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Strata and body corporate fees

A levy notice arrives quarterly and gets paid without much thought. Annualised, split into its two funds and set against the rent, it looks like a very different number — and for an investor it is the difference between the yield an ad quotes and the yield you actually get.

Your levy notice shows the two funds separately. If yours shows one figure, put it all in the administrative box — the total is still right, only the split is unknown.

Your tally

Levies a year

$4,800

0.7% of the property’s value, and $92.31 a week.

Admin $3,200Capital works $1,600

What it does to the yield

Rent a year$31,200
Gross yield (what listings quote)4.5%
Rent eaten by levies15.4%
Yield after levies3.8%

The capital works fund is 33.3% of your ordinary levies — the half that is saving for work still to come.

Levy amounts come from your own notice — they are set by each scheme and no calculator can know them. Yield after levies is before land tax, insurance, management, repairs and vacancy. General information only — not financial or legal advice.

Strata, body corporate, owners corporation: the same thing

The name changes at the border. In New South Wales and Victoria the entity that owns the common property is an owners corporation — the NSW Strata Schemes Management Act 2015 and the Victorian Owners Corporations Act 2006 both use that term. In Queensland the same body is a body corporate, under the Body Corporate and Community Management Act 1997, and the scheme itself is a community titles scheme. Other states and territories have their own wording again, so check your own state’s consumer body for the exact term on your paperwork.

None of that changes the money. Whatever it is called, the entity levies the owners, holds the funds, insures the building and maintains what nobody owns individually.

The two funds, and why the second one decides everything

The administrative fund pays for running the place this year: insurance premiums, cleaning, gardening, management fees, minor repairs, electricity for common areas. It is budgeted to be spent.

The capital works fund is saving for work that has not happened yet — the roof, the lifts, repainting, waterproofing, the things that arrive once a decade and cost a great deal. It is budgeted to accumulate.

This is where two apartments that look identically priced diverge. A scheme with a thin capital works fund has lower quarterly levies and an unfunded liability; the work still has to happen, and when it does the money is raised as a special levy instead. So the cheap-looking building is often the expensive one, just later and in a lump. When you are comparing, ask for the capital works fund balance and the most recent maintenance plan, not only the levy figure.

What the gross yield in a listing is hiding

A listing quotes rent against price and calls it yield. On the default numbers above that is4.5% — a respectable figure. Levies of $4,800 take it to3.8%, and they do it before land tax, insurance, management fees, repairs or a single week of vacancy. Apartments carry levies that houses do not, which is why comparing a unit and a house on gross yield alone is meaningless.

If you are weighing the whole investment case rather than just the levies, the negative gearing calculator takes the full set of outgoings and shows the after-tax position.

Frequently asked questions

What are strata fees?
Levies every lot owner pays into the scheme that owns and maintains the shared parts of the building — the lifts, roof, common walls, gardens, insurance and management. They are split into two funds that do very different jobs, which is the part most owners never have explained to them: an administrative fund for day-to-day running, and a capital works fund saving for the big repairs that arrive eventually.
What is the difference between strata fees and body corporate fees?
Nothing, functionally — it is the same arrangement under a different name. In New South Wales and Victoria the entity is an owners corporation (Strata Schemes Management Act 2015 in NSW, Owners Corporations Act 2006 in Victoria). In Queensland it is a body corporate under the Body Corporate and Community Management Act 1997. Other states and territories use their own terms again. The levies do the same work whichever word appears on your notice.
What is the capital works fund, and why does it matter?
It is the scheme's savings account for work that is coming but has not arrived: roof replacement, repainting, lift refurbishment, waterproofing. The NSW Act calls it the capital works fund; older documents may call it a sinking fund. A scheme that keeps this fund thin looks cheap on the levy notice and is not — the money is still needed, and it arrives later as a special levy instead. When comparing two apartments, compare the capital works balance, not just the quarterly figure.
What is a special levy?
A one-off charge struck when the capital works fund cannot cover a job — remedial building work, a failed lift, defect rectification. It is the single biggest financial risk of buying into strata, it can run to five figures per lot, and it is why the strata report matters more than the levy notice. Add any special levy you know about to the calculator above to see what it does to a year.
Do strata fees affect rental yield?
Substantially, and gross yield figures in listings ignore them entirely. On a $700,000 apartment renting at $600 a week, the gross yield is 4.5% — but $4,800 of levies takes it to 3.8% before a single other cost. That is 15.4% of the rent gone to levies alone, and land tax, insurance, management and repairs still come out of what is left.
Are strata fees tax deductible?
On an investment property, ordinary levies to the administrative fund are generally deductible in the year you pay them. Contributions to the capital works fund are treated differently, and special levies for capital improvements are usually capital rather than an immediate deduction — they may instead form part of your CGT cost base or be claimed over time. The distinction turns on what the money was spent on, so keep the levy notices and ask a registered tax agent.

Sources

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Yearly

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Investors

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