Strata financial responsibilities

Here are the key duties when managing your owners corporation or body corporate finances.

Living in a strata, owners corporation, or body corporate property comes with benefits like access to shared facilities and maintenance duties. However, it also involves joint financial responsibilities. Think of the owners corporation or body corporate as a legal body similar to a board of directors. Each member shares responsibility for the group’s actions. As a collective, all owners have a legal obligation to manage the funds and operations of their property. This responsibility also extends to the actions taken on its behalf by its delegates, such as the managing agent and its committee members. Neglecting these responsibilities and mismanagement can lead to serious legal and monetary consequences. Knowing who handles what can help prevent misunderstandings, disagreements, and poor decisions. Even if you’re not on the committee, every owner should stay informed about the property’s financial health.

Financial powers and duties of an owners corporation or body corporate

All property owners within a strata scheme collectively form the owners corporation or body corporate and share legal responsibility for managing the finances of common property. This includes duties to operate a bank account, set fees to cover running costs, set special levies for extraordinary expenditure, establish a fund to cover the cost of works in a maintenance plan, borrow money, invest money, recover money owed, and charge penalty interest.

Financial mismanagement can negatively affect all owners. This is why all owners should keep track of the property’s overall financial status and be aware of how strata funds are being utilised.

The 12 key financial duties of an owners corporation or body corporate are:

  • Issuing fee notices and final fee notices to members of the owners corporation or body corporate.
  • Keeping books and preparing financial statements and accounts.
  • Processing and paying all invoices on behalf of the owners corporation or body corporate.
  • Providing receipts for all payments to the owners corporation or body corporate.
  • Operating and reconciling the owners corporation or body corporate bank account.
  • Preparing and lodging Business Activity Statements (BAS) returns.
  • Preparing and lodging tax returns.
  • Withholding tax from suppliers who fail to provide an Australian Business Number (ABN).
  • Paying remuneration to managers and employees.
  • Paying insurance premiums.
  • Following up with owners who are in arrears.
  • Holding a tax file number (TFN), ABN, and registering for GST if income exceeds $75,000.

Managing strata budgets and funds

One of the primary responsibilities of an owners corporation or body corporate is to prepare and manage an annual budget. While the treasurer typically oversees this task, it can also be delegated to a strata manager.

The budget must be realistic, transparent, and approved by the owners at the annual general meeting (AGM). It serves as the foundation for determining levies, funding everyday expenses, and planning future building work.

The budget and expenditure for the previous and forthcoming years are generally included in the AGM agenda. This provides an opportunity for all owners to see how the owners corporation or body corporate is tracking financially, raise any concerns about the expenses, and have a say in the proposed spending for the year ahead. The two main funds that are budgeted for include:

Administrative fund

This fund covers regular operating costs. It pays for services and upkeep of shared areas, including:

  • Insurance
  • Utilities (water and electricity)
  • Gardening and cleaning
  • Minor repairs (e.g. plumbing and lighting)

Capital works/maintenance/sinking fund

This reserve fund is used for major repairs and long-term upgrades, and must be well-funded to cover essential work. A shortfall may signal poor financial planning. Common expenses include:

  • Roof and gutter replacement
  • Repainting shared surfaces
  • Window installations
  • Stormwater system repairs
  • Replacement of structural fixtures

Issuing notices for strata levies and fees

To fund the budget, the owners corporation or body corporate needs to collect levies from all lot owners. These contributions are calculated based on each lot’s liability and entitlement, and are determined at the AGM. At this meeting, each owner’s payment amounts and schedules are proposed and agreed upon.

These payments cover administration, maintenance and repairs, insurance, and other property obligations. Special levies may sometimes be issued to cover major, unforeseen expenses not included in the original budget. These additional payments ensure the owners corporation or body corporate can meet urgent financial needs.

While the owners corporation or body corporate is ultimately responsible for issuing and collecting levies, the task is often delegated to a strata manager. The committee, elected by lot owners, oversees financial decisions and approves the annual budget, determining levy amounts. Once finalised, the strata manager can help administer the levy collection process, maintain records, and manage arrears under the committee’s direction.

