UNDERSTANDING STRATA

Strata Fees

Strata Fees

What Are Strata Fees?

At Strata One, we know that strata fees are an essential part of managing a strata-titled property. These regular financial contributions, made by lot owners, support the upkeep and operation of shared spaces and services. In New South Wales (NSW), these fees are mandatory under the Strata Schemes Management Act 2015. They ensure that common property areas such as gardens, hallways, lifts, and recreational facilities are maintained to a standard that benefits all occupants.

When reviewing strata fees in Sydney, it’s important to recognise that costs can vary significantly depending on the building size, amenities, and the age of the property. Strata fees (also known as levies) are set at the Annual General Meeting and are determined by the budget set for the building at this meeting If you would like to gain a more in depth understanding of how the strata fees in your building are calculated it would be a good idea to attend the Annual General Meeting.

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Types of Strata Fees Explained

When managing a strata-titled property, understanding the breakdown of fees is essential. Strata fees are not a single, uniform charge but are composed of multiple categories, each with its own purpose and financial implications. These categories ensure that both the day-to-day and long-term financial needs of the property are met effectively and sustainably. Broadly, these contributions fall into three main categories, with each one supporting a different area of property management and planning.

Administrative Fund Levies

Administrative fund levies cover routine operational expenses. These include costs related to cleaning services, gardening, minor repairs, insurance premiums, management fees, and general maintenance. The frequency and amount of these levies are guided by the building’s annual budget and are subject to approval by the owners’ corporation.

Capital Works Fund (Sinking Fund) Levies

The capital works fund—previously known as the sinking fund—is allocated for long-term expenses. This may include structural repairs, painting, roofing, or major upgrades to lifts and plumbing.  Specialised companies complete a capital works report for the building which sets out the funds required to be put aside for capital works requirements. The capital works  fund ensures that the building remains compliant with safety and maintenance standards without sudden financial burdens on owners. 

Special Levies

Special levies are charged when unforeseen or extraordinary expenses arise that are not covered by the administrative or capital works funds. Common triggers for special levies include urgent structural repairs, legal costs, or unexpected damage. These levies are generally decided through a majority vote in a special general meeting and are shared among owners in accordance with their unit entitlements.  On occasion when funds and budgets have not been managed well, special levies are required to be raised to get the building back into a financially sound position.

Paying Your Strata Fees

Paying strata fees is a key responsibility of all lot owners within a strata scheme in New South Wales. These financial contributions are not optional; they are an essential obligation under NSW legislation designed to ensure the ongoing viability and operation of the strata community. The fees collected are used to fund the wide range of services and maintenance activities required to uphold the building’s infrastructure, amenities, and safety standards. At Strata One, we support our clients with transparent systems and efficient levy collection to ensure smooth operations. From everyday upkeep to long-term planning, these contributions help maintain the property’s value and functionality, ultimately benefiting all current and future residents.

Payment Methods and Frequency

Strata fees are typically paid quarterly. Payment methods usually include direct debit, BPAY or, bank transfer, or credit card. practices.

Consequences of Late Payments or Non-Payment

Non-payment or late payment of strata fees can lead to several consequences. Interest charges may be applied to overdue amounts, and persistent non-payment can result in legal action. The owners’ corporation has the authority to recover outstanding levies through the NSW Civil and Administrative Tribunal (NCAT), which may include debt recovery processes and legal fees charged to the non-compliant owner. At Strata One, we assist in managing these processes professionally and fairly.

Understanding Strata Fee Increases

Strata fees will be adjusted at the Annual General Meeting of the building and are determined from the approved budget. Changes from the previous year are often driven by both the operational requirements of the property and broader economic trends. As buildings age or as service demands shift, the costs associated with maintaining common areas and essential infrastructure may rise. Similarly, external economic influences such as inflation or market-driven increases in service and insurance costs can lead to necessary adjustments in the fee structure. Understanding why and how strata fees increase is essential for lot owners to prepare financially and participate effectively in their strata community.

