A property manager of one of our clients queried the format of the levy notice that we issue on behalf of a body corporate that we manage. They suggested that they might have to withold tax because the body corporate did not have an Australian Business Number (ABN).
The body corporate is a small scheme that will never need to register for GST. The body corporate does not have any assessable income and is not likely to ever have assessable income. Elsewhere on this site, we have written how this body corporate is not required to submit a tax return. For these reasons, an ABN was never sought when the body corporate was titled.
The levy notice issued by the body corporate is not an invoice as defined by the Australian taxation office. The levy notice is a statutory notice for contributions (levies) as defined in the QLD BCCM Act. The ATO has been very clear in defining these monies as “mutual receipts”. You can read the interpretation by googling ‘Taxation Ruling TR 2015/3’. Mutual receipts are not assessable income of the body corporate and therefore not an invoice and consequently a lot owner must not withhold full payment on the basis of the notice not displaying an ABN. In short, a “mutual receipt” is the payment of an amount to ones-self! and this is the basis of why this is not assessble income.
However, to avoid these type of discussions with lot owners, it may be easier to get the ABN. When interest rates improve, the body corporate might decide to earn interest on their bank account and then they will need the ABN so that a tax return can be submitted.