Body corporate fees and charges

When it comes to claiming deductions for body corporate fees and charges, it’s important to differentiate between the types of fees and their purposes, as this determines how and when you can claim them. Here’s a breakdown of what you can and cannot claim:

What You Can Claim

1. Administrative Funds:
   • Description: Payments made to the body corporate administration fund.
   • Purpose: Covers day-to-day expenses for maintaining and managing common property (e.g., insurance premiums, garden maintenance, and general administration).
   • Deductibility: You can claim an immediate deduction in the year you incur these fees.
2. General-Purpose Sinking Fund:
   • Description: Payments made to a general-purpose sinking or reserve fund.
   • Purpose: Covers non-routine but anticipated expenses within the year the levy is raised (e.g., roof repairs or painting of common property).
   • Deductibility: You can claim the sinking fund contribution. However, you cannot claim a separate deduction for specific items covered by these funds, such as gardening or building insurance costs.

What You Can’t Claim

1. Special Purpose Fund:
   • Description: Funds established to cover specific, often significant expenses not covered by the general-purpose sinking fund.
   • Purpose: Used for major capital expenses or one-off, unexpected expenses.
   • Deductibility: Payments to these funds are not deductible in the year incurred.
2. Special Contribution for Major Capital Expenses:
   • Description: Additional contributions to cover major capital expenses from the general-purpose sinking fund.
   • Purpose: Intended for capital improvements or repairs of a capital nature.
   • Deductibility: These payments are not immediately deductible. Instead, you may be able to claim a capital works deduction for your share of the expense once the work is completed and the cost is charged to the fund.

Capital Works Deduction

For expenses related to capital improvements or repairs of a capital nature, you generally need to claim a capital works deduction. This applies to significant structural improvements or major repairs and is spread over several years, rather than being deducted in the year the expense was incurred.

Understanding these distinctions ensures you maximize your tax deductions appropriately and comply with tax regulations.

For more information contact our office on (03)98485933 or on the ATO factsheet.

Source: www.ato.gov.au