Common Reasons for Fee Increases

Several elements can influence a rise in strata fees. These include:

  • Inflation and general cost of living increases: Over time, the price of services and goods required for building maintenance tends to rise. This includes wages for cleaning staff, gardening services, and other operational costs. As these increases accumulate annually, the strata scheme must adjust the budget to reflect these higher expenses.
  • Age-related maintenance and repairs: Older buildings often require more frequent and intensive upkeep. This can include addressing wear and tear, replacing outdated systems such as lifts or plumbing, and ensuring ongoing safety compliance. These increasing maintenance needs necessitate higher capital works contributions.
  • Updated safety or fire compliance standards: Regulatory changes may require new safety systems or upgrades, such as fire door replacements, sprinkler systems, or smoke alarm integrations. Complying with these mandates incurs additional costs that must be spread across the owners.
  • Insurance premium hikes: Insurance costs can fluctuate significantly based on market conditions, property claims history or valuation changes. Higher premiums directly affect administrative fund budgets and, subsequently, strata fees.
  • Increased service charges or contractual updates: Contracts for essential services, such as strata management, maintenance, or security, are periodically reviewed and renewed. If rates increase or additional services are included, this can result in higher annual expenses.

Tip: If your notice shows this year’s levies jumping from last year’s figure, you can quickly calculate the percentage increase to see exactly how much your contribution has gone up before the AGM.

How Owners Are Notified of Changes

Any proposed changes to strata fees are discussed and voted on during the annual general meeting (AGM). Lot owners receive formal notification in advance, including a copy of the proposed budget and explanatory notes. This ensures transparency and allows owners to voice concerns or suggest alternatives before changes are approved. Strata One facilitates these communications, ensuring clarity and compliance.

Reducing and Managing Strata Fees

Managing strata fees effectively is a crucial part of maintaining financial sustainability within any strata scheme. Although certain expenses, such as insurance and regulatory compliance, are unavoidable, many aspects of strata expenditure offer opportunities for control and optimisation. By implementing strategic management practices and making informed financial decisions, lot owners and committees can work collaboratively to reduce unnecessary costs while preserving the safety, functionality, and aesthetic quality of their property. This section explores practical approaches that can help limit fee increases and ensure a more balanced and efficient use of resources. At Strata One, we actively support our clients in applying these principles.

Effective Budgeting Practices

Strata schemes can benefit from proactive financial planning. This includes:

  • Regular reviews of service contracts to ensure value: Periodically evaluating service providers ensures competitive pricing and helps identify opportunities for cost savings. Strata committees can request multiple quotes and conduct performance reviews to decide whether to continue, renegotiate, or terminate agreements.
  • Preventative maintenance to reduce long-term costs: Implementing a maintenance schedule for common areas and building infrastructure reduces the likelihood of major repairs or system failures. Addressing minor issues early prevents them from becoming more expensive and disruptive in the future.
  • Accurate forecasting of future expenses using historical data: Analysing past spending patterns allows strata schemes to predict and prepare for recurring or expected costs. Historical data helps create realistic budgets that align with actual financial needs.

Strategies to Minimise Levies Responsibly

Owners and committees can explore several strategies:

  • Investing in energy-efficient infrastructure to lower utility bills: Installing LED lighting, solar panels, or energy-efficient heating and cooling systems reduces ongoing energy expenses. These savings can help offset annual levies while supporting sustainable practices.
  • Implementing smart irrigation and lighting systems: Automated systems optimise water usage and electricity consumption, leading to lower operational costs. These systems also reduce manual labour, which decreases service contract expenses.
  • Conducting competitive tendering for trades and services: Soliciting bids from multiple contractors promotes transparency and ensures fair pricing. Committees can compare scope, experience, and rates to make informed decisions that align with the scheme’s financial objectives.
  • Encouraging voluntary participation to reduce reliance on contractors: Where appropriate, engaging owners in tasks such as committee work can reduce paid service needs. Active community involvement can contribute to cost containment while fostering collective responsibility.

