Strata Plans – The GST and Income Tax Explained

When, how and why does a Strata Scheme pay GST and Income tax? Let us explain.

While fresh food and water remain GST exempt, if your building collects more than $150,000 a year in income (levies) we must register your strata plan for GST. This in turn means that GST is collected on your levies, and paid on goods and services received. The general net effect is minimal. On occasion, should levies collected exceed expenditure, a GST payment is due. Likewise, should expenses exceed collected levies (as an example, a large insurance claim is made), a GST refund will be made.

For GST registered strata plans, the financial statements you receive from Strata Sense are net of GST. Meaning the GST component is not shown. As the GST generally Has a zero effect on the overall totals, the inclusion on financial documents such as the budget and transaction list can provide a slightly skewed picture of the financial position of the scheme.

GST is visible on the schemes Statement of Financial Position (balance sheet) by reading the GST clearing account line, which will demonstrate the funds held for GST payment to the Australian Tax Office, or amount owing as a credit to the scheme.

As well GST obligations, Strata Schemes are considered a public company for tax purposes and must lodge a tax return every financial year. Income for strata schemes is considered to be interest received on any investment, receipts from penalties as imposed by the Tribunal on individual owners (for example, by-law breaches), sale or lease of common property and revenue received for inspections of the strata records, except when it is from an individual owner.

Levies are considered ‘mutual income’ and therefore are not considered taxable income. Any surplus arising from a fund that is controlled by a number of people that contribute to a common fund for a common purpose is not income as you cannot derive income from yourself.

We appreciate the trust each of our clients provide when they appoint us to manage their money. Strata Sense are proud of our qualified, professional accounts team who you are welcome to contact directly if you have any questions in relation to the GST, income tax or your strata schemes financials in general.

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