Find out everything you need to know about what they are, how they’re used and how they’re calculated in this helpful guide.
Property investment is a savvy way to boost your income and build a nest egg that will support you well into retirement. Though, as with any investment strategy, it comes with a few considerations and costs. This can include body corporate fees.
Not sure what we’re talking about? No worries! Read on for your full guide, including what they are, how much to pay and how you might be able to offset this cost.
What are body corporate fees?
A body corporate is a legal entity that’s created when a property is subdivided and registered. This means that properties such as townhouses, apartments and duplexes come with a body corporate. They are tasked with maintaining and managing the property.
If you purchase an investment within a multi-resident property — such as a townhouse or apartment — you will automatically become part of the body corporate. This means that you will be able to have your say in how the property is managed.
This also means that you will have to pay body corporate fees — the money used to carry out management and maintenance duties. It’s important to note that body corporate fees are not Council Rates, and must be paid in addition to any council rates that apply to your property.
Once collected, these fees are generally distributed between an administration and sinking fund to allocate money for specific purposes.
The administration fund is used to cover the day-to-day expenses of managing and maintaining the property. This can include everything from insurance to cleaning and landscaping.
Sometimes called a ‘general purpose sinking fund’, this is created to cover the costs of major one-off expenses.
The sinking fund is there to ensure owners are not stung with surprise costs when major projects need to be carried out. This can include things such as repainting the building, repairing a driveway or roof, or carrying out major renovations on communal features such as a lobby or swimming pool.
How much are body corporate fees?
There is no set amount for body corporate fees. They are determined by the cost it takes to maintain the property each year. This means that they not only vary from property to property, they will also vary from year to year.
Some factors that determine the costs of body corporate fees include:
- size and age of the building
- number of units
- property management costs
- onsite facilities such as a pool or gym.
Usually the body corporate will present a proposed budget each year. As an owner and member of the body corporate, you have the opportunity to agree or disagree with the proposal. If the majority of the body corporate agrees, the budget is passed and split between all members for payment.
Can you deduct body corporate fees?
The good news for investors paying body corporate fees is that you may be able to deduct the cost come tax time.
According to the Australian Taxation Office, you can claim a deduction on body corporate fees if, “Payments you make to body corporate administration funds and general purpose sinking funds are considered to be payments for the provision of services by the body corporate and you can claim a deduction for these levies at the time you incur them.”
There are conditions to this, though. For example, payments to a special purpose fund for specific capital expenditure are not deductible. It’s important to do your research here and understand all of the conditions involved to ensure you’re following all appropriate rules and regulations.
To find out more about how body corporate fees are calculated and allocated, including your responsibilities as an owner, check out the rules and regulations for your state: