Strata, owners corporations, or body corporate schemes are taxed like public companies under Australian income tax laws. Therefore, committees should understand the scheme’s legal obligations to maintain financial compliance.
Even if your scheme doesn’t pay tax, you may still be required to lodge a return or notify the Australian Taxation Office (ATO) that none is needed. Therefore, it is essential to review the scheme’s books and records annually to understand any obligations that must be followed. This article explains a strata tax return, when and why it must be lodged with the ATO, the taxable income types, and more.
Owners corporations or body corporates need to lodge a return for any year in which they generate taxable derived assessable income, even if deductions result in a loss. This is based on the period from 1 July to 30 June, which is not necessarily the same as the plan’s financial year.
It is important to note that taxable or assessable income does not include mutual income. Here are the differences:
The principle of mutuality is central to the taxation of strata, owners corporations, or body corporate properties.
This principle states that an entity cannot make a profit from itself. So, when a plan collects funds from its lot owners, it is considered mutual income and is excluded from assessable income. The principle requires that a group of members contribute and that the same group benefits.
Under this principle, all levies and late payment interest are considered mutual income. Therefore, if these sources are the only income in a year, then there is no need to file a tax return.
Assessable or non-mutual income is any monetary gain made from non-lot owners. This could include: investment interest, statutory certificate fees, inspection fees from potential buyers, or income from a pay-washing machine owned by the strata plan. Rent and fees from common property are not taxed in the strata, owners corporation, or body corporate scheme. See the next section below.
If the strata manager delivers services related to this income, such as providing records for inspection and statutory certificates, they are able to bill the strata plan for these services. The strata plan can then claim this charge as a tax deduction.
An owners corporation or body corporate may earn rent from common property. This might include a rooftop lease for a communications tower, an office or shop lease, or leased storage and parking spaces.
As the lot owners also own the common property, the income is taxed to them and not to the strata plan. The proportion is divided based on the unit entitlements.
An exception exists where:
If an owners corporation or body corporate generates any of the following income or expenses, it will likely need to lodge a tax return. On the other hand, any loss generated in the financial year can be carried forward and offset against future income.
Interest and investment income.
Certificate fees – usually result from the sale of a unit and charged to the owner.
Search/inspection fees – usually from the sale of a unit.
The cost of managing tax affairs results in a loss that can be carried forward and offset on future income.
Certificate fees charged by the strata manager.
Pay As You Go (PAYG) instalments.
ABN withholding tax.
Learn more about the legislative requirements for owners corporations and body corporate income tax.
A tax return is not required if a strata, owners corporation, or body corporate scheme received no assessable income.
However, the ATO still needs to be informed in writing to avoid any penalties. The strata manager typically does this on behalf of the owners corporation or body corporate.
This ATO notification can be done through a non-lodgement advice or a tax return without income. The latter is preferred because:
Note: If the scheme had an ABN withholding tax (e.g. a commercial owner with an ABN withheld part of their levies because the levy notice did not show an ABN) it must lodge a tax return to claim a refund.
Informing the ATO can be done by a non-lodgement notice or a ‘nil’ tax return. It is cheaper for a strata plan to lodge it as they are semi-automated and are produced individually.
The short answer is no. Inspection and certificate fees are paid when a lot is put up for sale. This applies even if the lot is not sold. Although this is not guaranteed to occur every year, there is still a possibility that units can be for sale in the future. This assessable income of the owners corporation or body corporate triggers the need to lodge a tax return, even if deductions would result in a loss for the year. Since this type of income is unpredictable, a strata plan cannot say ‘no further returns required’.
The only time the ATO can be notified of ‘no further returns’ is if the strata plan is being terminated.
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Strata taxation can be complicated, especially if your scheme has unusual income sources or one-off events, such as selling part of the common property. This is why seeking professional advice ensures everything is done correctly.
The strata manager can typically help the owners corporation or body corporate handle day-to-day finances and fulfil their tax obligations.
This article is edited by Lauren Shaw Regional General Manager and Licensee-in-Charge on May 2025.
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