A Complete Guide to Body Corporate Fees

The chances are that if you’ve just bought (or are planning to buy) an investment property in a multi-unit development such as a unit, townhouse, or apartment, you’ll have heard about an owner's corporation or a Body Corporate.

These are essential to the smooth functioning of any building or housing lot in which owners have joint ownership of common areas or facilities.

From what a Body Corporate is to what the fees cover, and how much you can expect to pay, here is your complete guide for everything you need to know about Body Corporate fees in Australia.

What is Body Corporate?

This is the managing body that administers common property or common areas in multi-unit developments.

Common property or common areas can include things such as the driveway, facilities, foyer and stairwell, gym, pool or any other common area in the building.

By buying an apartment, townhouse, or duplex the owner is automatically part of the Body Corporate for that complex.

A treasurer, secretary, and chairperson are then elected, and these spots can be filled by any owner.

What does a Body Corporate do?

This managing body is responsible for a lot more than setting out rules of what you can and can’t do on your property.

A Body Corporate can be responsible for things such as maintaining, managing, and controlling common property on behalf of the owners.

This includes gardens, pools, gyms, common and shared spaces such as hallways, and even elevators.

But a BC is also responsible for calculating body corporate fees and resident payment schedule, making and enforcing body corporate rules (called ‘by-laws’) about what residents can and can’t do, and managing and controlling body corporate assets.

Usually, decisions about these items are raised at general meetings, which happen at least once a year (AGM), where all owners are given the opportunity to attend.

Other large meetings may take place, but usually require 14 days' notice.

What are Body Corporate fees?

Body Corporate fees are those annoying levies that are a necessary evil; as without them, your BC can’t adequately manage and maintain the property to the highest standard.

They are the cost of managing the common property or common areas on behalf of all the owners in the complex.

There are three main types of body corporate fees in Australia however these may vary slightly between the different states and territories.

1. Administration Levy – this is a levy to cover the day-to-day running of the complex (e.g. common water, common insurance, maintenance of lawns, management of the Body Corporate, etc).

2. General Purpose Sinking Fund Levy – this is a levy that is imposed to cover non-routine expenses (e.g. roof replacement or major repainting). It usually accumulates in a separate fund and is done so that owners are not hit with a large “one-off” expense for major works.

3. Special Purpose Levy – this is usually a one-off levy on the owners to pay for major works or a major expense required.

What is not covered by Body Corporate fees?

Given that body corporate fees are generally used for the maintenance and management of shared or common areas, they typically don’t cover things such as the following:

• Contents insurance for your personal belongings

• Council rates for your property.

• Maintenance, repairs, and improvements to your private-use property. For example, installing air conditioning or fixing a blocked toilet would not be covered.

• Utilities such as water, gas, and electricity, unless there is a shared meter and this cost is covered by your body corporate fees. An owner would need to check with their own body corporate or strata management company as this differs between Body Corporates.

How much are Body Corporate fees?

This fee could be as low as $30 per week - and as high as $600 per week.

It really depends on the property’s size, age, condition, maintenance schedule, and strata committee.

Generally the smaller the apartment, townhouse, or villa complex, the less the body corporate rate will be as there will be fewer or smaller common areas to maintain.

Before buying a property under a strata title it is important to ask the real estate agent to give you the previous few years’ body corporate fees for the apartment or unit, to give you a rough idea of what you’ll be expected to pay.

Of course, this figure may change in the future, particularly if major capital works are undertaken.

Are Body Corporate fees tax deductible for property investors?

Many investors who either own or are planning to buy a strata property are unsure as to whether they can claim body corporate fees as a tax deduction.

The answer depends on the type of Body Corporate Fee charged.

According to the ATO, expenses are deductible depending on what the fees are ultimately spent on (either a capital item or a deductible item).

Generally, the ATO has accepted the following general rules.

Administration Fund Levies that are for the general running expenses of the complex are deductible when incurred.

Sinking Fund Levies that are imposed on a regular basis are deductible and the owner does not need to differentiate based on what happens to the funds (i.e. whether spent on deductible expenditure or capital expenditure).

Special Purpose Levies must be traced to see what the actual funds raised were used for. If they were to repaint the entire complex or replace the entire driveway, they would be capital expenses and not deductible.

Source - Body Corporate Fees in Australia - A Complete Guide (propertyupdate.com.au)