Last night Treasurer Josh Frydenberg’s brought down his first federal budget, promising personal & small business tax relief on the back of the first budget surplus in 12 years. Mr Frydenburg’s has promised small businesses that their tax rate will be lowered to 25 per cent by 2021-22.
Unfortunately the Australian Tax Office doesn’t classify strata entities (bodies corporate) as a “small business”, and income from external sources, like banks and telco’s, disappointingly remains taxed at 30%.
SSKB Tax Compliance P/L challenged this position in 2017 when we applied for a private tax ruling from the ATO on behalf of a client.
The ATO ruled that “Even though bodies corporate conduct activities which are usually indicative of operating a business such as keeping books of account, and carrying on its activities in a systematic and organised manner…” the ATO said, “…the body corporate is not operating a business because it receives minor passive income from non-mutual sources and there is no profit intent or activity. As it is not operating a business it is not a small business entity, and therefore not entitled to the reduced rate of company tax”.
Not the ruling we wanted but at least we know where we stand.
If you have a grey area of tax relating to your body corporate that you would like clarified, SSKB Tax Compliance P/L can assist in the preparation of your Private ruling.
Just another value adding professional service from SSKB.