Strata levies are a regular part of strata ownership, but many owners aren’t clear on how they work. This blog covers the key areas you need to know so you can understand what you’re paying for, how they are set, and other important insights to help you manage and stay on top of these costs.
Key Takeaways:
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Strata levies fund the upkeep of shared property through three main types: administrative, sinking, and special levies.
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Levies are calculated through an annual budgeting process and divided among owners based on lot liability or unit entitlement.
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Staying involved in budgeting decisions and applying cost-saving strategies can help keep levies manageable without compromising building quality.
What do strata levies pay for?
Strata levies are regular payments made by lot owners to cover the costs of managing and maintaining shared spaces. Beyond the everyday costs, they also help pay for major repairs, upgrades, and insurance to keep the building in good condition and protect its value over time. If you’re wondering why these costs have increased in recent years, see our guide explaining why Melbourne owners corporation levies are rising.
What types of strata levies should lot owners know about?
When you contribute to strata levies, your payments are usually divided into three categories, each serving a specific financial purpose within the strata scheme:
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Administrative fund levies
This fund covers the day-to-day costs of maintaining shared areas of the building. It makes sure that common spaces stay safe, clean, and functional for everyone through essential services and regular upkeep.
The administrative fund typically includes:
- Service contracts, such as cleaning, waste collection, security patrols, gardening, and safety measure (ESM), and other routine services
- Utility bills for electricity, water, and gas used in common areas
- Repairs and maintenance of shared systems, fixtures, and common property areas
- Insurance for common property risks, replacement value, and public liabilities
- Administrative and compliance costs like strata management fees, disbursements, and ATO compliance
A well-maintained administrative fund keeps shared spaces running efficiently and helps prevent minor issues from escalating into costly repairs.
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Sinking fund levies
Also referred to as Maintenance Fund in Victoria, is allocated for long-term expenses needed to keep the building in good condition over time. It is generally formed after the owners corporation approves a maintenance plan.
Maintenance fund is usually reserved for:
- major repairs, such as roof replacements and structural work
- repainting or refurbishing common areas
- replacement or upgrades of lifts, gates, and other shared facilities and items
- large-scale improvements to shared spaces and infrastructure
Building up the sinking fund over time also helps avoid sudden, large contributions from lot owners when major work is needed.
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Special levies
Special levies are charged when the administrative and sinking funds are insufficient to cover unexpected costs. These are usually raised to pay for urgent or unforeseen expenses that require immediate action to protect the safety of residents and the property.
Funds collected through special levies may go toward emergency repairs caused by storms, fires, or floods. In some cases, they also cover legal costs related to disputes or compliance issues, as well as urgent upgrades needed to meet new safety regulations or building codes.
How are strata levies calculated?
Strata levies are calculated through a budgeting process managed by the Owners Corporation (OC). This process guarantees that contributions are fair and sufficient to meet the strata property’s financial needs.
The process generally works as follows:
- Planning the annual budget
The owners corporation manager usually prepares the annual budget by estimating the financial needs of the common property. This covers both the administrative and maintenance (sinking) funds.
For OCs operating for two years or more, past expenses can be analysed to help forecast future costs and determine the financial requirements for the year ahead.
- Review and approval process
The Committee reviews and approves the proposed budget before it is presented at the annual general meeting (AGM) or special general meeting (SGM), where owners review, discuss, and vote on the annual fees.
In Victoria, if a lot owner cannot attend the meeting, they can appoint a proxy to vote on their behalf. Proxy voting rules vary between states and territories, so owners should check their local legislation for specific requirements and restrictions.
- Calculating individual contributions
Once the budget is approved, each lot owner’s levy is calculated based on their lot liability or unit entitlement. This is typically determined by factors such as lot size, location, and exclusive use of facilities, as outlined in the plan of subdivision.
If you’ve ever looked at your strata levies and felt unsure about how they’re worked out, you’re not alone.
It’s common for owners to wonder whether strata levies are being calculated and applied fairly. Speaking with a strata professional can help you sense-check what’s happening and point you toward management that explains these things clearly and keeps owners in the loop.
Who pays strata levies and when are they due?
All lot owners in a strata scheme must pay levies to cover the property’s financial needs. The owners corporation sets the payment schedule, which is usually quarterly, but may also be monthly or annually, depending on the scheme’s budget.
The deadline for payment varies across states. For example, in Victoria, owners corporation fees must be settled within 28 days from the date the fee notice is issued.
What happens if strata levies are not paid?
Unpaid levies result in the Owners Corporation issuing a final notice to the lot owner, which comes with consequences, including:
- Financial penalties: overdue fees and interest may apply, as set by state laws or the owners corporation’s by-laws
- Loss of voting rights: owners with overdue levies may lose their right to vote, except in cases requiring a special or unanimous resolution
If the debt remains unpaid after 28 days from the final notice, the Owners Corporation may take legal action to recover the outstanding levies through a tribunal or court.
To avoid these consequences, lot owners should make sure levies are paid on time and stay informed about the payment rules that apply to their strata scheme.
How can owners reduce strata levies without cutting essential maintenance?
Strata levies may increase to meet the financial needs of the year, but there are practical measures that can help keep them manageable:
- Efficient budgeting: regularly review financial reports to ensure that funds are used effectively and unnecessary expenses are avoided
- Competitive contractor quotes: source multiple quotes for maintenance and repairs to secure the best value and reduce overall costs
- Cost-saving initiatives: introduce energy-efficient upgrades, water-saving measures, efficient service scheduling, and proactive maintenance to help prevent costly repairs and reduce long-term expenses
Smart and sustainable choices like these can help reduce costs over time which can create long-term benefits for both the building and its owners.
Are strata levies the same as body corporate fees?
Yes, these terms are often used interchangeably. The difference is purely based on terminology, depending on the state or territory:
- Victoria (VIC)– strata levies
- New South Wales (NSW) – strata levies
- Queensland (QLD)– body corporate fees
- Western Australia (WA) – strata levies
Regardless of the name, these payments all serve the same purpose: funding the costs of managing and maintaining common property.
What laws govern strata levies in Australia?
Strata levies are regulated by state-specific legislation, with each state and territory following its own legal framework. For example:
- NSW – Strata Schemes Management Act 2015
- VIC – Owners Corporations Act 2006
- QLD – Body Corporate and Community Management Act 1997
These laws set out how levies are calculated, approved, collected, and enforced. They help owners corporations manage the financial needs of the property while protecting lot owners by making sure that costs are shared properly, disputes can be resolved, and rules follow state legislation.
Why understanding strata levies matters
Strata levies are what keep a strata scheme functioning—not just day to day, but well into the future. Without them, essential maintenance gets delayed, major repairs become harder to fund, and the overall condition of the property starts to decline.
That’s why it’s important for lot owners to stay informed and involved. Taking part in meetings and reviewing budgets helps you protect how your levies are spent. This makes sure your money is used wisely, and the property stays well-maintained.
If your owners corporation is dealing with unreasonable rising costs, struggling with levy management, or needing better oversight, Strata Management Consultants can help. We connect owners corporations with reliable strata managers who prioritise transparency and service quality.
