QLD: Q&A Body Corporate Audits and Tax

This Q&A is about privacy and correspondence within a body corporate.

Table of Contents:

• QUESTION: Our levy notices are titled Tax Invoice. As a tax invoice, should a tax receipt be issued upon payment of the Invoice?
• QUESTION: When a body corporate changes auditors, what information should be noted on the correspondence list for the next committee meeting?
• QUESTION: If a Body Corporate has never had an income, do they need to lodge a tax return every year to declare no income or would a single notice informing there will never be an income suffice?
• QUESTION: Are we required to have an audit of our body corporate accounts carried out? If so, how often and who should conduct the audit?

Question: Our levy notices are titled Tax Invoice. As a tax invoice, should a tax receipt be issued upon payment of the Invoice?

Answer: This should only be tax invoice if it is registered for GST, as this is a minimum requirement for GST registered buildings. But no there is no need for tax receipt, no such concept exists in GST law.

Caren Chen
Tinworth Accountants
E: [email protected]
P: (02) 9922 3660

This post appears in Strata News #498.

Question: When a body corporate changes auditors, what information should be noted on the correspondence list for the next committee meeting?

A body corporate (Qld standard module) changed auditors last year. 
None of the following have been noted on a correspondence list that is always tabled at the next relevant committee meeting:

• the fee proposal from the auditors pre their appointment
• the communication advising of their appointment
• the communication advising the previous auditors that they hadn’t been reappointed
• the usual engagement letter issued by the successful auditors
• the usual representation letter required by the auditors before signing off on the financial statements
• any letter often issued by an auditor post completion of the audit advising of internal control issues and/or matters requiring attention

Are these communications body corporate records and if so, are they required to be kept and for how long?

Answer: Whether all of that information should be included as part of a Committee meeting notice is really up to the Committee

The correspondence mentioned relating the appointment of the auditor would be part of the body corporate records and copies of this should have been kept and be available to owners. You could request this from your body corporate manager or access via a search of the books and records.

Whether all of that information should be included as part of a Committee meeting notice is really up to the Committee – if the Committee need those documents included at a formal meeting, or a record of receipt, they should request that. The question mentions that the information was made available at previous meetings, but perhaps there has been a change of direction in terms of how the meeting notice is created. Depending on your agreement, the body corporate will likely be paying for the distribution of meeting notices to some extent, particularly if they are lengthy. The more documents included in the notice the greater the cost and there may have been some attempt to limit that. Alternatively, the information may have been made available in any motion to appoint the auditor and it may have been felt it was unnecessary to repeat this.

Otherwise, there is no obligation to list every communication of the body corporate on a meeting notice and from a management perspective it is probably better to keep the volume of information included in a notice at a reasonable level. Do you really need to see the email of confirmation from the auditor to the body corporate manager acknowledging that they have received the work order from the manager to conduct the audit? It suggests a wider issue if that is the case, but perhaps something like that could be managed by cc’ing the Committee into the body corporate managers emails to the auditor.

In terms of the audit itself, it is not clear from the question if this has been received or not. Certainly, you would expect the full report, including any advice from the auditors, to be sent to the committee when complete. This would then be part of the next committee meeting notice or annual general meeting as appropriate. The report would also be available to all owners as part of the records and should be provided on request. If it is not then there may be an issue.

William Marquand
Tower Body Corporate
E: [email protected]
P: 07 5609 4924

This post appears in Strata News #484.

Question: If a Body Corporate has never had an income, do they need to lodge a tax return every year to declare no income or would a single notice informing there will never be an income suffice?

Answer: It is probably best to lodge an annual zero-income notice.

Strata title bodies corporate are treated as public companies under the tax law and must lodge a tax return for any year in which they derive assessable income over $1.

Income from levy payments and contributions are exempt from income tax. If levy payments and contributions are the only income that the entity has received, there is no requirement to lodge. However, income does include factors such as interest received from a bank account and most body corporates would derive sufficient income from this item alone to necessitate a tax lodgement.

It may be possible to lodge a permanent exemption application but in that instance it could be difficult to change back if income is earned and you need to lodge. It is probably better to lodge an annual zero-income notice.

For further information please see the ATO web page on strata tax: Taxation Ruling

William Marquand
Tower Body Corporate
E: [email protected]
P: 07 5609 4924

This post appears in Strata News #453.

Question: Are we required to have an audit of our body corporate accounts carried out? If so, how often and who should conduct the audit?

Are we required to have an audit of our body corporate accounts carried out? If so, how often?

If this is requested to be done at an AGM, our we best to use our current accountant or should this be done by another company suitably qualified?

Also, once complete, are we able to ask to see the result of the audit?

Answer: Unless the body corporate has resolved by special resolution at the AGM not to have the statement audited, the body corporate must have its statement of accounts for each financial year audited by an auditor.

The body corporate must keep proper accounting records and each financial year, prepare a ‘statement of accounts’ showing the income and spending of the body corporate for the financial year. A copy of the statement of accounts must accompany the notice of the Annual General Meeting (AGM) after the end of the financial year for which the accounts have been prepared.

Audit

Unless the body corporate has resolved by special resolution at the AGM not to have the statement audited, the body corporate must have its statement of accounts for each financial year audited by an auditor.

The motion relating to the appointment of an auditor:

• must be included in the agenda for the meeting; and
• must include the name of the auditor proposed to be appointed; and
• is not voted on if, it is resolved not to have the statement of accounts audited.

The motion for a special resolution must be:

• in the form ‘that the body corporate’s statement of accounts for the financial year (state the financial year concerned) not be audited’; and
• accompanied by a note ‘NOTE: If you want the accounts to be audited, vote ‘no’; if you do not want the accounts to be audited, vote ‘yes’.’.

Who may perform the audit?

The body corporate audit may NOT be audited by a committee member, body corporate manager or any associate of these persons.

The person undertaking the audit must be a member of:

• CPA Australia or
• the Institute of Chartered Accountants in Australia; or
• the Institute of Public Accountants; and
• have a total of 2 years auditing experience.

Audit results

On completion of the audit of the body corporate’s statement of accounts for a financial year, the auditor must issue a certificate:

• stating whether the statement of accounts gives a true and fair view of the body corporate’s financial affairs; and
• if the statement of accounts does not give a true and fair view of the body corporate’s financial affairs— identifying any deficiencies in the statement; and




• a copy of the auditor’s certificate must accompany the notice of the next annual general meeting held after the certificate is given.

Relevance

Body Corporate/Strata Property auditing requirements vary from state to state.

The above information is relevant to schemes registered under the Queensland Body Corporate and Community Management Act:

• Standard Module
• Accommodation Module
• Commercial Module

Schemes registered under the Small Schemes Module do not have strict auditing requirements and it is not compulsory for a motion about the audit to be on the agenda of the AGM.

Schemes registered under the Specified Two-lot Schemes Module are not required to maintain a bank account and therefore do not need an audit.

The information herein is general information only and is not intended to constitute, legal, financial or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.

Tammy Lynch
Tower Body Corporate
P: 07 5609 4924
E: [email protected]

This post appears in Strata News #379

Have a question or something to add to the article? Leave a comment below.

Embed

Read More:

• QLD: Q&A Can I Access Body Corporate Records
• QLD: Q&A Privacy and Correspondence within Body Corporates

Visit Strata Committee Concerns OR Strata Legislation Queensland

Looking for strata information concerning your state? For state-specific strata information, take a look here.

After a free PDF of this article? Log into your existing LookUpStrata Account to download the printable file. Not a member? Simple – join for free on our Registration page.