If you own a rental apartment, unit, or townhouse under a unit title (body corporate) structure, you pay body corporate levies alongside your other property costs. Some of these levies are fully deductible against your rental income — but not all. Knowing which costs are deductible, and how to split levies that cover both operating and capital spending, keeps your tax returns accurate.
Body corporate operating levies (maintenance, insurance, management, utilities for common areas) are tax-deductible as rental expenses. Capital levies (major repairs, building improvements, lift replacements, seismic strengthening) are generally not immediately deductible — they may be added to the property's cost base or depreciated as chattel improvements. If your levy covers both, you must split it. Ask your body corporate for an annual breakdown of operational vs capital spending.
What Is a Body Corporate?
A body corporate (sometimes called a strata title or owners corporation) is a legal entity created when a building is divided into unit titles. Every unit owner is automatically a member. The body corporate manages and maintains the common property — lifts, lobbies, gardens, exterior walls, roofs, and shared services.
Body corporates raise money through two main mechanisms:
- Operating levy — regular contributions to cover ongoing running costs
- Capital levy / special levy — contributions to the long-term maintenance plan (LTMP) or unexpected capital works
Operating Levy — Fully Deductible
The operating (or maintenance) levy covers the day-to-day costs of running the building:
| Cost type | Examples | Deductible? |
|---|---|---|
| Building insurance | EQC excess top-up, full replacement insurance | Yes |
| Common area maintenance | Garden upkeep, cleaning, painting | Yes |
| Management fees | Body corporate secretary, management company | Yes |
| Common utilities | Electricity for foyer, carpark lighting | Yes |
| Building WOF and inspections | Fire warrant, elevator certificate | Yes |
| Minor repairs | Plumbing fixes, common area lighting | Yes |
| Administration | Accounting, legal, AGM costs | Yes |
These costs are deductible in the year paid — they match the income-earning principle (you need a habitable building to generate rental income).
Capital Levy and Long-Term Maintenance Plan (LTMP) — Not Immediately Deductible
New Zealand body corporates are required to establish a Long-Term Maintenance Plan (LTMP) covering major works over at least 10 years. Contributions to the LTMP fund that relate to capital improvements or major structural work are not immediately deductible:
| Cost type | Examples | Deductible? |
|---|---|---|
| Roof replacement | Complete reroofing | No — capital (may be depreciable) |
| Lift replacement | Full lift system replacement | No — capital |
| Seismic strengthening | Earthquake upgrade | No — capital (may qualify for building improvements) |
| Facade replacement | New cladding (e.g., leaky building remediation) | No — capital |
| Major plumbing replacement | Full repiping of building | No — capital |
Exception — repairs that restore but do not improve: If the LTMP levy funds genuine maintenance and repairs (restoring the building to its original condition), these may still be deductible — but this requires analysis.
How to Handle Capital Levies
Capital levies become part of your cost base in the property:
- They may be depreciable if they relate to building fitout (chattels) — e.g., lift equipment, HVAC
- They are generally not depreciable if they relate to the building structure itself (buildings depreciation rate is 0% since 2010 for residential, 2024 for commercial)
- They may reduce your taxable gain if you ever sell the property (when CGT eventually exists, or under the bright-line test)
Splitting Mixed Levies
Many body corporate levies are a single line item that covers both operational and capital spending. To claim the deductible portion:
- Request the body corporate’s annual accounts — they will show the breakdown of how levies were spent (operating vs LTMP)
- Calculate the proportion of the levy that went to operating costs
- Claim that proportion as a deductible expense; treat the balance as capital
Example:
- Annual body corporate levy: $4,800
- Body corporate accounts show 70% operating / 30% LTMP capital
- Deductible: $4,800 × 70% = $3,360
- Capital (added to cost base): $4,800 × 30% = $1,440
Body corporate secretaries are obliged to provide financial information to unit owners — you are entitled to this data.
GST on Body Corporate Levies
For GST-registered landlords (those with commercial property or residential property turnovers above $60,000):
- Body corporate levies are generally charged at 15% GST
- You can claim an input tax credit for the GST portion
- Ensure your body corporate is GST-registered and issues tax invoices
For residential landlords (not GST-registered):
- Body corporate levies are a GST-inclusive expense
- Deduct the full (GST-inclusive) amount — no GST input credit adjustment required
Specific Situations
Leaky Building Remediation
Remediation levies for leaky building repairs are complex. If the work genuinely restores the building to its original condition (repair, not improvement), the levies may be deductible. If the remediation involves improvements (e.g., better cladding system), the improvement component is capital.
IRD has specific guidance on leaky building remediation — get specialist tax advice if significant amounts are involved.
Sinking Fund Contributions
Some body corporates maintain a sinking fund (reserve fund) for future capital works. Contributions to the sinking fund are not deductible when contributed — deductions only arise when the money is actually spent on deductible maintenance. If you pay into a sinking fund and it later pays for operating costs, those are deductible at the time of expenditure.
Record-Keeping for Apartment Investors
Keep for 7 years:
- Annual body corporate levy statements
- Body corporate annual financial accounts (showing operational vs capital split)
- Special levy notices and explanations of the work funded
- Body corporate meeting minutes for context on capital decisions
Frequently Asked Questions
My body corporate issued a special levy for earthquake strengthening. Is any of this deductible?
Seismic strengthening is a capital improvement. It is generally not immediately deductible. It adds to your cost base and may be depreciable if structured as building fitout improvements — but structural strengthening typically is not depreciable under current rules. Consider getting specialist advice if the levy is large.
My body corporate levy includes insurance. Can I claim the insurance portion?
Yes — building insurance for a rental property is deductible. If the levy bundles insurance and capital costs, split the levy and claim the insurance (and other operating) portion.
I pay a body corporate levy but I also pay my own insurance separately. Do I double-claim?
No — if your body corporate levy covers building insurance and you also have your own contents or separate policy, they are separate deductible expenses. You cannot claim the same cost twice, but two genuinely separate policies are each deductible.