No. The rental income received from leasing the community property is not assessable income of the Community Association. Rather it is assessable income of its members, being the subsidiary strata schemes, in proportion to their respective unit entitlements.

Based on the information provided, it is considered that the Community Association holds the community property in the Community Scheme as an agent for its members (being the subsidiary strata schemes) as tenants in common whose shares in the community property are proportional to the unit entitlements of their lots.

Taxation Ruling TR 2015/3 provides the Commissioner's view on the tax treatment of income derived from common property in a strata scheme. As community property in a community scheme is similar to common property in a strata scheme, it is considered the principles in TR 2015/3 also applies to community property.

That is, in the present case:

(i)            Rental receipts from the leasing of community property are not mutual receipts; and

(ii)           Any rental income received from leasing the community property in the Community Scheme is not assessable to the Community Association but assessable to the subsidiary strata schemes in proportion to the unit entitlements of their lots.

This ruling applies for the following periods:

1 July 20XX to 30 June 20XY

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You are the Community Association for the community title scheme known as the Community Scheme.

The Community Scheme consists of community property and several subsidiary strata schemes. Each of the subsidiary strata schemes is a member of the Community Association and each has their respective unit entitlements in the Community Association.

The Community Association and its members (being the several subsidiary strata schemes) are bound by the registered Community Management Statement which is a set of by-laws and plans that regulate the management and operation of the Community Scheme.

The primary function of the Community Association is to repair and maintain the community property and manage the community scheme.

The community property is defined in Community Management Statement as Lot 1.

The Community Association receives rental income from leasing the community property.

In New South Wales, community schemes are governed by two principal Acts, the Community Land Development Act 2021 and the Community Land Management Act 2021.

The term "Association property" is defined in the Community Land Development Act 2021 (NSW) and the Community Land Management Act 2021 (NSW). For a community scheme, association property means the community property in the scheme.

Regarding ownership of association property, section 22 of the Community Land Development Act 2021 No 6, provides:

1)            An association for a scheme holds association property in the scheme as agent for the following, as tenants in common:

(a) the owners of the development lots or neighbourhood lots in the scheme, other than lots in a subsidiary scheme,

(b) any subsidiary body for a subsidiary scheme comprising a former development lot in the scheme.

2)            The shares in the association property are proportional:

(a) for owners of development lots or neighbourhood lots, to the unit entitlement of the lots, and

(b) for a subsidiary body, to the unit entitlement of the former development lot.

In accordance with section 22 of the Community Land Development Act 2021 No 6, the community property in the Community Scheme is held by the Community Association as an agent for each of the subsidiary strata schemes as tenants in common in proportions equal to the unit entitlement of their lot.

In New South Wales, community property in a community scheme is similar to common property in a strata scheme where the strata title body holds the common property as an agent for the proprietors of the lots.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

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