Levies are raised to meet the financial obligations of the body corporate for today and in the future.
Levy rates vary from one body corporate to another. This is due to the different size, location, amenities etc of the Scheme.
There are two types of levies: -
- Administrative Fund Levy: Funds normal day-to-day operational
expenses such as:
Audit fees, bank charges, caretaking or management fees, community power, taxation, body corporate insurance, administration costs for the body corporate, lifts and other equipment servicing, pools and common area maintenance / materials, and the like. Usually, these expenses occur once or frequently every year.
- Sinking Fund Levy: Funds large common property
maintenance, repairs, improvements as well as purchase of new assets.
Large items are listed below: -
Repainting common property, repairs to roof and guttering, refurbishing pool and gardens, purchase of additional or replacement pool furniture etc. In other words, these expenses are large irregular costs.
A levy is paid by all lot owners according to their individual lot entitlements. These lot entitlements (particularly the contribution schedule lot entitlements) are listed in your body corporates community management statement.
By way of an example: -
Whereas:
Administrative Fund Budget totals $100,000.00 for the ensuing financial year.
The total Contribution Schedule Lot Entitlements for Example Body Corporate is 500.
Lot 6 has 12 Contribution Schedule Lot Entitlements according to the community management statement.
Calculation:
$100,000/500 = $200.00 per Contribution Schedule Lot Entitlement.
To calculate Lot 6's levy amount for the year: $200.00 x 12 = $2,400.00
This is then adjusted to take into account any provision for discount and GST payable.
This levy might be further broken into smaller period to reduce burden of lot owners making one lump sum levy payment.
As you can appreciate, if the body corporate does not receive levy monies, it cannot meet its obligations. In extreme cases, this can mean no lights in the common areas or insurance protection and a number of Writs served by creditor upon the body corporate.
Consequently, under the prevailing body corporate legislation, a body corporate can take legal action against any lot owner who does not pay their levies.
Should anyone experience difficulty in fulfilling their financial obligations to the body corporate, they will need to contact their financial institution to make appropriate arrangements.
Like other operating corporate entities, at the end of the financial year, the actual expenses are compared to the budget. Any surplus or deficit may be taken into account for the calculation of next years levies.
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