What financial management strategies can a body corporate use to manage levy income and expenses effectively? Should committees seek professional tax advice when preparing budgets?
As the treasurer of our body corporate, I'd like to explore whether there are more effective accounting and budgeting practices we could adopt to manage our levy income and expenses more efficiently. What financial considerations should committees take into account when deciding how to fund works?
Is it good practice to seek professional tax advice when preparing budgets, or do most committees rely on guidance from the strata manager alone?
Tax in strata is relatively simple.
It's my understanding that many committees rely on their strata manager for budgeting advice. Of course, this is all relative to the manager, but generally speaking, this is ok.
Very often, a budget should be the prior year's expenses rounded up. You may be aware that certain items, such as management fees, increase by 5% annually. Insurance premiums, being the exception lately, sometimes increase by 20%. Then, for new expenditure, budgeting is a best guess, or you may have quotes.
Then, levy income budgets are meant to either equal expenses, exceed expenses by any brought forward deficit (excluding loans), or exceed expenses to build up a surplus. All dependent on what the owners want to do. There is always a wide variety of owner’s income within a building that prevents a surplus from being realistic. A budget is an estimate/plan that is ruined by anything unforeseen. Seeing the unforeseen is quite difficult.
Tax in strata is relatively simple, with the only real issue being the deductibility of levies to investor owners, which is the realm of your personal tax agent.
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I am an FCPA and Tax Agent and run the only accounting firm in NSW that specialises in strata accounting. Whilst my practice is 11 years old, I have 15 years experience in the industry.
Based in Helensburgh (northern Illawarra) we audit strata from NSW, VIC, QLD & ACT.
My firm also lodges tax and BAS and acts as an ASIC agent too for those very old buildings that are Company Title Strata.
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