Published: 05 Aug 2026
A financially healthy Body Corporate does not happen by chance. It is the result of careful planning, responsible decision-making and Trustees who understand the importance of budgeting for both today's expenses and tomorrow's maintenance.
Every owner has a vested interest in how their Body Corporate is managed. Well-prepared budgets, appropriate levy contributions and proactive maintenance planning all contribute to protecting property values, maintaining the common property and avoiding unnecessary financial surprises.
Understanding how the budgeting process works helps owners appreciate not only what they are contributing towards, but also why regular levy increases and long-term maintenance planning are essential to protecting their investment.
Every owner has a vested interest in how their Body Corporate is managed. Well-prepared budgets, appropriate levy contributions and proactive maintenance planning all contribute to protecting property values, maintaining the common property and avoiding unnecessary financial surprises.
Understanding how the budgeting process works helps owners appreciate not only what they are contributing towards, but also why regular levy increases and long-term maintenance planning are essential to protecting their investment.
Why is budgeting so important?
The annual budget is the Body Corporate's financial plan for the year ahead. It provides the funding needed to:
Without a realistic budget, a Body Corporate may struggle to meet its financial obligations, resulting in deferred maintenance, financial pressure and dissatisfaction amongst owners.
- maintain the common property;
- insure the buildings;
- pay municipal charges and service providers;
- meet the Body Corporate's statutory obligations;
- provide for future maintenance; and
- reduce the likelihood of raising special levies.
Without a realistic budget, a Body Corporate may struggle to meet its financial obligations, resulting in deferred maintenance, financial pressure and dissatisfaction amongst owners.
The Trustees role
Trustees have a fiduciary duty to act in the best interests of the Body Corporate. This includes ensuring that sufficient funds are available to operate and maintain the scheme effectively.
Preparing a budget should never be viewed as an exercise in keeping levy increases as low as possible. Instead, Trustees should focus on preparing realistic budgets that reflect the actual operating costs of the scheme and its future maintenance requirements.
Preparing a budget should never be viewed as an exercise in keeping levy increases as low as possible. Instead, Trustees should focus on preparing realistic budgets that reflect the actual operating costs of the scheme and its future maintenance requirements.
Understanding the Administrative Fund and Reserve Fund
The Sectional Title Schemes Management Act (STSMA) requires every Body Corporate to maintain two separate funds: the Administrative Fund and the Reserve Fund. While both funds contribute to the financial health of the scheme, they serve very different purposes.
Administrative Fund
The Administrative Fund is the Body Corporate's operating fund. It is used to pay the ordinary day-to-day expenses of running the scheme, including:
In addition to meeting the Body Corporate's operating expenses, the Administrative Fund budget must also make reasonable provision for future maintenance and repairs.
This recognises that not all maintenance expenditure relates to major capital items. Routine and recurring maintenance should be anticipated and budgeted for through the Administrative Fund, while the Reserve Fund provides for future major maintenance, repair and replacement projects identified in the Body Corporate's approved 10-Year Maintenance Plan.
- municipal services;
- insurance premiums;
- managing agent fees;
- security;
- gardening and cleaning services;
- repairs and maintenance;
- professional fees; and
- other operating expenses.
In addition to meeting the Body Corporate's operating expenses, the Administrative Fund budget must also make reasonable provision for future maintenance and repairs.
This recognises that not all maintenance expenditure relates to major capital items. Routine and recurring maintenance should be anticipated and budgeted for through the Administrative Fund, while the Reserve Fund provides for future major maintenance, repair and replacement projects identified in the Body Corporate's approved 10-Year Maintenance Plan.
Reserve Fund
The Reserve Fund is often misunderstood. It is not a savings account.
It is a dedicated fund established to provide for the future maintenance, repair and replacement of the common property in accordance with the Body Corporate's approved 10-Year Maintenance, Repair and Replacement Plan.
Unlike the Administrative Fund, which provides for the Body Corporate's day-to-day operating expenses, the Reserve Fund ensures that funds are accumulated over time to meet the cost of major maintenance and replacement projects as they become due.
