What Do Strata Levies Pay For? Understanding How Your Money Keeps the Building Running

Every strata owner in NSW contributes to the financial health of their building through strata levies. These regular contributions are the lifeblood of a strata scheme—covering everything from daily cleaning and insurance to long-term capital works such as roof repairs or lift upgrades.

Understanding what your levies pay for—and how they’re determined—helps you plan your budget, make informed decisions at meetings, and ensure your scheme remains financially sustainable. Here’s a closer look at how strata levies work and where every dollar goes.

The Two Core Funds: Administration & Capital (Sinking)

Under the Strata Schemes Management Act 2015 (NSW), every Owners Corporation must establish at least two separate funds: the Administration Fund for day-to-day expenses and the Capital Works Fund (formerly called the “Sinking Fund”) for long-term maintenance and improvements.

The Administration Fund – Keeping the Scheme Running

This fund covers the ongoing operational costs of your building—the predictable, recurring expenses required to keep the property safe, functional, and compliant. Typical examples include:

• Building and public-liability insurance premiums
• Cleaning services for foyers, lifts, and shared areas
• Gardening and landscape maintenance of common grounds
• Repairs and minor maintenance of common property (lights, locks, doors)
• Water consumption and waste services
• Electricity for lighting and common equipment
• Strata management and audit fees
• Fire safety inspections and compliance certificates

The administration fund is essentially the scheme’s operating budget. Ideally, it’s budgeted so that income matches forecasted annual expenses—ending close to a zero balance each financial year. Large surpluses may indicate over-collection; chronic deficits suggest the levies are set too low.

The Capital Works Fund – Planning for the Future

Where the administration fund manages today, the capital works fund safeguards tomorrow. This account is dedicated to major repair, replacement, and upgrade projects that extend your building’s lifespan and protect property values. Examples include:

• Repainting external and internal common walls
• Replacing roofing, guttering, or waterproofing membranes
• Renewing common-area carpets and flooring
• Upgrading lifts, intercoms, or security systems
• Structural repairs to balconies, façades, or basement areas
• Energy-efficiency projects such as solar panels or LED lighting

By law, every scheme must prepare a 10-year Capital Works Plan that forecasts likely expenses and recommended contributions. This ensures the Owners Corporation collects enough funds gradually—rather than imposing sudden, costly special levies when big projects arise.

How Levies Are Determined

Levies are set annually at the Annual General Meeting (AGM). Before each AGM, your strata manager circulates a proposed budget showing projected expenses for both funds. Owners vote on this budget, which in turn determines how much each lot contributes during the next financial year.

Each owner’s levy share is calculated according to their unit entitlement—a value assigned to each lot on the strata plan that reflects relative size or value. For example, a penthouse with higher unit entitlement pays a larger proportion than a smaller one-bedroom apartment.

Levies are typically raised quarterly, but some schemes prefer monthly or bi-annual payments depending on cash-flow needs.

Special Levies – When Funds Fall Short

Despite careful budgeting, unexpected costs sometimes arise: storm damage, emergency plumbing, or urgent façade repairs. If there isn’t enough money in existing funds, the Owners Corporation may vote to raise a special levy.

Special levies are one-off payments made by owners to cover a specific shortfall or project. These must be approved by ordinary resolution at a general meeting, and each owner pays according to their unit entitlement. While not ideal, special levies are sometimes necessary to address unforeseen works without borrowing.

What Happens If Levies Go Unpaid

Once levies are struck at the AGM they become a debt owed to the Owners Corporation, and they are not negotiable after the fact. If you disagree with a budget, the time to say so is before or during the meeting. What happens after a levy is missed is set out in the Strata Schemes Management Act 2015 (NSW), and several of these rules changed in the recent round of strata reforms.

Interest starts after one month

An unpaid contribution carries simple interest at 10% a year until it is paid, unless the regulations set a different rate (section 85(1)). No interest is payable at all if the levy is cleared within one month of the due date (section 85(2)), so a payment that is a fortnight late costs nothing extra. An Owners Corporation can also resolve that a contribution carries no interest, either generally or in a particular case (section 85(3)).

Payment plans come first

An Owners Corporation and an owner can agree a payment plan for overdue contributions (section 85(5)). A plan runs for up to 12 months, and a further plan can be agreed after that (section 85(5AA)). An Owners Corporation cannot pass a blanket resolution refusing payment plans (section 85(5AB)), though it may refuse in particular cases (section 85(5AC)) and may reasonably refuse an individual request (section 85(5A)). If an owner believes a refusal was unreasonable, they can apply to NCAT, which may order the Owners Corporation to agree (section 85(9)).

The limits on recovery action

An Owners Corporation can recover unpaid levies, interest and its reasonable recovery costs either by applying to NCAT (section 86(1)) or as a debt in a court (section 86(2A)). Two safeguards sit around that:

• Notice. At least 30 days written notice must be given before recovery action starts, and that notice has to state the amount being sought and the action proposed (sections 86(4) and 86(5)). The notice period used to be 21 days.
• Payment plans are protected. No recovery action can be taken over an amount that is being dealt with under a payment plan the owner is complying with (section 86(6)).

Separately, an Owners Corporation or strata committee cannot engage legal services that require payment unless a general meeting has approved it, either with unlimited costs or up to a set maximum (section 103).

How your payments are applied

Where an owner is in arrears, payments must be applied in a set order: to contributions first, in order of due date, then to interest, then to recovery expenses ordered to be paid (section 86(7)). That order does not apply if a court or NCAT has directed otherwise, or if the owner specifies how their payment is to be applied (section 86(8)).

If you are struggling to pay

Tell your strata manager or committee before the due date rather than after. A plan agreed early costs the owner less and is better for the scheme than arrears that build. Unpaid levies are never only an individual problem: they squeeze the scheme’s cash flow, can force a special levy that the owners who did pay then have to fund, and delay maintenance the whole building relies on.

Source: Strata Schemes Management Act 2015 (NSW), sections 85, 86 and 103.

Transparency and Accountability

Under NSW law, owners have the right to review financial records and budgets at any time. Modern strata managers, including Metro Strata, provide online portals where owners can access real-time statements, invoices, and levy histories. This transparency ensures owners know exactly how their money is being managed.

Owners Corporations are also required to maintain detailed financial records, present audited statements annually, and comply with trust-accounting standards for all funds collected.

Tips for Owners and Committees

• Read your AGM papers carefully — Review proposed budgets, not just total levies.
• Plan ahead — Support regular updates to your Capital Works Plan every 3–5 years.
• Encourage preventative maintenance — Small repairs today save thousands later.
• Understand special levies — They should be used strategically, not habitually.
• Ask questions — If something in the budget seems unclear, seek clarification from your Strata Manager.

Final Word

Strata levies aren’t just another household expense—they’re an investment in your property’s future. They ensure buildings remain safe, compliant, and well-maintained, protecting both lifestyle and value for all owners.

At Metro Strata, we believe in full transparency around levy allocation, forecasting, and reporting.