1. Hidden
Liabili>es
and
Opportuni>es
From
Being
a
Member
of
an
OC
Webinar,
2
June
2011
©
Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

2. Outline
1. Relevant
strata
concepts
2. Tax
concepts
3. Specific
examples
©
Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

3. Specific
examples
1. Mobile
phone
carrier
installa>on
on
common
property
2. Development
and
sale
of
common
property
to
fund
refurbishment
3. Selling
solar
generated
electricity
to
defray
levies
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

4. Part
1
Strata
Concepts
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

5. What
is
a
strata
en>ty
• Separate
legal
en>ty
to
the
individual
owners
• Limited
powers
under
non-­‐uniform
state
legisla>on
• Controls
common
property
and
assets
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

6. Ownership
of
common
property
VIC
QLD
TAS
WA
Direct
ownership
SA
Common
property
ACT
NSW
Trust
Agency
rela>onship
rela>onship
NT
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

7. Strata
en>ty
assets
• Assets
not
forming
part
of
common
property
• Strata
en>ty
is
both
legal
and
beneficial
owner
• En>tled
to
buy
and
sell
assets
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

8. Funding
of
strata
en>>es
• Administra>ve
fund
• Sinking
fund
• Special
purpose
fund
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

9. Part
2
Tax
Concepts
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

10. The
tax
commissioner’s
star>ng
point
• Income
tax
ruling
2505
• Strata
en>>es
are
treated
as
‘public
companies’
• Taxed
at
corporate
rate
of
30%
• Taxed
as
a
‘for
profit’
company
• Principal
of
mutuality
applies
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

11. What
is
mutuality
• ‘One
cannot
make
a
profit
out
of
oneself’
• Where
there
are
iden>cal
contributors
and
par>cipants
in
surplus,
there
is
not
assessable
income
• Can
apply
to
strata
en>>es
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

12. Examples
of
mutual
income
• Administra>ve
fund,
sinking
fund
and
special
levies
• Rent
by
a
lot
owner
for
common
property
• Interest
for
late
paid
levies
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

13. Examples
of
non-­‐mutual
income
ie
assessable
• Interest
from
a
bank
• Access
fees
from
non
owners
eg
occupants
• Rental
income
from
external
par>es
• Profit
on
the
sale
of
assets
to
external
par>es
• Fees
paid
on
the
transfer
of
management
rights
where
the
rights
are
held
separately
to
the
manager’s
lot
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

14. Appor>onment
of
expenditure
Non-­‐mutual
income
Appor>onable
Total
income
expenditure
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

15. Part
3
Specific
Examples
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

16. Mobile
phone
carrier
installa>on
• Licence
fees
paid
by
external
party
• Strata
scheme
registered
in
NSW
• Common
property
held
as
agent
• Income
assessable
in
the
hands
of
the
individual
owners
–
not
assessable
to
strata
en>ty
©
Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

17. Development
and
sale
of
common
property
• Common
property
developed
to
produce
new
penthouse
lots
in
NSW
• Common
property
is
vested
in
the
strata
en>ty
as
agent
for
individual
owners
• CGT
provisions
should
apply
to
individual
unit
holders
• Income
assessable
to
individual
unit
holders
©
Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

18. Selling
solar
generated
electricity
to
defray
levies
• Private
ruling
1011739693623
solar
feed
in
tariff
scheme
is
not
carrying
on
business
by
the
strata
en>ty
• Payments
received
from
electricity
retailer
is
assessable
income
• Associated
costs
eg
deprecia>on
and
maintenance
are
deduc>ble
expenses
• Assessable
to
the
individual
proprietors
rather
than
the
strata
en>ty
• The
right
to
create
a
renewable
energy
cer>ficate
does
not
create
a
GST
situa>on
(authorisa>on
number
1011750210428)
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Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

19. Join
our
next
webinar
Join
us
for
our
next
webinar
at
4.00pm
on
Thursday
7
July
2011:
‘Would
Your
OC
Survive
a
Financial
Performance
Health
Check?’
Reserve
your
seat
now
hfps://www3.gotomee>ng.com/
register/480522310
©
Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au

20. About
the
presenter
Michael Teys is the Founder and Principal Lawyer of TEYS
Lawyers. He has a Bachelor of Laws and practices exclusively in
the area of strata title law. He is a Fellow of the Australian College
of Community Association Lawyers. He was formerly an Adjunct
Lecturer with Charles Sturt University. He appears weekly on SKY
News Business Channel's Property Success with Margaret
Lomas and is a regular panellist for the property edition of Your
Money, Your Call for the same channel. You can find out more
about Michael at www.michaelteys.com
Teys Lawyers practice nationally in strata title law representing owners corporations,
bodies corporate and apartment owners. The firm’s practice groups include building
defects, strata community disputes, strata titles property law, by-laws and levy collection.
Subscribe for their free e-newsletter StrataSpace and find out more about them at
www.teyslawyers.com.au
©
Copyright
2011
Teys
Lawyers
www.teyslawyers.com.au