Key roles and responsibilities

  • Lot owners: Vote on the annual budget and their individual contributions at the AGM.
  • Committee: Prepares the budget which determines levy amounts.
  • Strata manager:Administers the levy collection process, maintains records, and manages arrears under the committee’s direction.
Lot owners:

Vote on the annual budget and their individual contributions at the AGM.

Committee:

Prepares the budget which determines levy amounts.

Strata manager:

Administers the levy collection process, maintains records, and manages arrears under the committee's direction.

Managing debt recovery for strata levies in arrears

When lot owners do not pay their levies on time, it can create financial pressure on the owners’ corporation or body corporate. These arrears could have a domino effect and impact essential services like insurance, maintenance, and cleaning, which still need to be paid for. A shortfall in funds can affect the entire community. For this reason, committees should regularly monitor levy balances to effectively manage arrears early.

Debt recovery is sometimes necessary to ensure the budget is met and the building operates smoothly. While following up on unpaid levies can be stressful and time-consuming, it is an important part of financial management. Committee members or strata managers may engage professional debt collection services to handle this process. These experts can help recover funds more efficiently and reduce the burden on volunteers or managers. Acting early can prevent small debts from becoming larger problems and maintain fairness for all owners who pay on time.

All lot owners ultimately decide by vote whether to approve the proposed budget and lot contributions. Additionally, it is the manager’s duty to issue fee notices in the required format, send final notices, and manage the follow-up of any outstanding debt.

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Invoice management

Effective invoice management is a cornerstone of financial governance within any strata, owners corporation, or body corporate. Whether for maintenance, repairs, or professional services, managing invoices ensures that essential work is properly documented, approved, and paid on time.

Invoices are typically paid from either the administrative fund or the capital works (sinking) fund, depending on the nature of the expense. All invoices must be logged and securely stored as part of the owners corporation or body corporate’s official financial records.

Receiving and verifying invoices

Before payment is made, each invoice must be verified to ensure accuracy and accountability. This includes:

  • Checked for accuracy, ensuring the goods or services were delivered as agreed.
  • Matched against contracts or service agreements, particularly for recurring services like cleaning, landscaping, or strata management.
  • Approved by the appropriate authority, such as the strata committee or appointed strata manager, before payment is processed.

Timely payment of invoices

Prompt payment of invoices is essential to:

  • Maintain good relationships with suppliers and contractors.
  • Avoid late fees or service disruptions.
  • Ensure continuity of essential services within the strata scheme.
Lot owners:

Indirectly contribute to invoice payments through levies, and rely on accurate financial governance to ensure funds are used appropriately.

Committee:

Monitors spending against the budget, and reviews and approves invoices, ensuring services were delivered as agreed.

Strata manager:

Receives, verifies, and logs invoices, matching them to contracts or service agreements, and processes payments once approved by the committee. Also maintains financial records and supplier relationships.

Strata tax returns

Strata, owners corporations, or body corporate schemes are taxed like public companies under Australian income tax laws. Therefore, committees should understand the scheme’s legal obligations to maintain financial compliance.

Even if your scheme doesn’t pay tax, you may still be required to lodge a return or notify the Australian Taxation Office (ATO) that none is needed. Therefore, it is essential to review the scheme’s books and records annually to understand any obligations that must be followed. It’s good practice to work with a strata manager or accountant to ensure everything is reported correctly and on time.

 

GST registration

If your scheme earns more than $150,000 annually (including levies, interest, and other income), it must register for Goods and Services Tax (GST). The owners corporation or body corporate will then need to:

  • Add GST to levies and service charges.
  • Regularly lodge a BAS .
  • Pay any GST owed to the ATO.

 

Income tax on interest and other earnings

While levies are generally not taxable, interest earned on bank accounts or investments are, and this income must be reported to the ATO. The owners corporation or body corporate usually lodges a tax return each year, even if no tax is payable.

