Why Do We Pay Levies?

As a Community Manager I am often asked “Why do I have to pay body corporate levies?” Let me start by explaining what actions are taken to create these. Firstly, the Body Corporate and Community Management Act 1997 provides that two funds must be established within a body corporate. These are:

Administration Fund

This is primarily to cover the re-occurring day to day running costs of the Body Corporate such as cleaning, grounds maintenance, electricity for the common area and insurance.

Sinking Fund

This is to pay for non-recurring capital expenditure items of the Body Corporate such as painting, re-roofing the building(s), resealing the driveway etc. The sinking fund must also maintain a reserve of funds for similar future capital expenses. The projected reserves and required contribution amounts are determined generally by experienced consultants within a sinking fund forecast report.
An annual budget is established for each of these funds annually, taking into account the projected expenditure of the body corporate and the current reserves. At the annual general meeting all owners consider, then accept or reject the budget for the ensuing year. The income for this budget is to be contributed to by all of the owners on a pre-determined basis known as a lot contribution entitlement. Lot entitlements (contribution and interest) for each lot are contained within the community management statement registered upon formation of the Body Corporate.
Levy notices are usually prepared by the Body Corporate Manager (if one is appointed) and forwarded to owners, often on a quarterly basis. It is imperative to ensure prompt payment is made so that the cash flow of the Body Corporate remains consistent. For this reason, some bodies corporate offer a discount for the prompt payment of levy contributions, however discount is funded by grossing up the levy by the corresponding discount.
There is a responsibility upon each owner to contribute to the maintenance of the Body Corporate common property. Unless there are levy payments to fund the body corporate expenses, this requirement cannot be met and complex will deteriorate.
Ask SSKB about the budget and levy process if you have any questions. They will be able to assist you with any particular concerns regarding your own circumstances.
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