Owning property in a strata scheme in Australia means more than just paying your mortgage; it also involves understanding strata levies. These regular contributions are the financial lifeblood of your shared community, funding everything from routine maintenance to major repairs and insurance for common areas. 

But what exactly are strata levies, how are they calculated, and what do they cover? This complete guide will demystify strata levies for Australian property owners, ensuring you’re fully informed about this essential aspect of strata living.

What Are Strata Levies?

Strata levies are regular financial contributions made by all lot owners in a strata scheme. These contributions are deposited into a central fund that is used to maintain and manage the shared property areas, such as lifts, stairwells, gardens, exterior walls, and sometimes even the roof. In essence, they exist so that shared properties are kept safe, functional, and well-maintained over time.

There are three types of levies:

  • Administrative Fund Levies: For day-to-day expenses like cleaning, minor repairs, and insurance.
  • Sinking Fund Levies: These are for long-term or larger expenses, such as replacing a roof or repainting the building.
  • Special Levies: These are one-off charges raised for unexpected costs or major works not covered by the existing funds.

 

If you’re working with strata consultants in Melbourne, they’ll often help you understand how these funds are managed and distributed in your particular scheme.

How Are Strata Levies Calculated?

Strata levies aren’t arbitrarily set; their calculation is a meticulous budgeting process overseen by the Owners Corporation (OC). This ensures that every owner’s contribution is equitable and adequate to cover the financial demands of the shared strata property.

The process typically unfolds in these stages:

     1. Crafting the Annual Budget: 

The Owners Corporation manager usually takes the lead in preparing the yearly budget. This involves forecasting the financial requirements for managing the common property, encompassing both the administrative fund (for day-to-day operations) and the maintenance or sinking fund (for future capital expenses). For OCs with two or more years of operation, historical expenditure data becomes invaluable, allowing for more accurate projections and a clearer picture of the upcoming year’s financial needs.

     2. Review and Approval by Owners: 

The proposed budget undergoes a thorough review and endorsement by the Committee before being presented to all owners. This usually happens at the Annual General Meeting (AGM) or a Special General Meeting (SGM). During this crucial meeting, owners have the opportunity to examine, discuss, and ultimately vote on the proposed annual fees. It’s worth noting that proxy voting rules, which allow an owner to appoint someone to vote on their behalf if they can’t attend (as is common in Victoria), can differ by state or territory. Owners should always consult their local legislation for specific stipulations regarding proxy appointments.

     3. Determining Individual Contributions: 

Once the overall budget receives approval, each individual lot owner’s levy is precisely calculated. This figure is based on their lot liability or unit entitlement, factors typically detailed in the subdivision plan. Elements such as the size of the lot, its location within the scheme, and any exclusive use of specific facilities often play a role in determining this individual proportion.

What Happens If Strata Levies Are Not Paid?

Failing to pay strata levies on time can lead to significant repercussions for lot owners. When levies become overdue, the Owners Corporation will issue a final notice, initiating a process with several potential consequences:

  • Financial Penalties: Overdue levies often incur additional charges. These can include late fees and interest, as stipulated by either state legislation or the specific by-laws of the Owners Corporation.
  • Loss of Voting Rights: Owners who have outstanding levies may forfeit their right to vote on most matters at Owners Corporation meetings. The only exceptions are typically situations requiring a special or unanimous resolution, where their vote might still be counted.

 

Should the debt remain unpaid 28 days after the final notice is issued, the Owners Corporation is empowered to pursue legal action. This could involve recovering the outstanding levies through a relevant tribunal or court.

To avoid these financial burdens and loss of privileges, it is crucial for lot owners to ensure their levies are paid promptly and to remain informed about the payment regulations governing their strata scheme.

How to Reduce Strata Levies Without Compromising Maintenance?

Strata levies can fluctuate to align with the evolving financial demands of the property, but proactive measures can help keep them in check. Here are practical strategies to maintain manageable contributions:

  • Smart Budgeting: Regularly check financial reports. This helps ensure that money is spent wisely and prevents unnecessary costs.
  • Best Contractor Deals: Always get multiple quotes for maintenance and repairs. This secures better value and cuts overall expenses.
  • Cost-Cutting Moves: Add energy-efficient upgrades and water-saving measures. Additionally, schedule services efficiently and perform proactive maintenance. These steps prevent costly repairs and lower long-term spending.

 

Making these sustainable choices helps reduce costs over time. This creates lasting benefits for both the building and its owners.

Strata Levies vs. Body Corporate Fees: Are They the Same?

Indeed, these terms refer to the same core concept and are often used interchangeably across Australia. The specific terminology primarily depends on the state or territory you are in:

  • Victoria (VIC): Commonly referred to as strata levies.
  • New South Wales (NSW): Known as strata levies.
  • Queensland (QLD): Typically referred to as body corporate fees.
  • Western Australia (WA): Generally known as strata levies.

 

Regardless of the regional name, the fundamental purpose remains consistent.

Legal and Regulatory Aspects of Strata Levies in Australia

Strata levies aren’t just a standard fee; they are rigorously governed by state-specific legislation, with each Australian state and territory operating under its own distinct legal framework. For clarity, some key examples include:

  • New South Wales (NSW): Regulated by the Strata Schemes Management Act 2015
  • Victoria (VIC): Governed by the Owners Corporations Act 2006
  • Queensland (QLD): Controlled by the Body Corporate and Community Management Act 1997

 

These comprehensive laws govern every aspect of levies, from how they are calculated and approved to their collection and enforcement. Such legislation, an important component for strata management in Sunbury and beyond, serves a dual purpose: it empowers owners’ corporations to effectively manage the financial health of the property while simultaneously safeguarding individual lot owners.

Why Understanding Strata Levies Matters?

For many first-time buyers, strata levies can come as a surprise. Even seasoned property owners can underestimate their impact. But understanding them helps you plan better, budget more accurately, and avoid unexpected costs.

Well-managed levies mean a well-maintained building. That improves not only your quality of life but also the value of your property. It all ties back to the collective effort to keep the shared space functional and appealing.

Have a Strata Management Question?

If you’ve got questions, don’t let them linger. Whether you’re unsure how your levies are calculated or you’re wondering if you’re being overcharged, there are strata consultants in Melbourne who can help. A simple conversation can often clarify a lot. 

Want to understand your strata levies better? Get in touch with us today for professional guidance.

Final Thoughts

Strata levies aren’t the most thrilling part of property ownership, but they are crucial. A little clarity upfront can go a long way in avoiding complications later. Understanding how they work, what they cover, and how to manage them better isn’t just helpful; it’s empowering.

Got questions about your strata scheme? Reach out to BFG Asset Management today and get the clarity you need.