Each body corporate has its own costs, including a combination of insurance, shared utilities, administration services, caretaking services and a wide range of common property maintenance – plumbing, electrical, gardening, lifts, pools, carparks, pumps or other machinery, gates, fences, fire equipment compliance, and shared roads or driveways. In addition, bodies corporate in Queensland are required to put funds aside for long-term maintenance. 

All body corporate costs, such as the above, are funded in full by its members, the lot owners, by annual levies and occasionally special levies.

At the end of each financial year, the committee prepares a proposed budget that is then tabled at the Annual General Meeting (AGM) for all owners to consider and vote on. If approved, these budgets are adopted and levies are then struck to raise the funds set out in the approved budget.

Levies are collected into two funds: the Administrative Fund and the Sinking Fund. In some bodies corporate, the insurance is paid for within the Administrative Fund levy, and in others it is required to be collected in a separate levy.

The Administrative Fund covers the day-to-day running costs of the body corporate including:

• utilities for common property
• repairs and maintenance for common property – this will differ significantly depending on the format plan for your body corporate [link] but may include gardens, driveways, roads, mailboxes, lifts, pools, plumbing, electrical, pumps etc
• pest and termite control
• fire maintenance and compliance works
• any caretaking or facilities management services
• strata management services
• any other professional fees such as engineers, lawyers, etc

The proportion of each lot’s contribution towards the Administrative Fund is calculated based on the lot’s contribution entitlements.

In Queensland, all bodies corporate are required to establish and contribute to a Sinking Fund, designed as a fund to meet long-term maintenance and replacement costs. These costs may include major projects such as roof replacement, lift upgrades, or repainting the building; or may also be on a smaller scale such as replacing emergency exit lights as they fail.

In addition, Queensland bodies corporate must also have a Sinking Fund Forecast drawn up to project long-term maintenance (including replacement) costs for the shared property for at least the next ten years. This is usually prepared by a third-party expert, such as a quantity surveyor and should be reviewed and updated regularly to ensure it is kept meaningful and relevant. This Forecast projects the likely foreseeable costs for the Sinking Fund and on this basis also then calculates the required levies required to fund those included projects

Unlike the Administrative Fund, the balance of the Sinking Fund will fluctuate from year-to-year as large projects and their associated costs are undertaken as and when required. For example, painting the exterior of the property will likely occur every ten years and the balance of the fund will build up from years 1-9, and then drop when the painting project is paid for in year 10. 

The aim of the Sinking Fund Forecast is to ensure that appropriate level of funds are collected and retained every year in order to meet the forecast maintenance costs and projects as they are required, and to avoid special levies. If funds are used for costs that have not been foreseen and included in the future projection of the Sinking Fund, it stands to reason that the required funds will not then be available for those foreseeable costs when they arise. As such, it’s vital to ensure the Sinking Fund Forecast is as comprehensive as possible but, equally, to ensure that proper consideration is given to how to fund unforeseen projects as and when they arise, so as not to erode the Sinking Fund and its projected balance.

The proportion of each lot’s contribution towards the Sinking Fund is calculated based on the lot’s contribution entitlements.

In Queensland, all body corporate lots have both ‘contribution entitlements’ and ‘interest entitlements’. Amongst other things, contribution entitlements are used to determine the proportion of Administrative and Sinking Fund levies that each lot contributes. Interest entitlements are used to determine the proportion of building insurance costs that each lot contributes.

In many schemes, for each individual lot, the contribution entitlements and interest entitlements are equal (even if they differ from one lot to the next). In these cases, the proportion of insurance costs is calculated on the exact same basis as the Administrative and Sinking Fund levies and so is not required to be calculated and billed separately; instead, it is included in the Administrative Fund levy.

In other schemes, the contribution entitlements and interest entitlements vary from each other and where that is the case, the contribution towards insurance needs to be separately calculated and billed. In these circumstances, you will see a separate line item on your levy statement noted as ‘Insurance’. These funds are collected into the Administrative Fund but simply calculated and billed on a different apportionment.

For clarity, while there are many components to a strata insurance policy, it is only the building replacement portion of the premium (as determined by the insurer) that is required to be billed under a separate calculation, using interest entitlements. All other components of the insurance premium costs are covered within the Administrative Fund levy.

