Strata title is actually an Australian innovation in property law that has been copied around the globe, according to the Strata Community Association.Strata title enables individual ownership of part of a property (usually an apartment or townhouse and referred to as a ‘lot’), combined with shared ownership in the remainder of the property e.g. lifts, foyers, gardens, which are referred to as ‘Common Property’. The property management of strata schemes is organised through a legal entity known as the body corporate, strata company, community association or owners corporation and there is usually an appointed strata manager.Strata Community Association says there are now more than 270,000 such schemes encompassing more than two million individual lots across Australia, including strata-titled retirement villages, caravan parks, resorts and vineyards, although most developments tend to be for residential, commercial or retail use.
Strata fees, or levies, cover maintenance of any shared or common areas in a building, for example garden areas, foyers, elevators, gyms and pools. According to realestate.com.au, there are three main types of levies:
These cover the day-to-day running of the scheme, such as cleaning, gardening, strata management and the paying of utility bills for common areas.
Sinking fund levies are typically used for bigger or longer-term projects such as building works, painting, plumbing and repairs.
Special levies are usually unexpected and might include major building works and repairs such as a new roof or elevator. They require every owner to chip in extra funds and are not part of the administrative fund levies.
With a strata property investment, you benefit from:
Investing in a strata titled property also comes with watchouts:
Strata fees will vary widely depending on what you’re buying. A modern apartment with an elevator, pool, gym and garden, for example, is likely to have higher strata levies than a unit in an older-style building with no lift or on-site facilities.
A strata title refers to some parts of the property being shared and maintained by all of the apartment or unit owners collectively, whereas a Torrens title property refers to one in which the purchaser owns both the house and the land on which it stands.Apartments and townhouses tend to be strata title, however it’s not uncommon to find Torrens title townhouses too.
Typically yes, strata is tax deductible on an investment property. The ownership of the common property varies according to the relevant state strata title legislation. However, in all states, the income derived from the use of the common property constitutes assessable income of lot owners.Accordingly, expenses attributable to the derivation of the income from the common property, such as depreciation and capital works, may be able to be claimed as deductions by the lot owners in proportion to their lot entitlement.You may be able to claim a deduction for body corporate fees and charges you incur for your rental property.
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