Question: We sold an easement and put the proceeds into our capital works fund. Do owners need to declare this as income, and should it have been split between us instead?
We recently sold an easement over land that our block of 38 units originally sold back in 2003. That land has since been built on twice, with the most recent units completed in 2022, from memory.
The proceeds from the easement, around $37,000, were added to our capital works fund to help with expenses. Our strata managing agent has just sent a note to all owners saying that these funds must be declared as income on our tax returns, despite no one receiving any individual funds from the sale.
How should we handle this? Should the proceeds have been divided between owners? Should there have been an EGM to ask owners to agree to using the funds for expenses of the strata scheme? The strata committee made the decision.
At the time, we paid lawyers to negotiate the sale, and no mention was made of how the proceeds should be divided. We are far from confident in our strata managing agent and are reluctant to test their knowledge further on this.
Answer: Easement sale proceeds are declared in each owner’s own tax return, split by unit entitlement.
It’s what I would consider an unusual rule, but ‘income from common property’ must be declared in the owners’ tax return, not the strata tax return. Unusual or surprising in that I don’t know what the reasoning was behind making this a tax rule. This is Taxation Ruling TR 2015/3, which of course applies across Australia like all taxes do, as opposed to strata legislation, which is all state and territory-based.
The sale proceeds are declarable as income in the portion of your unit entitlements. In your case, these are split by the same ratio as levies. With 38 units, $37,000 would be split at roughly $1,000 if all unit entitlements were equal.
The common property sale proceeds are most likely a capital gain for which CGT discounts may be available for investor owners. If your unit in that plan is your ‘principal place of residence’, you should be exempt from tax, but confirm this with your tax agent.
There is a more common type of income from common property, being rental income (roof space to a telco, an accessway for nearby construction, lease of a common storage cage or car space), which all owners, including resident owners, would declare and pay tax on.
TR 2015/3 explains that a distribution of the proceeds to owners is of no consequence to it being taxable or not. A benefit exists to all owners (eg., reduced levies) even if it remained in the plan’s bank account.
Tax deductions may be available for a portion of strata levies, but that’s another question for your tax agent, who would consider your individual circumstances.
The strata managing agent is doing the right thing in advising owners, who subsequently include it in the paperwork they give to their tax agent.
This post appears in the September 2026 edition of The NSW Strata Magazine.
Matthew Faulkner
Matthew Faulkner Accountancy PTY LTD
E: matt@mattfaulkner.accountants
P: 0438 116 374
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