These measures should be balanced with quality assurance to avoid compromising property value or safety.

Frequently Asked Questions About Strata Fees

Strata fees themselves are set collectively and cannot be negotiated individually. However, owners can influence levy amounts by participating in budget discussions and voting processes at general meetings. Input on contractor selection, cost-saving proposals, or long-term planning can affect the budget and levy size over time. Strata One facilitates these discussions with transparency and fairness.

Failure to pay levies can lead to interest accrual, legal recovery actions, and even debt collection proceedings. The owners’ corporation may initiate formal recovery through NCAT, with legal and administrative costs typically added to the debtor’s account. Continued non-compliance may also affect an owner’s voting rights and access to certain communal facilities. We assist with managing these scenarios in accordance with legislation.

For owners of investment properties, strata fees may be partially tax-deductible. Administrative fund contributions are generally deductible as ongoing expenses, while capital works levies may fall under depreciation claims. Owners should maintain detailed records and consult a registered tax agent to determine eligibility and ensure compliance with Australian Taxation Office (ATO) guidelines.

Owners often ask what happens when strata fees fall into arrears. In most NSW schemes, unpaid levies accrue interest after the due date. If amounts remain outstanding, the owners’ corporation may start recovery action, which can include reminder notices, referral to debt collection and, where necessary, legal proceedings. Our role is to apply the building’s policies consistently, keep the committee informed and work with owners early to minimise escalation.

Another common question is why strata fees in NSW increase over time. In many cases, increases are driven by rising contractor costs, insurance premiums, new compliance requirements or the need to improve contributions to the capital works fund so longer-term projects can be funded without constant special levies. When we prepare budgets, we explain the main cost drivers in simple terms so owners can see how each component has been set.

Owners and buyers frequently want to know whether their contributions are reasonable for the age, size and facilities of the scheme. When we review a building, we compare its fees and planned spending with typical ranges for similar properties and look at the condition of common property and the strength of the capital works fund. Our general frequently asked questions content gives plain language responses about levies, budgets and running costs, and we build on this with scheme-specific advice so committees can explain why contributions are set at current levels.

Contact Strata One for Further Information

Contact us for comprehensive strata management services and expert guidance on your specific strata scheme. Our experienced team can assist with budgeting, compliance, and operational support to ensure your building functions efficiently.

What Are Strata Fees?

When we talk about strata fees in NSW, we are referring to the regular contributions owners pay to fund the running of their strata scheme. These contributions are also called strata levies. They allow the owners corporation to pay for insurance, maintenance, utilities for common areas, compliance costs and professional services such as strata management and auditing.

The legal framework for what strata fees are and how they must be raised and used comes from NSW legislation. An overview of how fees work from a regulatory perspective is set out by NSW Fair Trading on its strata fees information page. We work within that framework to help owners’ corporations set contributions that are lawful, sustainable and defensible.

Types of Strata Contributions

In every scheme we manage, we explain that strata fees are not a single undifferentiated charge. Contributions are allocated into specific funds so that day-to-day running costs, long-term projects and unexpected expenses are each handled in a structured way. This makes budgets clearer for committees and allows owners to see how their money is being used.

Administrative Fund Contributions

The administrative fund covers the routine, predictable costs of running the building. In this fund, we budget for items such as common area electricity, water for shared facilities, cleaning, gardening, minor repairs and routine compliance services. When we prepare annual budgets, we work with committees to identify the real operating needs of the scheme so that administrative fund contributions are sufficient without being excessive.

Capital Works Fund Contributions

The capital works fund is reserved for longer-term and higher-value items. Typical examples include external painting, roof replacement, lift upgrades, major waterproofing, window replacement and other significant projects that do not occur every year but are inevitable over the life of the building. We help committees align capital works contributions with realistic time frames and cost estimates so the fund grows in step with future obligations rather than falling behind them.

