Charging Interest on Overdue Contributions

When an owner falls behind on levies, the shortfall lands on everyone else. The Strata Titles Act gives the corporation a way to charge interest on arrears, but there are limits, and the corporation has to actively decide to do it. Please note that the following article relates to South Australia only. Local rules and regulations will change the details of this matter.

Interest is allowed, but only by resolution

Under Section 27(4)(b) of the Strata Titles Act 1988, a strata corporation may charge interest on contributions or instalments that are in arrears by ordinary resolution. No resolution, no interest. This is worth putting in place at the AGM as a standing policy, so the mechanism exists before anyone falls behind rather than being scrambled together after the fact.

The cap: 15% a year, and no compounding

The rate charged cannot exceed 15% per annum, and interest cannot be charged on unpaid interest (Strata Titles Regulations 2018, reg 11). So there's no compounding: interest accrues on the overdue contribution itself, not on interest that has already built up.

Recovering the debt

The Act gives the corporation the tools to recover what it's owed:

Section 27(1) lets the corporation raise the funds it needs to run.
Section 27(5) lets it recover an unpaid contribution as a debt from the unit holder of the unit the contribution relates to. If it comes to it, that means action in the Magistrates Court.

Interest that has been correctly imposed forms part of the recoverable debt, alongside the unpaid levy itself.

Arrears also cost an owner their vote

An owner who is behind on payments is an unfinancial member and cannot vote on most matters at a general meeting. The one exception is a matter requiring a unanimous resolution, where everyone's consent is needed. So arrears cost the owner their say as well as the interest, which is often the more persuasive point when a polite reminder is called for.

Best practice

Set the interest policy by ordinary resolution at the AGM, so it applies consistently.
Issue clear levy notices with due dates, and follow up early and politely when a payment is missed. A conversation often resolves it before formal steps are needed.
Keep the option to waive interest in genuine hardship. A corporation can resolve to do that, and there are times when it's the sensible call.

A note on tax

Interest charged on late levies is treated as a mutual receipt, so it is not assessable income of the corporation (see Tax and the Strata Corporation).

This is a practical reference, not legal advice. For a specific arrears situation, seek advice before starting court action.

Get in touch

If your corporation is dealing with persistent arrears, or you'd like help putting a sensible interest and recovery policy in place, get in touch. Acacia Collective manages strata and community title groups across South Australia. Call us on 1300 792 255 or email hello@acaciacollective.com.au.