By planning and collecting contributions in advance, the Reserve Fund helps to reduce the financial impact of major maintenance projects and, where possible, minimises the need for significant special levies.
It is a dedicated fund established to provide for the future maintenance, repair and replacement of the common property in accordance with the Body Corporate's approved 10-Year Maintenance, Repair and Replacement Plan.
Unlike the Administrative Fund, which provides for the Body Corporate's day-to-day operating expenses, the Reserve Fund ensures that funds are accumulated over time to meet the cost of major maintenance and replacement projects as they become due.
By planning and collecting contributions in advance, the Reserve Fund helps to reduce the financial impact of major maintenance projects and, where possible, minimises the need for significant special levies.
The importance of the 10-Year Maintenance Plan
The 10-Year Maintenance, Repair and Replacement Plan is one of the most important financial planning tools available to a Body Corporate.
It is a statutory requirement that assists Trustees in identifying major maintenance projects expected over the next ten years, estimating the costs involved and planning how those costs will be funded through the Reserve Fund.
Rather than waiting for assets to fail, the plan encourages proactive maintenance, helping to:
The plan is reviewed and updated annually by the Trustees before being presented to the members at the Annual General Meeting for approval, with or without amendment. It should remain a rolling 10-year plan, with one year falling away and another being added each year to ensure the Body Corporate is always planning ten years ahead.
It is a statutory requirement that assists Trustees in identifying major maintenance projects expected over the next ten years, estimating the costs involved and planning how those costs will be funded through the Reserve Fund.
Rather than waiting for assets to fail, the plan encourages proactive maintenance, helping to:
- extend the life of common property assets;
- reduce long-term maintenance costs;
- minimise emergency repairs;
- preserve property values; and
- reduce the need for significant special levies.
The plan is reviewed and updated annually by the Trustees before being presented to the members at the Annual General Meeting for approval, with or without amendment. It should remain a rolling 10-year plan, with one year falling away and another being added each year to ensure the Body Corporate is always planning ten years ahead.
When are special levies necessary?
While good financial planning will reduce the need for special levies, unforeseen circumstances do sometimes arise.
The STSMA allows Trustees to raise a special levy where additional funds are required to meet an expense that was not budgeted for and cannot reasonably be delayed until provision can be made in the next financial year's budget.
Special levies should therefore be regarded as the exception rather than the normal method of funding the Body Corporate.
The STSMA allows Trustees to raise a special levy where additional funds are required to meet an expense that was not budgeted for and cannot reasonably be delayed until provision can be made in the next financial year's budget.
Special levies should therefore be regarded as the exception rather than the normal method of funding the Body Corporate.
Today's Levies Protect Tomorrow's Investment
A financially healthy Body Corporate does not happen by chance. It is the result of careful planning, informed decision-making and responsible financial management.
Good financial management is one of the foundations of a successful Body Corporate. Realistic budgets, responsible levy planning and proactive maintenance help ensure that the scheme remains financially sustainable, the common property is properly maintained, and owners can have confidence that their investment is being responsibly managed.
After all, today's levies are not simply paying today's bills—they are funding tomorrow's maintenance, preserving property values and helping to build financially sustainable communities.
Good financial management is one of the foundations of a successful Body Corporate. Realistic budgets, responsible levy planning and proactive maintenance help ensure that the scheme remains financially sustainable, the common property is properly maintained, and owners can have confidence that their investment is being responsibly managed.
After all, today's levies are not simply paying today's bills—they are funding tomorrow's maintenance, preserving property values and helping to build financially sustainable communities.
Continue Your Sectional Title Journey
For more practical guidance, you may also be interested in:
Looking for information on another Sectional Title topic? Visit our Media Centre for our full library of articles and resources.
- Decoding Your Levies: Where Does Your Money Actually Go?
- Navigating Arrear Levy Collections: Protecting the Financial Stability of Your Community
- Body Corporate Insurance: What Every Owner Should Know
- Common Property: Understanding the Shared Assets in Your Scheme
- Defining Roles in Your Scheme: Trustees, Owners and Managing Agents
Looking for information on another Sectional Title topic? Visit our Media Centre for our full library of articles and resources.
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