Strata levies
If you are a strata owner, you pay levies. They are a financial reality of strata ownership. Knowing what you’re paying for and what happens if owners miss payments matters.
What are strata levies?
Lot owners make regular contributions to fund the scheme's running costs and ongoing maintenance. These are your strata levies. The owners corporation determines the levies at the annual general meeting (AGM), based on the budget, which covers the scheme's expected costs for the year ahead.
The terminology varies by state. Across most of Australia, they're called levies. In some states, you'll see the term strata fees or body corporate fees. These are the same thing.
What are the two main funds?
Every scheme has two separate accounts, and your levy payment is split between them.
The administrative fund
This covers day-to-day running costs: building insurance, cleaning, gardening, common-area utilities, minor repairs, and the strata manager's fees. This fund keeps the lights on and the building running from one quarter to the next.
The capital works fund
Called the sinking fund in QLD, WA, SA, ACT and NT, and the maintenance fund in VIC and TAS, the capital works fund is the long-term savings account. It's there to pay for major future work: repainting the building exterior, replacing the lifts, resurfacing the car park, re-roofing. The idea is that owners contribute steadily over time so the money is there when big expenses arrive, rather than being hit with a sudden large bill.
What does a healthy levy split look like?
Buyers rarely think to check the levy split, but it matters. A scheme that puts very little into the capital works fund is, in effect, undercharging its owners now and deferring costs to the future. When that bill arrives, it comes as a special levy.
When you're looking at a scheme, check the 10-year capital works plan (required in most states, depending on the scheme's size). It shows what major works are coming and whether the fund is on track to cover them. If the capital works fund balance is low relative to what the plan projects it needs, that's a serious red flag.
How are levy amounts set?
At the AGM, owners vote on a budget for the upcoming year. The budget determines the total amount needed across both funds. That total is then divided between lots based on unit entitlement: the larger your entitlement relative to the rest of the scheme, the more you pay.
The strata manager doesn't set the levies. They prepare a budget proposal and present it to owners for a vote. Owners can question, challenge or amend the proposed budget at the AGM. If you have concerns about the proposed budget, raise them with the strata manager or committee before the AGM, where possible, in writing.
What is a special levy?
A special levy is raised when the capital works fund doesn't have enough money to cover an unplanned or larger-than-expected expense, such as an emergency repair, a legal dispute, an insurance shortfall, or work not in the 10-year plan.
All owners must pay it, regardless of how long they've owned in the scheme. If you buy into a scheme and a special levy is raised the following month, you're liable for your share.
Before you buy, a strata inspection report will show you the current fund balances and flag whether a special levy is likely. This is one of the most important things to check before signing a contract.
Why are my levies going up?
Levy increases are common, and many schemes have seen them accelerate in recent years. The main drivers are:
Insurance premiums
Building insurance is typically the highest single cost in a strata scheme, and premiums have risen significantly across Australia over the past few years. This alone has pushed levies up for many schemes.
Cost of services
Cleaning, gardening, waste management and utilities have all increased with general inflation.
Deferred maintenance catching up
Schemes that kept levies artificially low for years are now facing the cost of maintenance they postponed. That often means special levies or sharp increases to rebuild depleted funds.
Age of the building
Older buildings generally cost more to maintain. As a building ages, more of the levy budget tends to shift toward the capital works fund.
If your levies are rising and you want to understand why, it's reasonable to ask your strata manager for an itemised budget breakdown.
What happens if I don't pay?
Unpaid levies accrue interest from the date they fall due. If arrears continue, the owners corporation can engage a solicitor or debt collector, and ultimately take you to court to recover the debt. The owner in arrears bears all recovery costs, not the scheme.
Beyond the financial consequences, owners with outstanding levy debts may face restrictions on some voting rights.
If you're struggling to pay, contact the strata manager early. In NSW, owners corporations must now consider any request for a payment plan and can refuse only on limited grounds set out in the legislation. Levy notices must include a Financial Hardship Information Statement. Victoria is moving in the same direction, with similar reforms before parliament. Waiting until the debt grows makes it harder to resolve, wherever you are.
The information on this page is general. For anything affecting your property or your financial obligations, seek independent advice.
