Somersoft Property Investment Forums  

Go Back   Somersoft Property Investment Forums > Finance, Accounting, Tax, Legal > Accounting and Tax

Reply
 
Thread Tools Display Modes
  #1  
Old 15-07-2004, 10:34 PM
ChrisOs ChrisOs is offline
Member
 
Join Date: Feb 2003
Location: Adelaide
Posts: 182
ChrisOs is on a distinguished road
Question Body Corporate Fees - Tax Deductions

I have a few questions related to exactly what can and can’t be claimed as tax deductions for body corporate fees and charges.

Let’s use a hypothetical example of body corporate fees of $1,000 per annum, that comprises $750 administration fees and $250 contribution to a sinking fund.

In any given year, there may be no use of the sinking fund, so how much would be claimable that year?

The next year, there is a project to paint the exterior of the building and this is funded from the sinking fund. Based on evenly distributing the cost across all the units in the body corporate, an amount of $500 is taken from the sinking fund on behalf of each unit. Does $500 then become deductible? If for painting, it would be immediately deductible wouldn’t it?

What about if the complex requires a new pool pump, filter etc. Should the cost of these be apportioned across each unit and appropriate depreciation claimed?

What about if the unit is owned for say 5 years and none of the money contributed to the sinking fund are expended and the owner decides to sell. Do the sinking funds contributed for 5 years get added to the cost price of the unit, to reduce capital gains?

I have read the relevant section in ATOs rental Properties guide (NAT 1729-6.2003) but I find it rather vague.

Any ideas?

Regards,
ChrisOs.
Reply With Quote
  #2  
Old 15-07-2004, 11:08 PM
Fester's Avatar
Fester Fester is offline
Member
 
Join Date: Oct 2002
Location: Adelaide, SA
Posts: 222
Fester is on a distinguished road
I saw my Accountant today to process my return for 2003/2004. She has never, and didn't today make a claim for the sinking fund component of the Body Corp fees. She has always told me it is never a deduction but it is being contested at the moment, but she didn't know the full details. Interesting point you make though, if some of the sinking fund is used, is it then tax deductable. Dale would know.
Reply With Quote
  #3  
Old 15-07-2004, 11:20 PM
NickM NickM is offline
Member
 
Join Date: Feb 2003
Location: Sydney
Posts: 289
NickM will become famous soon enoughNickM will become famous soon enough
I read up on this about 4 weeks ago and from my understanding - contributions to a general fund and to a sinking fund are both deductible.

Contributions for a special levy or a special purpose sinking fund are not deductible.

I will try and post a reference for you tomorrow when i get to the office.

NickM
__________________
www.strategicwealthmanagement.com.au
"Any comments are general in nature and not to be construed as specific advice"
Reply With Quote
  #4  
Old 16-07-2004, 03:33 PM
babushka babushka is offline
Member
 
Join Date: Mar 2003
Posts: 389
babushka is on a distinguished road
Here is the explanation from the ATO website on body corporate fees for rental properties -

"Body corporate fees and charges

You may be able to claim a deduction for body corporate fees and charges you incur for your rental property.

Body corporate fees and charges may be incurred to cover the cost of day-to-day administration and maintenance or they may be applied to a special purpose sinking fund.

If the fees and charges you incur include a contribution to a special purpose sinking fund you will only be able to claim a deduction for that portion of the fees and charges that relate to the cost of day-to-day administration and maintenance. This is because payments to a special purpose sinking fund are usually to cover the cost of capital improvements or capital repairs and are therefore not deductible — see Taxation Ruling TR 97/23-Income tax: deductions for repairs. You may be able to claim a capital works deduction for the cost of capital improvements or capital repairs once the cost has been charged to the sinking fund.

If the body corporate fees and charges you incur are for things like the maintenance of gardens, deductible repairs and building insurance, you cannot also claim deductions for these as part of other expenses. For example, you cannot claim a separate deduction for garden maintenance if that expense is already included in body corporate fees and charges."

My body corporate fees have 2 separate components - administration fund and sinking fund. Having read the above I have always claimed on the portion related to the 'administration fund', but not the 'sinking fund' portion because I thought this would form part of the base cost for CGT purposes. The body corporate fees only have one sinking fund - there is no mention of a 'special purpose sinking fund'. Should I have claimed the whole amounts of body corporate fees or only the admin part? According to NickM I could have claimed the whole lot. Looking forward to some clarification from the forum.
Reply With Quote
  #5  
Old 16-07-2004, 03:46 PM
ChrisOs ChrisOs is offline
Member
 
Join Date: Feb 2003
Location: Adelaide
Posts: 182
ChrisOs is on a distinguished road
Hi Babushka - thanks for the contribution.

I picked up the ATO 2003/2004 Rental Properties guide today and it states what you have posted. It still isn't terribly clear though is it? I too have never had a "special purpose sinking fund".

Maybe NickM's reference will shed some more light on this.

Regards,
ChrisOs.
Reply With Quote
Reply

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump


All times are GMT +10. The time now is 07:59 PM.


Powered by vBulletin® Version 3.8.8
Copyright ©2000 - 2014, vBulletin Solutions, Inc.
Copyright © Somersoft Financial Services Pty Ltd