A client is paying capital works strata levies over 10 years to fund a wide range of expenditure including repainting, new carpet, new lifts, fire protection, facade and structural overhaul, air-conditioning and other work. The ATO website states that the work is deductible/depreciable when completed and paid for. How can you correlate the capital works levies paid to the actual expenditure?
Hi @Maurice333,
You're entitled to deductions for capital works for construction expenditure in creating or remediating capital items that are common property of the body corporate. Your share of deduction for capital works for any particular item is calculated by reference to your proportionate ownership of the common property item when it is completed.
TR 2015-3 states that:
“Expenses attributable to the derivation of the income from the common property, including deductions allowable under Division 40 and Division 43 of the ITAA 1997,20 would be allowable to the proprietors in proportion to their lot entitlement, relevant costs or expenditure, and to the extent of the income producing use of the individual lots.”
In practical terms this means that a lot owner in a strata titled property needs to establish the construction cost of a completed item. This would likely necessitate info being provided from the body corporate as to costs of construction for any particular capital works. Generally, each year either 2.5% or 4% of the original construction cost of the lot owner’s property share is allowable to the lot holder as a deduction. The owner would claim as a capital works deduction their ownership proportion of the cost of construction of the item.
In practical terms this means that there's no necessary direct correlation between levies and capital works deduction in this context. For example, for longer projects a newer owner may contribute less than their share of the construction costs that had been levied- as a previous owner may have contributed part of that cost
Hi @Maurice333
We'll get some advice from our experts! We'll let you know as soon as we can.
Hi @Maurice333,
You're entitled to deductions for capital works for construction expenditure in creating or remediating capital items that are common property of the body corporate. Your share of deduction for capital works for any particular item is calculated by reference to your proportionate ownership of the common property item when it is completed.
TR 2015-3 states that:
“Expenses attributable to the derivation of the income from the common property, including deductions allowable under Division 40 and Division 43 of the ITAA 1997,20 would be allowable to the proprietors in proportion to their lot entitlement, relevant costs or expenditure, and to the extent of the income producing use of the individual lots.”
In practical terms this means that a lot owner in a strata titled property needs to establish the construction cost of a completed item. This would likely necessitate info being provided from the body corporate as to costs of construction for any particular capital works. Generally, each year either 2.5% or 4% of the original construction cost of the lot owner’s property share is allowable to the lot holder as a deduction. The owner would claim as a capital works deduction their ownership proportion of the cost of construction of the item.
In practical terms this means that there's no necessary direct correlation between levies and capital works deduction in this context. For example, for longer projects a newer owner may contribute less than their share of the construction costs that had been levied- as a previous owner may have contributed part of that cost
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