Do ownership change certificates create unnecessary tax return obligations?

Management & Agreements

Can strata managers charge for ownership change certificates on their own behalf to avoid unnecessary tax returns?

When a change of ownership occurs, the strata manager issues the necessary certificates on behalf of the strata company and invoices the requesting party. The payment goes to the strata company, and the strata manager then charges the strata company for the amount received. The strata manager also engages a tax professional to file an annual return at a cost of around $300, even though the only income is from the issue of certificates.

The result is that the return costs around $300, there is no taxable income, the tax office processes the return and may issue an assessment, and significant time is wasted preparing the return.

Has this issue ever been raised with the state strata regulator so that strata managers can charge directly for issuing certificates, or with the tax office so that an Australia-wide exemption ruling could apply?

The reason for this treatment lies with the trust account requirements in most States.

I understand the frustration with this issue. The reason for this treatment lies with the trust account requirements in most States. For transparency reasons, all trust income must be banked into the trust account and expenses disbursed from the trust account. This requires the certificate income paid by the new owner being banked into the trust account and then disbursed to the managing agent.

Unfortunately, ATO reissued IT 2505, largely unchanged as TR 2015/3. The receipt of certificate fees by non-owners is specifically mentioned as non-mutual income and, therefore, it is taxable, resulting in the requirement of an income tax return.

I agree this is counterproductive, but it is not on the Government's priority list. Unfortunately, given that the ATO reissued its ruling for Strata Plans, there appears to be no change coming anytime soon.