Think a strata company only needs to lodge when there’s income? Not quite. This article clears up the common confusion between tax returns, nil returns, and Return Not Necessary (RNN) submissions — and why every building needs one of them lodged each year.
Tax Return or Return Not Necessary?
Each year, every strata company must either lodge a tax return or notify the Australian Taxation Office (ATO) that a return is not required by submitting a Return Not Necessary (RNN). A common misconception among strata managers is that only buildings with assessable income need to report. While that’s true for the preparation of tax returns, it overlooks the requirement to also submit RNNs for the remainder of the portfolio.
Failing to lodge either a tax return or an RNN means the ATO will treat the company as if it has failed to lodge its tax return, potentially leading to penalties.
Tax Returns: What is a 'Nil Return'?
Strata companies must lodge a tax return in any year where $1 or more of assessable income is received—regardless of whether the end result is a profit. That income might include interest on investments, status certificate fees or laundry receipts. Even if expenses completely offset the income, the return is still required. This is referred to as a nil return, which simply means there is no taxable income (ie: profit) — not that no return is required.
One of the most common examples is a strata property that only earns income from status certificates. The fees received from prospective buyers are then typically passed straight to the strata manager as a preparation fee, resulting in no taxable income. But because these are separate transactions, a tax return is still required. This is a classic example that requires a nil return—not a Return Not Necessary.
A lodged tax return may result in one of three outcomes:
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Tax Payable – income exceeds expenses
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Nil Return – income is entirely offset by deductions
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Refund – pre-paid tax instalments exceed final tax payable
Return Not Necessary: A Legal Requirement
For all other buildings that have no assessable income during the financial year, a RNN submission must be made. While quick and straightforward to lodge, the submission must still be completed by the regular tax return deadline—usually 15 May. Managers sometimes incorrectly refer to these as nil returns, but it’s important to be clear: an RNN is not the same thing as a nil return.
Many managers are aware that there exists an option to circumvent the annual RNN requirement by declaring to the ATO that future returns will never be required. While this might appear attractive in terms of efficiency, it is not a valid path for strata properties. To lodge this permanent exemption, a declaration must be signed confirming that the company will never need to lodge a return again — something that can’t be confidently stated in the strata context as even a small amount of bank interest or a single status certificate fee in a future year would trigger the need for a return. Ascend recommends avoiding this approach entirely.
Best Practice: Manage the Entire Portfolio Together
The simplest way to stay compliant is to have your accountant manage the tax affairs for your entire portfolio—including the RNNs - as opposed to a piecemeal approach where you send them only those that require a return. At least once per year, you should arrange a check-in with your tax agent to reconcile your live portfolio list against their tax lodgement list to ensure no buildings are missed.
This process becomes even more important now that the ATO is applying penalties more strictly. Since mid 2024, we’ve found it increasingly difficult to have non-lodgement penalties reversed — even when the manager acted in good faith or made a genuine error. ATO staff are now applying very technical criteria for penalty remission, and in some cases, waivers are no longer available where they once might have been.
Quick Takes:
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Every strata company must either lodge a tax return or submit a Return Not Necessary (RNN) each year.
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A nil return (e.g. status certificate income fully offset by expenses) still requires a tax return to be lodged.
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RNNs are due by the same deadline as a tax return—typically 15 May.
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Best practice is to manage the entire portfolio through one accountant and conduct annual reconciliations.
If you require assistance in regards to return not necessary submissions or tax return obligations for the buildings you manage, please reach out to our admin team.
Links:
- The ATO Has Flipped It's Stance on Penalties (Ascend Article)
- Do We Have To Do a Tax Return for Status Certificate Fees?
The above content is of a general nature and should not be relied upon as professional advice. Ascend encourages readers to seek advice from suitably qualified professionals in relation to their specific circumstances and not to rely solely on the information provided above. Please contact our office for more information.
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