What are my levies used for?

An owners corporation has the same type of expenditure that a conventional householder has. There are council rates, water and electricity charges for common areas, and public liability insurance and repairs and maintenance of common areas. In a strata scheme, there is also additional expenditure on workers compensation insurance, building valuations and the resolution of any disputes which may arise within the scheme and other matters related to the running of the scheme.

The law requires that each owners corporation establish an administrative fund and a sinking fund. The administrative fund is for the day-to-day operation of the scheme such as paying the gardener, the insurance premiums, photocopying, stationery, stamps and light globes for common areas.

The sinking fund is for necessary long-term future expenditure such as painting and replacement of guttering or fencing. The idea of the sinking fund is to have enough money available when the job needs doing. For many people, this is preferable to an owners corporation imposing a large sudden levy on lot owners when the time comes. Owners corporations are required to plan and estimate their long-term expenditure. Contributions made by a lot owner to the sinking fund are not refundable should the person later move out of the strata scheme (even if the money has not yet been spent on the item the levies were contributed for). It is important to recognise this, as some people do not fully appreciate the fact that every strata scheme will almost certainly at some time in the future be confronted with major capital expenditure and there needs to be money in reserve to pay for it.

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