08 Mar Strata Payments – Levies & Fees
What is the Meaning of Strata Fees and what are Strata Levies?
Strata fees are the levies placed on owners (members of the owners corporations) to fund the expenses of the owners corporation. Terms such as strata levy and contributions are interchangeable, with strata fees also meaning the same thing.
Are there Different Types of Strata Levies?
Administrative fund levies are used to pay the recurrent expenses of the owners corporation such as insurance, cleaning, caretaking, routine repairs and administrative expenses.
Special levies are intended to meet extraordinary items of expenditure which may be:
- unexpected events such as replacing a collapsed sewer
- infrequent occurences such as replacement of fencing
- a shortfall arising from an unbudgeted increased in an expense, or expenses, such the insurance premium since the last annual budget was approved.
Is a Maintenance Fund included in Strata Levies?
A maintenance fund is intended to provide for the longer term repair and replacement of major capital assets which is most common property. In Victoria there is no automatic vesting of the structure of the building as common property with the extent of common property determined by the plan of subdivision, meaning it would typically be included in strata levies.
Is an Owners Corporation Required to Have Maintenance Fund?
A maintenance plan and fund is required for a tier 1 (more than 100 occupiable lots) or tier 2 (between 51 and 100 occupiable lots) owners corporation. The maintenance plan is prepared by a competent party (such as an engineer, for example) and sets out the anticipated cost of capital works in the next 10 years. Fees sufficient to fund the plan must be included in the annual fees. Other owners corporations may prepare and approve a maintenance plan and if so, an amount sufficient to fund the plan must be included in the annual fees.
What is a Sinking or Capital Works Fund?
An owners corporation which does not have a maintenance fund, may elect to have a sinking or capital works fund to be used as a reserve for the long term maintenance and repair of the building. The intent of such a fund is, as far as possible, to eliminate the need for special levies arising from time to time.
How is the Budget Set?
The annual budget is reviewed and approved by the members of the owners corporation at the annual general meeting.
Who Approves a Special Levy?
Special levies are approved by the committee, a ballot of members or at a general meeting. For anticipated works such as replacement of a fence, the fee notice will issue prior to the works being undertaken and requires payment by all members before the works may commence to ensure that there are funds on hand to pay the contractor on completion. There may be unanticipated work such as replacement of a collapsed sewer which requires urgent remediation and the levy may be delayed until after the work has been undertaken and the cost known.
Are There Other Strata Fees?
There may be fees applied to a particular lot such as for an insurance excess in respect of the lot or fees arising from the particular use of the lot.
How I Am Notified of Strata Fees?
A fee notice will issue for all fees and levies whether annual fees, special levy, or a specific fee for a lot.
Is there a Specified Time For a Strata Payment?
Strata levies are required to be paid within 28 days of the date of issue of the fee notice, and interest at the prescribed rate may be applied if fees are not paid within 28 days. Interest applies from the issue of the notice until the outstanding fees are paid in full.
In addition to imposition of interest, a member with outstanding Strata payments owing to the owners corporation is not entitled to vote at a general meeting or a ballot of members for a matter requiring an ordinary resolution. For a general meeting, the fees must be paid in full at least four business days prior to the meeting. A member is entitled to vote on any matter requiring a special or unanimous resolution irrespective of any arrears owing.
A member with fees and charges owing is not entitled to nominate for election to the committee of the owners corporation. If a member has been elected to the committee at the annual general meeting and falls into arrears, the member is suspended from the committee until the fees are paid in full.
What is a Strata Fees Calculator / Body Corporate Fees Calculator?
The annual fees are apportioned on lot liability set out in the plan of subdivision. Special levies are usually apportioned on lot liability but there may be variation in particular circumstances if the owners corporation considers this appropriate. There are websites which will help you calculate strata fees for your particular type of property – an internet search will help you find them.
Is There a Standard Strata Rate?
The fees for a particular corporation depends upon many factors including the size, type, age and style of the building in addition to the service levels required by members. There may be rules of thumb, such as a percentage of the market value bandied about but these usually ignore the specifics of a particular building and can be misleading when comparing buildings.
Buildings with more complex infrastructure such as lifts, basements and swimming pools will have higher costs than buildings which do not have such facilities. Older buildings often incur great expense in the maintenance and replacement of ageing infrastructure.
Do Strata Fees Include Council Rates?
Each lot affected by an owners corporation is a separately rated property by council with the rates set by the relevant rating authority, so that will depend on your local council.
Do Strata Fees Include Water Rates?
Strata fees do not include council rates or water rates for a lot. If there are individual water meters, the water usage component of the water rates will be calculated on the amount of water consumed by that lot. The alternative is common metering which is where the usage is allocated equally to each lot by the water authority.
Are Strata Fees Tax Deductible?
Strata fees paid to the owners corporation in respect of a lot which is subject to rental will usually be deductible for taxation in the year paid, provided these are not capital in nature. For a property subject to rental, an owner should keep relevant records and engage a taxation adviser to determine which payments are tax deductible in the current year.
The treatment taxation of strata schemes is set out in Income Tax Ruling TR 2015/3 which is available from the Australian Taxation Office website.
We hope this helps you navigate the sometimes confusing world of strata fees and strata levies. If you have further questions, please refer to this article on Strata FAQs – Management, Fees, Responsibilities, Insurance, Cleaning. If your query is still unanswered, we’d love to hear from you and have one of our expert strata managers help you find a satisfactory solution – contact us here.