Tax time requires bodies corporate and their managers to consider their compliance responsibilities. Income treatment can depend on how money is received and who it relates to, so committees should avoid relying on old examples or fixed thresholds.
This article explains what to review, which records to gather and when to obtain tax advice.
What are the body corporate tax return requirements?
There is no current tax source in this guide confirming a universal income threshold, tax rate or lodgement trigger for every Queensland body corporate. A committee should not decide whether a return is required based only on the amount in the bank account.
A body corporate is a legal entity created when land is registered as a community titles scheme. Its role includes administering common property and body corporate assets and carrying out functions required under body corporate legislation.
At tax time, review the scheme’s income, expenses, investments and arrangements involving common property. Keep a clear record of any advice received and the basis for deciding whether a return should be prepared.
For background on owner contributions, see understanding your body corporate levies.
What is mutual and non-mutual income?
“Mutual” and “non-mutual” are tax concepts that may affect how body corporate receipts are considered. The available Queensland government sources do not establish the current tax treatment of particular receipts.
Levies should not automatically be treated as non-taxable in every context. Owner contributions are amounts collected to meet body corporate expenses, with annual levies decided at the annual general meeting.
Separate income and receipts in the accounts instead of combining everything under a broad label. This gives a tax adviser enough information to assess the relevant treatment.
Which body corporate income may need closer tax review?
Income that may need closer review includes:
- interest earned on bank accounts or term deposits
- payments connected with leasing or using common property
- income from shared facilities
- advertising or communications equipment arrangements
- amounts received from people who are not lot owners.
These examples are not definitive classifications. Treatment may depend on the agreement, the source of the payment, the rights attached to the arrangement and how the body corporate operates it.
Individual lot owners should obtain their own tax advice where an arrangement may affect them personally. The body corporate should also keep copies of agreements and payment records so the advice can be based on the actual arrangement.
Who is responsible for preparing and lodging the return?
The body corporate is responsible for decisions about its administration and finances. It may engage a body corporate manager to provide administrative services, but it is not legally required to have one.
A manager’s duties depend on the written engagement with the body corporate. Where authorised, a manager may manage body corporate money and perform administrative tasks. Check the engagement before assuming tax work is included.
A body corporate manager should not be described as a tax agent without checking the current tax-agent rules. If tax return preparation is being considered, the body corporate should confirm who is qualified and authorised to provide that service.
Read more about the manager’s role in what is a body corporate manager.
What records should a body corporate keep for tax time?
A body corporate should keep:
- bank statements and investment records
- levy notices and payment records
- invoices and receipts
- agreements involving common property
- records of income from shared facilities
- meeting minutes and resolutions
- copies of tax advice and returns.
The body corporate must keep financial accounts and records of assets, meetings, engagements and authorisations. A manager authorised to manage administrative and sinking funds must also prepare monthly reconciliation records, including financial institution statements and documents showing payments.
When should a body corporate obtain tax advice?
Obtain tax advice before lodging a return where the scheme has income beyond ordinary owner contributions, receives investment interest, earns money from common property or has an arrangement that may affect individual lot owners.
Professional advice is also sensible where the committee is unsure whether a manager’s engagement includes tax work. Unregistered tax-agent services can create serious compliance concerns, so businesses providing that service should ensure a suitably qualified person is involved.
Complete records and early advice can help your body corporate make a clearer decision about its tax obligations. For assistance with body corporate administration, contact StrataCare at reception@stratacare.com.au.
