If you own in a Strata property, you are required to pay Body Corporate contributions, commonly known as levies. Levies cover many items such as the costs of maintaining common areas, administrative costs for items such as audits and tax, contractual fees and sinking fund contributions for capital expenditure. The budgets are estimates of anticipated expenditure by the Body Corporate.
Preparation of a budget is one of the most important tasks a Committee must undertake during the Body Corporate’s financial year. Below we have shared some general information on strata budgeting and some top tips:
Community Managers can be particularly useful when setting budgets. They have experience in preparing and setting budgets and will have the knowledge to how your scheme runs and any anticipated expenditure for the scheme.
– Increase in service frequency (e.g. more frequent garden maintenance),
– Increase in scopes of work (e.g. more comprehensive garden maintenance),
– New expenses
For Administrative Funds, levies should be set at a point that supports the expenditure. The impact of any carried forward surplus (or deficit) needs to be analysed at this point. For example, if there is a carried forward deficit balance, the levies for the budget year may need to be increased to reduce the deficit. Where levies need to increase, it may be possible to do so over more than one year. This can soften the impact on owners, whilst simultaneously being financially prudent.
For Sinking Funds (known as Maintenance Funds in Victoria and New South Wales), levies should be set at a point which takes into account the balance suggested in the Sinking Fund Forecast (SFF), and any expenses which are expected but not included (or anticipated) in the SFF.
Each Body Corporate and Owners Corporation requires specific analysis of their past and future financial requirements when preparing budgets. If you require assistance or advice on preparation of a detailed budget for your strata scheme, talk to SSKB. Our experienced Community Managers provide strategies to deliver positive results to your body corporate.
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