If your scheme leases out common property (e.g. rooftop space for mobile antennas), the income may be treated as non-mutual income. This means each lot owner may need to declare their share on their personal tax return.

 

Reporting to the ATO

Owners corporations and body corporates may need to:

  • Lodge annual tax returns (especially if they earn interest or other taxable income).
  • Submit a BAS if registered for GST.
  • Keep accurate records of all income and expenses.

Strata tax return basics

What you need to know about owners corporation and body corporate tax return obligations.

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Securing common property strata insurance

Strata insurance protects common property areas shared by all lot owners that are not included in standard home policies. This helps provide the owners corporation or body corporate with coverage against financial loss due to accidents, damage, or natural disasters impacting common property. Not having the right insurance can put the scheme at risk of being unable to pay for unexpected damage or legal costs.

Strata insurance policies are mandatory for owners corporations and body corporates in Australia and must comply with each state’s legislation requirements. These typically include:

  • Building insurance: Covering structural damage to common property.
  • Public liability insurance: Protecting against injury or damage claims on common property.
  • Voluntary workers’ insurance: Covering committee members or volunteers performing duties.

The committee typically has the responsibility for securing an adequate policy. However, this duty is often delegated to a licensed strata manager, which can be especially beneficial for larger managed schemes.

Keeping owners corporation and body corporate  records

An owner’s corporation or body corporate must keep and manage the scheme’s financial records. This should include all information and documents that show the property’s financial health and position. The records must be kept in a safe and secure place and include basic information about the scheme including:

  • Income and expenditure.
  • Assets and liabilities.
  • Details of all financial transactions (for tax and GST purposes).

Good record-keeping helps avoid confusion, supports transparency, and helps the owners corporation or body corporate meet its legal obligations. These documents must be stored safely and kept up to date.

Committee members and lot owners can view the records for free and request copies for a small fee if held by a third party, like a strata manager.

Accounting and strata financial statements

Each year, the owners corporation or body corporate must prepare and present the scheme’s financial statements at the AGM, providing a summary of all transactions and reporting on the scheme’s funds, such as administrative, capital works, or sinking funds. This obligation is usually delegated to a professional strata manager who works with the committee throughout the year to track expenditure and execute the maintenance plan.

The financial statements for your administrative or capital works/sinking/maintenance fund must include:

  • A confirmation of the reporting period (e.g February 2024 to February 2025).
  • The monetary balance carried forward from the previous reporting period.
  • A description and the amount for each item of income (e.g. levy contributions, refunds, accrued interest).
  • A description and the amount for each item of expenditure (e.g. weekly cleaning invoice, monthly strata management fee, quarterly energy bill).
  • The amount each lot owner contributes.
  • Any outstanding contributions.
  • The cash in the fund and the fund’s balance.
  • The extent of the fund’s debit or credit.

Managing strata trust accounts

All levies and fees collected from lot owners must be deposited into a designated bank account. This is usually either held by the strata manager, service provider, or directly by the owners corporation or body corporate.

Funds held by a strata manager on behalf of an owners corporation or body corporate are treated as trust money. These accounts must be managed with strict controls to ensure transparency and prevent misuse. This arrangement would need to be kept separate from other funds and should be used for the individual needs of the owner’s corporation or body corporate.

If money is held in trust or for the benefit of another person, then general law duties arise, including:

  • Inquiring into the terms and state of the trust.
  • Obeying the terms of the trust.
  • Not making a personal profit or advantage from the trust.
  • Accounting for and providing information on the trust.
  • Keeping accurate and up-to-date records:
    • Administering the trust personally.
    • Exercising reasonable care not to mix trust monies.
    • Acting impartially.

Strata audit of financial statements

Depending on the size of your property and your scheme’s budget, you may need to have your accounts or financial statements audited. Even if not compulsory, lot owners can decide whether an audit is needed at the AGM. This process must follow the Australian Auditing Standards and provide an independent review of the financial records of an owners corporation or body corporate, which the strata manager typically manages.

