SCA (NSW) Annual Strata Owners Day is the best opportunity for owners and tenants to get the latest information from strata experts in one day, under one roof.
This year the event will be at the Swissotel in Market Street in the city and will feature a joint panel of expert professionals from cleaning and caretaking to insurance, tax and law. The panel will be hosted by ABC radio’s James Valentine.
Two of our professionals, Tony Nunes from Kelly & Partners and James Blake from Turnbull Bowles Lawyers have provided some insight into issues in the industry from an accounting and legal perspective respectively. These are especially interesting for owners to consider ahead of attending the day.
Tony has three questions strata owners should be asking themselves about what engaging a tax specialist can do for you:
– If you had brain surgery, heart surgery or any specialist surgery would you let your GP perform the procedure?
– If you sold a property for a profit of a $1m, would you prefer to pay $470,000 tax or $235,000 in tax?
– Is your strata’s manager creating significant tax risk for you?
“The answers to these are tax is a specialist area. Find a tax advisor who can advise on strata matters, not just fill in the tax return,” he says in response to the first question.
“If you or the strata committee don’t get tax advice, in particular on significant transactions, you are making a choice. Sometimes you will make a choice to pay higher income tax, GST or stamp duty.”
“Timing is everything! As tax advisors we can often structure a transaction to be more tax effective and have saved strata owners millions in the process. But we cannot change a transaction that has already occurred – make sure your strata manager is getting advice on any strata-related transaction before entering into the transaction.
James’ also has some areas that owners need to consider.
“These are the legal issues owners are concerned most about at present and are in no particular order.”
- Strata renewal and collective sales;
- Attempts by owners corporations to restrict short term lettings/Airbnb;
- Fire safety and cladding following the Grenfell tragedy;
- Window locking devices given the deadline for compliance was 13 March 2018;
- To a much lesser extent, Building Bonds, the effectiveness of them and how well they operate will only come to light in the next 12-18 moths when the buildings to which they apply reach completion.
James and Tony also have some current advice for owners on things they should be aware of that they may have not considered.
Tony wants owners to know that while there has been a proliferation of strata title schemes across Australia and an increasing complexity of tax legislation, the tax issues affecting strata title schemes appears to have been largely ignored by legal advisors, accountants and the ATO.
“The first major ruling issued by the ATO on the income tax issues was IT 2505. This ruling was released on 3 November 1988. An update to this ruling was issued in 2015 as TR 2015/3. Thus over the course of almost 27 years strata title schemes and proprietors have had to rely on a ruling issued in 1988 – a rare occurrence indeed in the world of tax. Further, a review of private binding rulings on strata will quickly highlight an inconsistency of approach and outcomes by the ATO prior to the issue of TR 2015/3.”
“The lack of rulings addressing key aspects of strata schemes and an inconsistent application of IT 2505 over the years has resulted in some confusion amongst advisors to strata schemes and proprietors. All the while property values have increased in value several fold across Australia, increasing the potential exposure where errors are made. The exposure risk is further increased when you couple this with an ageing building; or an ageing group of strata proprietors wishing to exploit the value attributable to their properties; or an owners corporation run by individuals who have little or no knowledge of tax; or where you have developers willing to exploit the latest strata legislative changes.”
“We have advised a number of strata on changes to the common property where the initial transaction that was suggested by advisors would have resulted in double tax for the strata owners. This is because in addition to the tax on the suggested transaction, the tax avoidance rules kicked in to create further liabilities for the strata owners, and in some cases for the owners corporation. In some cases, the owners were not even aware that they had a tax liability in the first place, as they had not been advised of this. It is therefore critical to get tax advice on any significant tax transaction,” Tony concluded.
James also has sage advice on the things strata owners need to be doing or not doing.
“Don’t undertake any building or renovation work without checking if you need to obtain consent from the owners corporation and/or the strata committee first,” he warns.
“‘Cosmetic work’ can be undertaken without the approval of the owners corporation while ‘minor renovations’ can be approved by an ordinary resolution or by the strata committee if that power has been delegated to it. All other work that affects the common property will require approval by a special resolution and may require a common property rights by-law.”
James also says to make sure that you do not fail to pay levies even if there is a dispute on going about them and how and why they were raised.
“If you fall into arrears, you will not be able to vote at meetings and will have no voice in the running of the strata plan.”
Also do not ignore correspondence from the owners corporation or strata manager. Take the time to consider meeting agendas so that you are across all the issues relevant to the strata plan and can make an informed decision when it comes time to vote.
And finally, James says make sure you participate.
“Have your say. Do participate in the running of the building by attending meetings and staying up-to-date with what’s going on.”
“Also, it may seem obvious, but you should try to be a good neighbour. Strata living involves many people living near each other. If people are not considerate to each other, it will inevitably lead to conflict and a general atmosphere of distrust and resentment. For example, don’t park in other people’s spaces. Do not monopolise common property facilities. Do not make excessive noise.
Wise words from two of the strata industry’s professionals who will be joining the expert panel on Saturday 24 March. We hope to see you there.