Hidden liabilities and opportunities from being a member of an oc 2 june 2011


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Hidden liabilities and opportunities from being a member of an oc 2 june 2011

  1. 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. 2. Outline  1.  Relevant  strata  concepts  2.  Tax  concepts  3.  Specific  examples   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  3. 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   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  4. 4. Part  1  Strata  Concepts  ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  5. 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   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  6. 6. Ownership  of  common  property   VIC   QLD   TAS   WA   Direct   ownership   SA   Common   property   ACT   NSW   Trust   Agency   rela>onship   rela>onship   NT  ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  7. 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   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  8. 8. Funding  of  strata  en>>es  •  Administra>ve  fund  •  Sinking  fund  •  Special  purpose  fund   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  9. 9. Part  2  Tax  Concepts  ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  10. 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   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  11. 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   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  12. 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   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  13. 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   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  14. 14. Appor>onment  of  expenditure   Non-­‐mutual  income   Appor>onable     Total  income   expenditure  ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  15. 15. Part  3  Specific  Examples  ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  16. 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. 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. 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)   ©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au  
  19. 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. 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 Channels 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.comTeys Lawyers practice nationally in strata title law representing owners corporations,bodies corporate and apartment owners. The firm’s practice groups include buildingdefects, 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 atwww.teyslawyers.com.au©  Copyright  2011  Teys  Lawyers                  www.teyslawyers.com.au