Can strata special levies generate depreciation deductions?
A special levy is an additional charge issued by a strata body corporate or owners corporation to fund a significant project — typically capital works that exceed the sinking fund balance. Whether a special levy gives you a tax deduction depends entirely on what the money is spent on.
When a special levy creates a Division 43 deduction
If the special levy funds capital works — such as:
- Replacing the building's roof
- Waterproofing or facade repairs
- Rebuilding common area structures
- Constructing new common facilities
Example: A special levy of $10,000 funds a new rooftop waterproofing project. This is construction expenditure. You can claim $250 per year (2.5% × $10,000) as a Division 43 deduction for 40 years.
When a special levy is not a depreciation deduction
If the levy funds:
- Repairs that restore existing fabric to its original condition (not an improvement)
- Legal costs or administrative costs
- Insurance excesses
What you need to know
The owners corporation does not automatically report these breakdowns to individual lot owners. You may need to:
- Request the breakdown of how the special levy was spent from the strata manager
- Review the strata's financial reports for the year the work was completed
- Provide this information to your quantity surveyor so they can include it in your depreciation schedule
What if you pay the levy but the work happens later?
The deduction begins when the work is complete, not when you pay the levy. If the work spans two financial years, your deductions begin from when the constructed portion is ready for use.