Edited version of private advice

Authorisation Number: 1052377074207

Date of advice: 9 May 2025

Ruling

Subject:Principle of mutuality - EV charger

Question 1

Are the amounts received from proprietors use of the EV charger assessable income of the strata company under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer 1

No. The contributions made by proprietors from the use of the EV charger are not assessable as the principle of mutuality applies.

This ruling applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The entity is a strata company.

The strata company owns an electric vehicle (EV) charger. The EV charger is installed on common property.

The EV charger is available for any owners to use.

The EV charger is not available for non-owners to use.

Those proprietors who use the EV charger will be charged on an invoice. The charge will be the same tariff as the power provider to recoup the cost of the usage.

No profit is made from the EV charger.

The payment for use of the EV chargers returned to the administrative fund.

The administrative fund is used for the purpose of repairing, cleaning and maintaining common property.

The administrative fund is controlled by the owners.

The owners that make payments into the administrative fund are the same people who have the right to use it on the condition that they reach a consensus.

The costs and fees for the EV charger are transparently documented and communicated to members in the annual general meeting budget.

Any surplus produced by the administrative fund is not distributed to members. It is rolled over each year to be used by owners for repairing, cleaning and maintaining common property.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 section 6-10

Reasons for decision

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 (subsection 6-5(2) of the ITAA1997). Under section 6-10 of the ITAA 1997 assessable income also includes statutory income.

The mutuality principle is a legal principle established by case law. It is based on the proposition that an organisation cannot derive income from itself.

The principle provides that where a number of persons contribute to a common fund created and controlled by them for a common purpose, any surplus arising from the use of that fund for the common purpose is not income. The principle does not extend to include income that is derived from sources outside that group.

The Commissioner's view on the assessability of money contributed and received by proprietors or members of a strata title is set out in Taxation Ruling TR 2015/3 Income tax: matters relating to strata title bodies constituted under strata title legislation (TR 2015/3).

Where the principles of mutuality apply an amount that is otherwise assessable to the strata title body will not be included in its assessable income under section 6-5 of the ITAA 1997(paragraph 23 of TR 2015/3).

Whether receipts from members are mutual receipts depends on the nature of the transaction and is a question of fact. The relevant considerations include (TR 2015/3 paragraph 25):

•                     The relationship between an amount received by the strata title body and the common fund - that is, whether it is within matters that govern the mutual relationship between members such that it has the requisite link to the common fund.

•                     The purpose for which the payment is made - that is, whether the payment of an amount by a member to the strata title body is to meet the member's proportion of their mutual liabilities.

•                     The capacity in which an amount is paid - that is, whether the member's dealing with the strata title body is within their role as a member.

Amounts contributed by owners which form part of a fund used for the day-to-day expenses, general maintenance and repair of common property are mutual receipts and are not assessable to the strata title body (TR 2015/3 paragraph 24).

For mutuality to apply there must be complete identity between the contributors to the fund and the participants in the surplus (Municipal Mutual Insurance Ltd v. Hills (1932) 16 T.C. 430). This does not mean there must be individual identity between contributors and participants, but in the identity as a class.

At any given moment in time the persons who are contributing must be identical to the persons who are entitled to participate (Faulconbridge v. National Employers' Mutual General Insurance Association Ltd (1952) 33 T.C. 103).

In Revesby Credit Union Co-Operative Ltd v Federal Commissioner of Taxation (1964-1965) 112 CLR 566 McTiernan J explained the principle of mutuality as follows:

The principle of mutuality seems to me to be settled. Where a number of people contribute to a fund created and controlled by them for a common purpose any surplus paid to the contributors after the use of the fund for the common purpose is not income but is to be regarded as a mere repayment of the contributor's own money (at 574).

Application to the strata company circumstances

The EV charger is owned by the strata company and specifically used by the owners. Although not all owners currently use the EV charger this is not crucial to the mutuality principle. It is the fact that all owners are entitled to use the EV charger.

Any monetary contributions by owners resulting from the use of the EV charger are mutual income as they are returned to the administrative fund, which is used for the day-to-day expenses including repairing, cleaning and maintaining common property. The owners are members of the strata company and there is complete identity between the contributors to the administrative fund and those entitled to participate and use the fund. Whilst not all proprietors make use of the EV charger, the class of contributors and participants are the same.

Any surplus becomes part of the strata companies' administrative funds and thus the participants to the fund are all members of the strata company. Consequently, a reasonable relationship exists between the contributors and the participants in any surplus.

The strata company does not make a profit from the EV charger as they charge the amount it cost to recoup the usage.

The contributions made by owners from the use of the EV charger are not assessable as the principle of mutuality applies.

Any contributions made from non-owners would be considered non-mutual income and would be assessable.