Edited version of your written advice

Authorisation Number: 1051392821812

Date of advice: 4 July 2018

Ruling

Subject: Tax treatment- common property income- strata title body corporate

Question

Can the strata title body corporate declare the income received from the common property in its own income tax return?

Answer

No

This ruling applies for the following period:

Year Ended 30 June 20xx

The scheme commences on:

1 July 20xx

Relevant facts and circumstances

You are a strata title body corporate and are registered under the Strata Titles Act 1985 (WA).

You administer, control and manage the lease of x car parking bays being a common property of xx individual lot owners (proprietors).

The rental income for the said common property amounts to $x,xxx per year. The income is received on a quarterly basis by the strata title body which has applied the amounts against the administration levies payable by the proprietors. The income has never been distributed to the proprietors. Of the annual lease income received, each proprietor would be required to declare an assessable income of $xx.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5.

Reasons for decision

Summary

Where legal and beneficial title to the common property is owned by the proprietors, the individual proprietors return any income derived from the income producing use of the property.

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.

In working out whether you have derived an amount of ordinary income, subsection 6-5(4) of the ITAA 1997 states that you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct.

The Commissioner's view on the assessability of money received by body corporates is set out in Taxation Ruling TR 2015/3 Income tax: matters relating to strata title bodies constituted under strata title legislation.

Each strata title legislation is different in its description of how common property is held. Notwithstanding these differences, the Commissioner will apply a consistent treatment across all strata schemes. Paragraph 40 of TR 2015/3 states that in relation to strata schemes registered under all the State and Territory Acts, it is the proprietors, rather than the strata title body, that are entitled to the deductions under Division 40 and Division 43 of the ITAA 1997 and who are assessable on any income from common property under section 6-5 of the ITAA 1997.

In the application, it has been stated that the strata title body corporate should be assessed on the income due to the following reasons:

● the nominal amount of income being derived

● the large number of individual owners

● the amount of administrative work required to inform each lot owner of the amount that they are required to declare in their income tax returns.

The Commissioner’s view is that the rental income from the common property is not your assessable income. Rather the income derived from the use of the two car parking bays should be declared as ordinary income of the individual proprietors under section 6-5 of the ITAA 1997.