How are levies calculated?

Strata levies are a necessary evil. They are raised and are used for the day to day and future capital works of a strata scheme. Levies are set at the annual general meeting of the strata scheme and are calculated in proportion to the unit entitlements of each lot.

Budgets

Budgets are not an exact science but are projections of the costs the scheme will incur in the following 12 months. When the financials are prepared for an annual general meeting, they contain the actual amounts spent in the previous 12 months and the projections for the upcoming financial year.

Administrative and Capital Funds

Usually administrative and capital funds levies are to be paid quarterly in advance.  This ensures an owners corporation has sufficient funds in its accounts to pay for the day to day bills plus make allowance for future capital works.

Capital works funds are calculated the same way, proportionally to unit entitlement of lot to the overall unit entitlement of the scheme.

Unexpected things happen at unexpected times e.g. the lift packs it in and needs replacement, or major repairs are required to the roof or because of aging and degrading processes, major defects are discovered. This may result in the need to strike a special levy.

Special Levies

Like the other levies, special levies are calculated according to the lot unit entitlement of each lot owner.

Variation of levies

The Strata Schemes Management Act 2015 allows for the variation of the amount of the levy that is struck. The owners corporation decides the timing that levies are collected, for example, yearly, half‑yearly, quarterly or monthly. The same applies to Special Levies.

Refund of levies are as rare as hen’s teeth

Levies are set by the majority but when it comes to refunds, this is decided by a unanimous resolution. Refunds are a rare species and a great deal of consideration should be given before even suggesting this be done.

If I move out can I get a refund of capital works funds?

The answer is simple, even if thought unfair – no.

Remember the administrative fund is for the day-to-day expenses, including maintaining the common property, providing for insurance, and other recurrent expenses, e.g. electricity, water, carpet cleaning, lawn mowing services etc.

Capital works funds are spent on such things as:

• painting or repainting the common property
• acquiring, renewing or replacing personal property for the scheme
• renewing or replacing fixtures and fittings that are part of the common property, and
• to replace or repair the common property.

Providing Amenities or Services

An owners corporation may enter into an agreement to provide amenities or services to particular lots. If that happens, those lots are responsible for payment of those amenities and services.

Examples include exclusive provision of Pay TV when the lot owners pay the costs for the service without passing costs on to other lot owners who do not wish to use the service. These special purpose funds require an account to be opened with an authorised deposit taking institution. This requires the owners corporation to undertake the financial reporting requirements under the Act.

Transferring funds from one fund to another

Funds can be transferred from one fund to the other, or a payment made from one fund that should have been paid from the other. But the owners corporation must make a levy to repay that fund within three months after the transfer of monies.

Capital Works Fund Plan

The owners corporation is required to prepare a plan of expected major expenditure to be meet from the capital works fund. The plan is for a 10 year period commencing on the first AGM, and must be reviewed at least every 5 years.

The capital fund plan should reflect the needs of the individual scheme.

Owners corporations can put the 10 year plan together themselves or hire an independent expert to prepare the plan.