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The Tax Office has changed the way it addresses levies paid into Strata Schemes and now not all strata levies are 100% deductible in the year they’re paid in.
Strata levies cover two areas – administration, paying for the day-to-day running expenses of a building, such as electricity, cleaning, wages, etc. and the sinking fund which pays for the non-recurrent expenses, such as;
• painting of the building
• replacement of fencing
• driveway refurbishment
• replacement of common property items
• lift overhauls
Because sinking funds cover quite extensive work and traditionally Strata Managers have attempted to keep levies to a minimum, often there is not enough money in the sinking fund to pay for it. In these cases, a Special Levy is issued and it is the Special Levies that the Tax Office has changed the way they are treated.
The Tax Office has now declared that Special Levies are of a capital nature and cannot be claimed as an outright deduction but treated as a capital expenditure and deducted at 2.5% per annum.
How to get over this? Simple! Your Strata Manager needs to do a 10 year Sinking Fund Plan taking into account problems that could or will arise and base the sinking fund fee structure on this. This ensures you have the fees to pay for major works, you are not hit with huge outlays at one time and you’ll continue to receive 100% tax deduction for them.
Provided by AIP Vision
Strata levies cover two areas – administration, paying for the day-to-day running expenses of a building, such as electricity, cleaning, wages, etc. and the sinking fund which pays for the non-recurrent expenses, such as;
• painting of the building
• replacement of fencing
• driveway refurbishment
• replacement of common property items
• lift overhauls
Because sinking funds cover quite extensive work and traditionally Strata Managers have attempted to keep levies to a minimum, often there is not enough money in the sinking fund to pay for it. In these cases, a Special Levy is issued and it is the Special Levies that the Tax Office has changed the way they are treated.
The Tax Office has now declared that Special Levies are of a capital nature and cannot be claimed as an outright deduction but treated as a capital expenditure and deducted at 2.5% per annum.
How to get over this? Simple! Your Strata Manager needs to do a 10 year Sinking Fund Plan taking into account problems that could or will arise and base the sinking fund fee structure on this. This ensures you have the fees to pay for major works, you are not hit with huge outlays at one time and you’ll continue to receive 100% tax deduction for them.
Provided by AIP Vision