Body corporate levies fund the budgets that pay for shared services, insurance, maintenance and future capital works. If owners are facing financial pressure, reviewing those budgets can show whether contributions can be reduced responsibly.
Reducing levies requires more than collecting less money. The committee needs to check the scheme’s commitments, fund balances and upcoming work before owners consider changing the budget. This guide explains what to review and how the process works.
How can a body corporate reduce levies?
Annual levies are based on the administrative and sinking fund budgets approved for the financial year. At the annual general meeting, the body corporate must approve those budgets, set the contributions for each lot and decide when instalments are due.
For a scheme registered under the Standard Module, the Body Corporate and Community Management (Standard Module) Regulation 2020 requires the body corporate to adopt both budgets by ordinary resolution. The budgets must provide for necessary and reasonable spending, including anticipated capital expenditure over at least the next 9 years.
A levy reduction should follow a proper budget review. It should not be based on pausing or waiving contributions. Owners can propose an alternative administrative or sinking fund budget for consideration at an annual general meeting or extraordinary general meeting.
A body corporate manager can help prepare financial information and meeting documents. The body corporate must make the relevant decisions through the applicable process.
What should the committee check before changing levies?
Before proposing a lower levy, the committee should compare the current budget with actual income and spending. Check:
- current balances in the administrative and sinking funds
- unpaid contributions and expected cash flow
- insurance costs and other ongoing contracts
- planned maintenance and approved works
- future capital works and replacement costs
- whether any special or interim contributions may be required
- whether the proposed budget still covers necessary and reasonable expenditure.
A budget should reflect the scheme’s own circumstances. Updated quotes or a professional sinking fund forecast may help the committee test whether forecast costs remain realistic.
A proposed budget may only be adjusted at an annual general meeting within the permitted process. For the Standard Module, the adjustment cannot be more or less than 10% of the proposed budget, must relate to spending considered at the meeting and must be approved by the required majority.
Budgets cannot be changed at the meeting merely because owners believe the amounts are too high or too low. If you are reviewing your own position, our guide to understanding your body corporate levies may help.
How do administrative and sinking funds affect levy decisions?
The administrative fund generally covers recurrent costs, such as insurance, maintenance and other regular expenses. The sinking fund is used for capital or non-recurrent costs, such as major repairs, painting and replacing significant common property items. Money cannot be transferred between the two funds.
The committee needs to consider both funds separately. A healthy balance in one fund does not necessarily mean the body corporate can reduce contributions to the other.
The sinking fund budget must provide for necessary and reasonable spending in the current financial year and reserve an appropriate amount for likely major expenditure over at least the following 9 years. Reviewing the sinking fund forecast can help owners assess whether a proposed reduction is sustainable.
Can levies be reduced without delaying repairs or capital works?
A levy reduction may be possible if the approved or proposed budgets still provide for the scheme’s necessary commitments. It should not depend on postponing work needed to protect common property or keep it in good condition.
The body corporate must maintain common property in a good and structurally sound condition. Maintenance can include work needed to prevent damage.
Review contracts, approved works, maintenance reports and the sinking fund plan before reducing contributions. If the review shows that the scheme needs more money, the body corporate may need to retain current levies or consider a special contribution for an unexpected or inadequately funded cost.
What happens when an owner cannot pay body corporate levies?
Financial hardship does not automatically remove an owner’s obligation to pay contributions. Owners should contact the body corporate or body corporate manager promptly to discuss the account and available options. They should not stop payment.
The body corporate must give written notice of a contribution at least 30 days before it is due. If a contribution is not paid by the due date, the body corporate can start debt recovery action.
For schemes under the Standard Module, an unpaid contribution can be recovered as a debt, including any applicable penalty and reasonable recovery costs. If it remains outstanding for 2 years, proceedings must start within 2 months after that period ends.
How should owners assess a proposed levy change?
Ask whether the proposal is supported by current figures and protects the scheme’s future obligations. Owners should look for:
- a clear comparison between the existing and proposed budgets
- current balances and arrears
- details of contracts and planned expenditure
- an updated sinking fund forecast or other supporting calculations
- an explanation of how maintenance and capital works will be funded
- the correct motion and resolution process.
A levy reduction may be reasonable in some circumstances, but it should not create a shortfall that leads to urgent repairs, special contributions or higher costs later. You can also read our practical guide on how to reduce your strata levies and body corporate maintenance.
Responsible levy decisions balance current affordability with the funds needed to maintain the property and meet future commitments. If your committee needs help reviewing levy budgets and fund planning, contact us at reception@stratacare.com.au.
