As a new Management Rights owner, it can be difficult navigating the complexities of the industry and its ever-changing regulations. Fortunately, BDO Cairns Management Rights specialists can help. Our tailored services are designed to assist your business every step of the way, from the initial purchase, through to management and operation, and finally selling when it's time to move on.
What are Management Rights?
Management Rights owners are paid an income stream for carrying out caretaking duties to maintain a strata titled property. The unit owners will normally specify that the Management Rights owners purchase a unit and live onsite, so it's a great option for those seeking lifestyle and business opportunities.
There are also three other ways in which Management Rights owners can derive income:
- Act as a property agent: After obtaining a licence, managers can become a property agent for unit owners collecting commissions on rental income
- Permanent letting pools: The Manager can earn further income by offering repair and maintenance services to unit owners in letting pools where tenants reside long term
- Holiday letting pools: In holiday letting pools, a Manager can gain additional earnings by offering repair, maintenance and cleaning services to unit owners and providing additional services to holidaymakers, such as tours.
Stage 1: Purchasing Management Rights
There are many elements involved in purchasing Management Rights. These include:
- Sourcing a potential business - including valuation, profit and loss statements and negotiating the Manager's unit
- Contracting the purchase
- Structuring the business
- Financial due diligence
- Trust account auditing and software implementation.
BDO Cairns can help with all elements of the purchasing Management Rights process. For example, our extensive knowledge of the Management Rights industry and the local business environment means we can create reliable projections and cash flow forecasts. This is useful when purchasing ‘off the plan’ Management Rights (where there's no historical financial information from which to determine a valuation).
We are also the market leader in financial due diligence, and our extensive Management Rights sales and due diligence reports provide valuable information to the purchaser.
The Agents Financial Administration Act 2014 specifies that any trust account must be audited annually in order to renew the required licence. There are many rules regarding these audits, and it helps to have a trusted adviser such as BDO on hand to take you through these complexities. We can also assist with the implementation of cloud accounting software, which will greatly improve your accounting efficiency.
Stage 2: Operating a Management Rights business
There are many elements involved in running a Management Rights business. These include:
- Employees: You may need to hire employees to assist with your day-to-day operations. This means you'll need to be registered as an employer with the ATO, WorkCover Queensland and any other relevant superannuation funds
- Business accounts
- GST: The GST treatment for holiday let apartments was determined by the 2012 Goods and Services Tax Ruling. It states that strata titled holiday unit accommodation is not subject to GST. However, the Management Rights business must still be registered for GST as it will charge GST on the services provided to strata title unit owners
- Business Activity Statements.
BDO's specialist GST and tax advisory team can help you understand and meet your GST obligations, and our business advisory services can help with all other aspects of running a business.
Stage 3: Selling a Management Rights business
If you decide to sell your business, BDO's industry expertise can help you maximise your return on investment. We'll assist with:
- Preparing a profit and loss statement
- Contracting to sell the business - including minimising any tax implications on the sale of your business
- Contract settlement.
Our specialist Management Rights services mean you'll have someone with you every step of the way in your business journey. For more information on what we can do for you, contact the team today.
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