Guide 2 · Comes in before signing, then every year

Body corporate levies and sinking funds

In most Queensland bodies corporate, every lot owner pays levies into two funds the body corporate must keep: an administrative fund for regular running costs, and a sinking fund for large, one-off and capital spending. The amounts are fixed each year at the annual general meeting and shared out by lot entitlement, and a buyer sees them on the body corporate certificate before signing.

General information, not legal or financial advice. This guide is published by Dotto and does not arrange loans or give advice. The official place to check is the Office of the Commissioner for Body Corporate and Community Management, whose information service is free and gives general information, not legal advice.

Which rules apply

Most Queensland bodies corporate come under the Body Corporate and Community Management Act 1997, with a regulation module chosen to suit the kind of scheme. A scheme with no community management statement falls under one of several older Acts instead, and Titles Queensland can say which applies. What follows is the Queensland Government’s description for schemes under the Standard, Accommodation, Small Schemes and Commercial modules. Two-lot schemes under their own module do not need formal budgets.

Two funds, side by side

Money cannot be moved from one fund to the other.

The administrative fund and the sinking fund, from the Queensland Government’s body corporate pages
Question	Administrative fund	Sinking fund
What goes in	Owners’ administrative levies, interest earned on the fund, fees paid to inspect or copy records, and anything not required to go to the sinking fund.	Owners’ sinking fund levies, interest from the fund’s investments, and insurance payouts for major capital items that are damaged or destroyed.
What it pays for	Anything not required to come from the sinking fund, such as regular maintenance of common property, insurance, and administration like secretarial fees and postage.	Large or one-off work such as painting or structural repairs to common property, replacing major items such as fences or carpets, and other items reasonably met from capital, such as pool furniture.
How far the budget looks	The financial year: maintenance of common property and assets, insurance, and recurring costs such as management fees and electricity.	The financial year, plus a reserve for likely spending over at least the 9 years after it.

The sinking fund looks ten years out

Each year the body corporate prepares a sinking fund budget that covers the year ahead and reserves money for likely spending in at least the following 9, so 10 years in all: painting a building, replacing a boundary fence, and other capital costs. A professional sinking fund forecast is allowed but not required. The Queensland Government says the committee or an owner can estimate the spending instead, and that this is up to each body corporate. So two buildings that look alike can carry quite different forecasts behind their levies, made in different ways.

How one lot’s levy is worked out

At each annual general meeting, the body corporate passes ordinary resolutions to:

agree the administrative and sinking fund budgets for the year;
work out from them what each lot must pay;
decide how many instalments the levies are paid in;
set the date each instalment falls due.

Each lot’s share follows its contribution schedule lot entitlement, recorded in the scheme’s community management statement, unless the law says otherwise. One exception is building insurance in a building format plan, which is shared by the interest schedule lot entitlement instead. The Queensland Government also notes that levies differ from one body corporate to the next with the age and condition of the common property and shared facilities, and that running costs are likely to rise over time.

When more is asked

A special contribution is an extra levy the body corporate must raise, by ordinary resolution, when it faces a cost the budget missed or did not cover in full. The Queensland Government’s example is painting common property that costs more than the sinking fund budget set aside.

An interim contribution can be fixed by the committee for either fund to bridge the gap until the new levies are set or paid. It is based on the previous year’s levies and is offset against the budget agreed at the next general meeting.

The levy notice

Notices, discounts and penalties

The body corporate must send each owner a written notice at least 30 days before a contribution is due, showing the amount, the due date, any discount, any late penalty and earlier amounts still owing.
If the body corporate decides to offer one, a discount for paying on time cannot be more than 20% of the instalment.
A late payment penalty, if the body corporate decides to charge one, is simple interest at a rate of no more than 2.5% for each month the contribution is overdue. The body corporate may waive the penalty, or allow the discount, in full or in part where there are special reasons.

The Queensland Government’s page for buyers puts the ceiling another way: late levies may attract interest of up to 30% a year, plus further costs. Unpaid levies can be recovered through the Queensland Civil and Administrative Tribunal as a minor civil dispute, or through the courts, together with the body corporate’s reasonable recovery costs. Once a debt has been overdue for 2 years, recovery must begin within 2 months.

What a buyer can read before settling

The body corporate certificate is one of the papers a seller must hand over before the contract is signed. For levies, the Queensland Government points buyers to three things in it: the levies set for the next financial year, a copy of the latest financial statement, and any levies the current owner has not paid, which the new owner may have to pay. A copy of the insurance certificate comes with it too.

For more, a buyer can ask to see the body corporate’s records, in writing and with a fee. The Queensland Government suggests being specific: contracts the body corporate has entered into, such as caretaking, letting, management or lift maintenance, which owners fund through their levies; financial information not on the certificate; and minutes of committee and general meetings. A buyer of a lot is among the people entitled to access, and the body corporate must allow inspection or provide copies within 7 days of the written request and the fee.

Where a loan comes in

Levies are paid for as long as the lot is owned, beside any loan repayments: membership of the body corporate comes with the lot and cannot be opted out of. For people buying through Queensland’s Boost to Buy scheme, paying body corporate fees and charges on time is one of the scheme’s listed ongoing obligations. More on that scheme is in guide 5.

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