Strata Maintenance Funds Should Not Be Taxed 5/05/2009 Thousands of strata title property owners in NSW could benefit by a small reform to company deposit funds.
Mr Richard Tooker, the director of New South Wales Strata Management, says the matter concerns the savings that strata titled buildings are required to set aside for the buildings’ ongoing maintenance and repair.
“The law requires strata schemes to set aside reserve funds which are held in a deposit account to cover costs. These funds are part of levies paid by the buildings’ owners, and can range from small sums for small buildings to large sums for what can be very big blocks. By a legal quirk these banked sums attract tax and the fairness of this tax needs to be questioned.
“The tariff issue questions why these funds, which have been set aside for such a legitimate purpose as upkeep of common areas and general preservation of the structure, should attract a duty at all. Unlike a company, an Owners’ Corporation makes no profit, so should be free of such charges.”
Mr Tooker notes that the funds have been accrued for a non-profit purpose, and are banked as a trust fund. These resources are to be used on either a regular or periodic basis, and can attract bank interest just like any other account.
“An anomaly seems to exist, and this raises the question about how such taxes work. A non-profit organisation is usually tax exempt, and a company would normally have a pre-tax debit, credit or other mechanism that would be taken into account for taxation purposes. But the banked sums from thousands of strata property owners are left out in the rain. Taxing the amounts these people set aside for maintenance looks to be an unnecessary burden, one that is unfair and unjust.”
Mr Tooker, whose company has a number of small schemes under management, says that the Real Estate Institute of Australia (REIA) has initiated a call for the tax to be stopped for strata titled properties not exceeding five lots.
“Whilst this is a good start as around half of all strata titled properties in Sydney fall within this small size category, we need to ask why stop there?”
He says banked funds accumulated for the purpose of maintenance are the ‘working money’ that needs to labour hard on behalf of all the building’s owners no matter what size of structure.
He points out that this funding is actually being taxed twice, first from the owner as income, part of which is used to pay periodic levies to the Owners’ Corporation, and again when it attracts interest whilst banked as a contribution to the accumulated working fund for building maintenance. This he says is double dipping by the tax department.
“The tax laws could benefit from being amended to make the incurred interest on these sums non-taxable. As things stand, the situation is clearly unequal. ”
New South Wales Strata Management (formerly Gilmour Strata Management) commenced business in early 1991, as a member of the highly respected J A Gilmour & Sons group of companies. Licensed solely and specialising only in strata management services, the company has steadily grown to become one of the largest such organisations in New South Wales.
|
|
|
