What are Strata Fees in Australia? A Quick and Easy Guide

Buying an apartment or unit in Australia can give you great ownership perks, including facilities like swimming pools, gyms, garden areas, lifts, and secure parking. However, these facilities do come at a cost to owners, called strata fees.

Strata fees are critical for anyone who owns (or wants to own) a property in a strata scheme. These fees, called strata levies, cover ongoing costs of managing and maintaining common property areas and facilities. Whether you’re a first-time homebuyer or an experienced investor, understanding what strata fees are and how they’re calculated will help you make an informed decision before you buy a strata-titled property.

If you’re thinking about buying a strata property soon, get personal advice from an expert mortgage broker for your borrowing situation:

• Top mortgage brokers in Sydney
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Otherwise, keep reading to discover everything you need to know about strata fees.

What Are Strata Fees?

Strata fees are mandatory fees paid quarterly by property owners who own a strata-titled property. A strata-titled property is a building or group of buildings that is divided into individual lots and shared common areas such as:

• Lobbies and hallways
• Swimming pools and gyms
• Shared gardens and parking areas

Owners pay strata fees to ensure the shared common areas and the property’s overall condition are well-maintained.

Who Collects Strata Fees?

Owners pay strata fees to an owner’s corporation or body corporate. The corporation uses the money to keep the shared facilities in good condition and manage community aspects of the property to ensure it’s a good place to live. It also prepares financial records for the building and establishes a grievance procedure.

How Often Do You Pay Strata Fees?

In Australia, strata fees are typically paid quarterly. However, the frequency can vary depending on the particular property and how the owner’s corporation manages the fees.

Components of Strata Fees

The breakdown of strata fees depends on the owner’s corporation’s needs, the size and complexity of the property, and the location. You can generally divide the types of strata fees into three main categories. Each one addresses the different financial needs of the property:

1. Administrative Fund Levies

These are the most common fees and generally what people think of when they hear “strata fees”. Fund levies cover day-to-day management fees and routine expenses involved in maintaining the property.

What Do Administrative Fund Levies Pay For?

These fees are used to pay for costs such ongoing expenses such as:

• Utility bills for shared areas (e.g., electricity and water)
• General building maintenance like cleaning and gardening
• Upkeep of amenities like pools and gyms
• Insurance premiums for the building
• Payments to the strata manager for day-to-day management

2. Capital Works Fund (Sinking Fund) Levies

The capital works fund, or the sinking fund is designed for primary and more costly repairs outside the day-to-day expenses. A portion of your administrative fund levies are paid into this fund, which accumulates over time and is used to cover irregular expenses.

What Does the Sinking Fund Cover?

The sinking fund is used to cover costs such as:

• Roof restoration or replacement
• Structural repairs to the strata building
• Painting of the building’s exterior

If you’re considering buying a property in an older building, you may need to contribute more to this fund, as older buildings typically require more repairs.

3. Special Levies

Special levies are raised to address unexpected expenses that exceed the budget of the administrative or sinking funds.

What Do Special Levies Cover?

You might need to pay special levies for:

• Emergency repairs from natural disasters that weren’t covered by insurance
• Legal costs due to disputes within the strata scheme

Special levies can significantly burden owners, but with effective strata management, they can often be minimised or avoided altogether.

How Are Strata Fees Calculated?

Only some owners in a strata complex always pay the same strata fees. Fees are calculated based on several factors, including:

1. Unit Entitlement: Each property in a strata scheme is assigned a unit entitlement, which determines the proportion of fees an owner must pay.
2. Amenities and Facilities: Properties with luxury features like swimming pools, gyms, or elevators will have higher strata fees.
3. Building Age and Condition: Older buildings often require more maintenance, which means higher costs.
4. Property Size: Larger units or those with exclusive-use areas (e.g., private gardens) have higher levies.

The owner’s corporation creates an annual budget, factoring in ongoing and future expenses and the required fees. They allocate fees to each owner based on their unit entitlement. This process is typically discussed and approved during the owner’s corporation’s annual general meeting.

Average Strata Fees in Australia

Strata fees vary widely depending on the property’s location, size, and features. Typically, the total fees range between $3,000 and $6,000 annually, but properties with luxury facilities may cost more.

• Properties with extensive facilities: Approximately 0.8% to 1.2% of the property’s market value annually
• Properties with minimal facilities: Approximately 0.3% to 0.7% of the market value annually

When budgeting for a strata-titled property, factor the fees alongside other costs to ensure it fits your budget.

What Should Property Investors Know About Strata Fees?

For property investors, strata fees can directly impact your rental yield, tax obligations, and overall strategy. Here are a few factors to consider when considering strata fees for your investment property.

Are Strata Fees Tax Deductible?

According to the Australian Tax Office (ATO), this depends on how the fees are spent. As a general rule, here’s how tax will impact each component of strata fees:

• Administrative Fund Levies: Since these expenses are directly linked to the property’s income-generating potential, they are usually tax deductible when incurred.
• Sinking Fund Levies: Given that these fees come from your regular strata fees imposed regularly, they will be deductible in most cases.
• Special Purpose Levies: The fees’ use is dependent on their purpose. For example, they are not tax-deductible if the funds raised are used for capital expenses, such as repainting the entire building or replacing a driveway.

Cash Flow Management

High strata fees can reduce your rental yield and eat into your profits. You should factor this into your financial planning and understand how fees reduce your returns.

Attracting A High-Quality Tenant

It’s too simplistic to say that high strata fees are nasty for investors. After all, properties with premium facilities may have higher strata fees but are also likely to attract premium tenants. If strata fees are high to keep the property in great condition, tenants are likely to stay longer and provide stability that lowers vacancy rates.

Check out our in-depth guide here to discover more about building wealth through property investment.

How Do Strata Fees Affect First-Time Homebuyers?

Remember how strata fees impact long-term affordability if you’re considering buying a strata property for your first home. Here are a few things to consider:

Budgeting for Strata Fees

Include them in your ongoing budget when calculating your mortgage repayments, council rates, and other expenses. You should be aware of the sinking fund balance and the possibility of needing to pay special levies at some point.

Quality of Facilities

You might be unable to afford every dream aspect of your home the first time. However, strata properties can give you shared ownership of some great amenities. But ask yourself, Is it worth paying for that nice new apartment with a swimming pool? Or will you barely use it? Weigh the strata fees against the facilities and what you’re willing to pay.

If you need more tips on buying your first home, read our complete guide and checklist for 2024.

What Happens If You Don’t Pay Strata Fees?

Failure to pay strata fees can lead to severe penalties. Generally, the first penalty will be paying interest on top of the overdue payments.

If you haven’t updated it, the owner’s corporation may take further action. This can range from debt collection to lodging legal action with the court. That’s why staying on top of your financial obligations is critical to avoid the stress and economic ramifications.

3 Tips for Prospective Buyers of Strata Properties

Strata-titled properties have different obligations than regular homes, so it’s essential to understand how these impact your ownership. Here are three tips to avoid buyer’s regret:

1. Get A Strata Report: A strata report allows you to review the strata plan, financial reports, and maintenance history before you commit to buying the property. It’s a great chance to uncover any red flags, such as major upcoming repairs.
2. Understand the Sinking Fund: Check whether the sinking fund is sufficient to handle future significant expenses. If not, you may be required to pay higher levies to make up the balance.
3. Factor Fees into Your Budget: Whether you’re an investor or an owner-occupier, Include strata costs in your financial calculations.

To better understand affordability, see Property Settlement: Everything You Need to Know When Buying a Home.

Conclusion

Strata fees are an integral part of owning a strata-titled property in Australia. They cover the ongoing maintenance and management of shared areas and amenities in the property, and all owners must pay them. While these fees may seem high, they often fund valuable amenities and essential maintenance that enhances residents’ quality of life. By reviewing your strata fee reports, understanding sinking fund balances, and factoring these fees into your budget, you’ll be better equipped to make smart property decisions – regardless of whether you’re a property investor or an owner occupier.

Get an expert mortgage broker to help you with your strata property. Check out the top 10 list for your area below.

• Top mortgage brokers in Sydney
• Top mortgage brokers in Melbourne 
• Top mortgage brokers in Brisbane 

FAQs on Strata Fees

What are strata fees?

Strata fees, also called strata levies or levies, are mandatory contributions paid by property owners in a strata scheme.

What do strata fees cover?

Strata fees cover the maintenance, repair, and management of common property. This includes:

• Building insurance
• Cleaning and maintenance of common property
• Utility bills for shared areas
• Compliance costs (e.g., fire safety inspections)
• Professional fees for strata management

How are strata fees calculated?

Strata fees are based on the strata company’s unit entitlement for each property, which determines the proportion of fees each owner will pay. This is calculated as a share of the property’s value, size, and use of amenities within the strata scheme.

Are strata fees tax deductible?

Strata fees may be tax deductible for investment properties. Speak with your accountant or tax professional to determine whether you can claim tax deductions on the payments.

What happens if I don’t pay strata fees?

Failure to pay strata fees can result in penalties, including interest charges and legal action by the owner’s corporation. Persistent non-payment of unpaid strata fees may lead to a court order for debt recovery.

What are administrative fund levies?

These levies are part of strata fees and cover day-to-day management costs, including cleaning, gardening, insurance premiums, and other routine operational expenses.

What is a sinking fund or capital works fund?

The sinking fund, or capital works fund, is a reserve for major repairs and long-term maintenance. This capital work levy includes significant expenses like roof restoration, structural repairs, and repainting.

What are special levies?

Special levies are additional payments that cover unexpected expenses that exceed the administrative or sinking fund budgets.

Do strata fees vary by property type?

Yes, strata fees vary depending on factors like:

• Amenities (e.g., pools, gyms)
• Age and condition of the strata building
• Size and unit entitlement of the property
• Location and local strata laws

Can I negotiate or dispute high strata fees?

While your strata managers’ fees are generally fixed by the owner’s corporation, you can participate in the annual general meeting to review budgets and raise concerns. If you believe fees are excessive or unfair, consult your strata manager or seek legal advice.

 

 

“Strata fees and their management by the body corporate overseeing the building can significantly impact your cash flow and influence the property’s future resale value. For example, if strata fees are already high, they’re likely to increase further, potentially deterring buyers when you decide to sell.”