Body Corporate Fees in Queensland

Most of what is written about this subject online is about Victoria or New South Wales, and the terminology gives it away. Victoria has owners corporations. New South Wales has strata schemes with an owners corporation running them. Queensland has bodies corporate, governed by the Body Corporate and Community Management Act 1997 and the regulation module that applies to your scheme.

The distinction is not pedantry. The funds are structured differently, the budget rules are different, and some of the obligations that apply in New South Wales simply do not apply here.

If you are reading a guide that talks about an owners corporation or a strata levy, you are reading about somewhere else. The numbers in it may still be a reasonable guide to cost, but the rules in it are not the rules you are under.

A Queensland body corporate must have both an administrative fund and a sinking fund. They are separate, and money cannot be transferred from one to the other.

The administrative fund covers recurrent expenditure: the running costs that come round every year or more often. Body corporate management fees, electricity for common areas, cleaning, gardening, insurance premiums and routine maintenance of common property all sit here.

The sinking fund covers major capital spending. Repainting the building, replacing a roof, resurfacing a driveway, replacing lifts. These are the expenses that arrive rarely and cost a great deal when they do, and the fund exists so that they are paid for gradually rather than by a sudden demand.

Both budgets are prepared each financial year and the contributions are set at the annual general meeting. What you pay is not a number the manager chooses; it is a share of an approved budget.

The sinking fund budget must provide for the coming financial year and reserve an amount to meet likely spending for at least nine years after it. In practice that is a ten-year view of what the building will need.

Here is the part that surprises people who have owned in another state: a Queensland body corporate may commission a professional sinking fund forecast, but it does not have to. New South Wales requires a ten-year capital works plan. Queensland does not require the professional report, only the nine-year budgeting horizon.

That matters when you are buying. A scheme with a professionally prepared forecast has usually thought about the roof before the roof starts leaking. A scheme without one may still be well run, but you are relying on the committee's judgement rather than on an engineer's estimate, and you should look harder at the fund balance against the age of the building.

A healthy sinking fund is not a cost, it is protection against a special levy landing on you the year after you buy.

Contributions are apportioned between lots according to lot entitlements, which are recorded in the community management statement for the scheme.

People assume the split follows the size of the unit, and often it roughly does, but it does not have to. Two apartments of identical size can carry different entitlements, and a townhouse with no access to the pool can still be contributing to maintaining it.

Read the community management statement before you buy, not after. Lot entitlements can be adjusted, but the process is formal and it is not quick.

This is where a lot of published advice is simply incorrect, and it is worth being precise because the amounts are not small.

Regular contributions to the administrative fund are deductible in the year you incur them. So are regular contributions to a general purpose sinking fund, the ordinary kind that covers a range of unspecified future expenses such as repainting common property or replacing common fixtures and fittings. The ATO treats both as payment for services the body corporate provides, which is why they are an immediate deduction.

What is not immediately deductible is a special levy raised to fund a specified capital improvement. That treatment does not change if the levy is paid into a special purpose fund or collected as a special contribution to the general purpose sinking fund. It is the purpose that decides it, not the account it lands in.

So the common line that sinking fund contributions are not deductible is wrong, and it costs investors real money at tax time. Ordinary sinking fund contributions are deductible. Special levies for a nominated capital project are not.

A special levy is not lost, though. Where it funds construction, it can qualify as a capital works deduction at 2.5% a year instead, which is a slower claim rather than no claim.

Council rates and water charges for your own lot are yours, not the body corporate's. So is everything inside your own walls: repairs, appliances, floor coverings and any improvement you make.

Building insurance for the common property and the structure is usually a body corporate expense and sits in the administrative fund budget. Your contents, and landlord insurance covering your tenancy risk, are separate and are yours to arrange.

This trips up new investors who assume the body corporate insurance covers a tenant damaging their kitchen. It does not.