Strata Levies & Financial Management

Strata Levies & Financial Management addresses the budgeting, levy setting, fund administration and financial reporting through which an owners corporation funds the operation and capital maintenance of a strata scheme. Every lot owner contributes to the scheme’s finances through periodic levies, calculated according to each lot’s unit entitlement, which fund both routine administration and longer-term capital works.

Owners corporation finances are typically structured across two separate funds: an administrative fund, meeting day-to-day operating costs such as insurance, common area services and management fees, and a capital works fund (also referred to as a sinking fund), accumulated over time to meet the cost of major capital works identified in the scheme’s capital works fund plan. Maintaining an adequately funded capital works fund is a recurring point of financial discipline and dispute within strata schemes.

Levy setting, fund management and financial reporting also bear directly on lot values and purchaser due diligence, since a scheme with an underfunded capital works plan or a pattern of special levies represents a material financial exposure for a prospective purchaser, disclosed through the vendor disclosure process addressed within the 35000 Property Law sub-series.

This node covers:

• Setting of annual levies, the structure and management of administrative and capital works funds
• Preparation and updating of ten-year capital works fund plans, the recovery of levy arrears, and the financial reporting obligations owed by an owners corporation to its lot owners

This node does not cover:

• The composition or conduct of the owners corporation committee → refer to Node 34310
• The physical execution of maintenance works funded by these levies → refer to Node 34330
• The drafting and enforcement of by-laws → refer to Node 34340

• Strata Schemes Management Act 2015 (NSW) and equivalent state and territory legislation

  Relevant state fair trading or consumer affairs agency

  Including the Owners Corporations Act 2006 (Vic) and the Body Corporate and Community Management Act 1997 (Qld), mandating the administrative and capital works fund structure, levy-setting procedure and capital works fund plan requirements.
• Relevant Australian Accounting Standards

  Australian Accounting Standards Board

  Inform the preparation of owners corporation financial statements and fund accounting where audited or reviewed financial reporting is required under the applicable state legislation.
• State civil and administrative tribunal legislation (for example, the Civil and Administrative Tribunal Act 2013 (NSW))

  Relevant state tribunals

  Establishes the tribunal jurisdiction — such as the NSW Civil and Administrative Tribunal or the Victorian Civil and Administrative Tribunal — through which levy arrears recovery and related financial disputes are determined.

In practice, the owners corporation committee prepares an annual budget ahead of the annual general meeting, setting proposed levy contributions for both the administrative and capital works funds with reference to anticipated operating costs and the scheme’s capital works fund plan. The budget and levy proposal are put to a vote of lot owners, who contribute according to their fixed unit entitlement.

Where the capital works fund proves insufficient to meet an unplanned or accelerated item of capital expenditure, the owners corporation may propose a special levy, requiring a specific resolution of lot owners. Persistent levy arrears are addressed through a graduated recovery process, beginning with statutory notice and interest and escalating, where necessary, to tribunal-based debt recovery proceedings.