  • In New South Wales, large strata schemes (properties with more than 100 lots or an annual budget exceeding $250,000) are required to have their accounts audited annually.
  • In Queensland, a body corporate can pass a motion by special resolution at its AGM not to audit its accounts. If the motion is not passed, the body corporate must have its accounts audited.
  • In Victoria, auditing is only mandatory for tier 1 and 2 owners corporation properties. An owners corporation that has more than 100 lots or collects more than $200,000 in fees (known as a “prescribed owners corporation”) must also prepare financial statements, in accordance with standards set out in the Owners Corporations Regulations 2018, ensure their financial statements are audited at the end of each financial year, and establish a maintenance fund.

  • In Tasmania, audits of financial statements are not mandatory unless required by by-laws or voted by the body corporate.
  • In the Northern Territory, financial audits are optional unless specified in the scheme’s constitution or by resolution.

 

The benefits of an audit are:

  • Obtaining an independent, expert opinion regarding the truthfulness and fairness of the financial statements.
  • Detecting any errors.
  • Ensuring compliance with accounting principles and standards.
  • Detecting and preventing any fraudulent activity.

 

Common examples of what can be discovered by an audit are:

  • Insufficient insurance coverage for the building.
  • Overpayment or double payment of expenses.
  • Unclaimed insurance items.
  • Unclaimed GST.
  • Insufficient funds to operate.

Distribution of surplus funds

At the end of a financial year, the owners corporation or body corporate may find that it has collected more money than needed. This extra amount is known as a surplus.

If these funds are not required for future expenses, the owners corporation or body corporate may choose to return them to the lot owners. A unanimous resolution or a motion without dissent must be passed to do this, meaning all owners must agree to the decision. If approved, the surplus is distributed back in the same proportion as their original contributions, based on unit entitlements.

Alternatively, the surplus can be kept in the administrative or capital works fund to reduce future levies or to help cover upcoming costs. This decision should be made with the long-term financial health of the scheme in mind.

Strata manager’s role in financial governance

When a professional strata manager manages the property, these duties are generally delegated to them. They will work with the strata committee to manage the financial obligations of the owners corporation or body corporate. Where a property is self-managed, the secretary and treasurer must fulfil these legislative duties.

 

1. Preparing and managing budgets

Strata managers work closely with the committee to prepare the annual budget. They analyse past expenditures, forecast future costs, and ensure that the administrative and capital works funds are adequately funded.

 

2. Issuing levy notices

They are responsible for generating and distributing levy notices to lot owners. These notices include payment schedules, due dates, and details of how the funds will be used.

 

3. Managing trust accounts

Strata managers can help operate trust accounts on behalf of the owners corporation or body corporate. They ensure that all income and expenses are accurately recorded and that funds are held securely and separately from other accounts.

 

4. Paying invoices and managing expenses

They process payments for insurance, maintenance, utilities, and contractor fees. This helps ensure that bills are paid on time and that the property continues to operate smoothly.

 

5. Financial reporting and record keeping

Strata managers maintain detailed financial records, including income, expenditure, bank statements, and levy contributions. These records are essential for transparency and are presented at the AGM.

 

6. Coordinating audits

If an audit is required, the strata manager liaises with external auditors, provides the necessary documentation, and ensures the process is completed per legal requirements.

 

7. Debt recovery support

They monitor overdue levies and may initiate debt recovery processes, including issuing reminder notices or engaging debt collection services, to protect the scheme’s financial health.

 

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Conclusion

Every owner in an owners corporation or body corporate is part of a financial ecosystem. Whether you’re a committee member or a lot owner, staying informed about your scheme’s financial responsibilities is essential. Furthermore, proactive financial management helps avoid disputes, protects property values, and ensures your building is well-maintained for years.

If you’re unsure about your obligations or need help managing your scheme’s finances, it is best to speak to your strata manager or request a financial health check for your building.

 

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This article is edited by Lauren Shaw Regional General Manager and Licensee-in-Charge on August 2025.

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