Special Levy Contributions

A special levy is raised when existing funds are not enough to cover a specific cost, often urgent or unplanned, such as major storm damage, structural defects or unexpected regulatory upgrades. While special levies will sometimes be necessary, frequent reliance on them can be a sign that regular contributions or planning need to be reviewed. These three categories of contributions are recognised across the industry and consistent with guidance from professional bodies such as the Strata Community Association. When we prepare budgets, we ensure each fund has a defined purpose and that contribution levels reflect the actual needs of the building rather than arbitrary figures.

How Strata Fees Are Calculated

Strata fees are worked out by first setting a yearly budget for the building, then splitting this cost between all owners. Each owner’s share is based on their unit entitlement, which is a number set out in the scheme’s documents.

What is a unit entitlement?

A unit entitlement is a figure that represents each lot’s share of the building. Bigger or premium lots usually have a higher entitlement and pay more strata fees.

How is the total budget set?

The total budget is set by looking at how much is needed to cover yearly costs, such as repairs, cleaning, gardening, insurance, and long-term projects. The budget is divided into two main parts: the administrative fund (for regular expenses) and the capital works fund (for big or future projects).

How does this work in real life?

For example, if a small building has 6 lots and needs $36,000 for the year, and each lot has the same unit entitlement, every owner pays $6,000 a year. In a bigger building with 30 lots and a $300,000 budget, if one owner has 100 out of 3,000 unit entitlements, they pay $10,000 a year. In a large block with 120 lots, a $1.2 million budget and an average lot holding 80 out of 12,000 entitlements, the owner pays $8,000 a year.

Why do unit entitlements matter?

Unit entitlements make sure fees are shared fairly, according to the value or size of each lot. For more on how budgets and levies are set, independent sources such as MoneySmart explain what to look for if you want to check your fees are reasonable.

We can prepare examples like these for any committee so everyone understands how changes in the budget or entitlements affect what each owner pays.

What Do Strata Fees Cover in NSW?

Owners often ask what strata fees cover in practical terms. In most NSW schemes, administrative fund levies cover items such as common water and electricity, cleaning, routine gardening, minor repairs, fire safety inspections, lift servicing, strata management fees, bank charges and meeting costs. Capital works fund levies are held for more significant projects, such as the replacement of roofing, external painting, major concrete repairs or plant and equipment upgrades.

We provide detailed budget breakdowns and explanatory notes so owners can see how their fees are applied. For a fuller description of what levies fund and how they are structured, you can review our overview of strata levies. Our goal is to make the link between contributions and actual services as clear as possible so committees can explain this confidently to owners and buyers.

Capital Works Funds and Long-Term Planning

A healthy capital works fund strata account is central to a well-run building. It allows the scheme to plan for major repairs and replacements without relying entirely on special levies. Typical items funded from this account include external painting cycles, roof renewals, window replacement, lift modernisation and major waterproofing projects. Good planning reduces risk and can improve buyer confidence in the building.

We work with committees to align their capital works fund with realistic long-term needs. This includes reviewing past expenditure, upcoming obligations and any existing capital works reports, then calibrating contributions accordingly. Our explainer on what strata levies are and how funds are structured sets out the link between these funds and long-term building performance. Committees use this insight to justify contribution levels and avoid surprises.

Special Levies in NSW and When They Are Raised

A special levy strata contribution is usually raised when existing administrative and capital works funds do not cover a particular cost. Examples include urgent structural repairs, legal costs, unexpected building defects or major compliance upgrades that were not part of prior budgets. While special levies are sometimes unavoidable, frequent reliance on them may indicate that annual budgets or capital works planning need adjustment.

We encourage committees to think carefully before proposing a special levy and to present clear information to owners about the purpose, amount and timing. Our article on strata levies discusses how different levy types work together, including when a special contribution might be appropriate. In service work, we aim to reduce the need for emergency special levies by improving forward planning and reserves.

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