Special levies occur when an unforeseen project and funding is required, on top of the regular annual levies. This normally occurs in emergent situations that could not have reasonably been predicted, such as storm damage, or building defect rectification. Sometimes, these might also be required where the current costs of a foreseen project are significantly more than has been projected and collected through the Sinking Fund; or on occasion where a body corporate has spent Sinking Fund monies on other projects and then has insufficient funds to meet the planned project.

The schedule for levies differ from property to property – anywhere from once to four times a year. These are normally set at intervals that ensures the body corporate can have sufficient cashflow in order to meet its costs throughout the year.

The timing for levies is published in several places, and lot owners can familiarise themselves with your property’s schedule in any of the following ways:

• the Annual General Meeting (AGM) notice, sent to all lot owners once a year will outline each period, due date, and amount due for each levy (note, these are proposed amounts only, until the AGM votes them in)
• the AGM minutes, also issued to each lot owner, will confirm the periods, due dates, and amounts for each period throughout the year
• a levy notice is issued to each lot owner for each period, at least 30 days’ before the due date

There are a range of payment options available, including direct debit arrangements, all of which are listed on each levy notice. Please note, your unique reference numbers ensures the funds you pay are automatically directed and applied to your individual lot account. (This is important to note if you pay levies for multiple lots, as separate payments for each lot is generally required.)

Through our Cassels owner’s portal, you can view your levy balance and make payment at any time. Log-in or create an account here. [link]

At Cassels, we ensure that each body corporate has its own unique bank account to ensure compliance, accountability, and transparency. All body corporate levy payments are paid directly into each scheme’s bank account.

While Cassels undertakes administrative and financial duties on behalf of your body corporate – such as issuing levy notices to lot owners – levy funds are not paid to Cassels, they are paid and received into your body corporate’s unique bank account.

All body corporate lot owners are required to contribute to body corporate costs. These costs (levies) cannot be waived or written-off, as they are each lot’s share of common costs.

If a levy is not paid by the due date, the body corporate must take steps to recover the debt owed to it. This normally includes issuing reminder notices which attract penalty fees, directly attributable to the lot owner. Some bodies corporate also charge interest of up to 30% on outstanding levies, again, charged directly to the lot owner. Because bodies corporate are membership entities relying solely on contributions by members to cover costs, the laws are set up to provide incentives for lot owners to prioritise body corporate levy payments amongst their personal financial commitments.

If the above steps do not result in payment of the outstanding levies, a body corporate is required to take action to recover the funds. Normally this involves appointing a debt collection solicitor to recover the funds from the lot owner, and can at times result in legal action through the court system. Any and all reasonable costs associated with taking this action are also attributable to the lot owner directly, under Queensland law.

Please also note that, when a lot owner owes a debt to the body corporate, voting rights are suspended until the debt is cleared. In addition, nomination and election to the committee is also not accessible while a body corporate debt is owed.

We encourage you to keep track of your levy due dates, and make arrangements to pay these by the due date to avoid these extra steps, costs, and restrictions.

There may be situations that arise where you are unable to pay your levies by the due date. If you are experiencing genuine financial hardship or believe you have extenuating circumstances, please contact our helpful Cassels team to assist in making suitable payment plan arrangements. Please remember, timely communication is key in these situations.

While levies cannot be waived (they are a membership contribution to shared costs), each body corporate committee may apply a policy of leniency regarding waiving interest and fees or allowing additional time for payment. It is important to note that this is not a requirement for body corporate committees but your prompt and open communication will assist.

Levies increase as and when body corporate costs increase. This could occur from a myriad of reasons such as:

• increases to electricity prices (common area electricity)
• additional maintenance requirements as the property ages
• new government regulations that require additional reporting or maintenance (eg asbestos, cladding, fire, WHS)
• increases to insurance coverage and/or premiums
• improvements to common property
• general CPI increases from year-to-year

While some of these cost increases may be unavoidable (such as general inflationary pressure), other costs may be discretionary (eg common property improvements, frequency of maintenance/cleaning) and up to lot owners to consider including or excluding.

Each body corporate in Queensland is required to vote at each year’s Annual General Meeting (AGM) on whether to undertake an audit of the financial records. If this is approved, the audit is undertaken at the end of the financial year by specialist body corporate auditors and the audit report is circulated to lot owners as part of the next AGM notice.