Better budgets for bodies corporate: How to “future-proof” your scheme
16 Febraury 2026 | Sarah Sydenham
Budget season is fast approaching for many schemes, and while there are several ways to draft a budget, and set the year’s levies, not all methods are created equal. In this article, we’ll explore the common industry strategies and explain why the "informed approach" is the only way to ensure your scheme's financial health.
1. The fixed percentage approach
The first strategy is the fixed percentage approach, where trustees apply a set percentage increase to the previous year's figures. This percentage is often derived from a managing agent’s experience with other portfolios, industry averages, the current inflation rate, or the Consumer Price Index (CPI). In some cases, it is even tied directly to staff salary increases within the body corporate.
This approach carries significant risks because it may not accurately reflect the actual financial reality of the scheme. Because expenses do not all increase at the same rate or at the same time, and every body corporate has unique requirements, applying a blanket industry standard is often inappropriate. Furthermore, this method fails to account for costs that might decrease or one-time expenses from the previous year that should not be included in the new budget.
2. The historical approach
Another common tactic is the historical approach, which involves using the same increase as the previous year, assuming that the prior budget was accurate. This is often popular because it provides owners with a sense of stability and a predictable increase.
The primary problem with this method is that it relies entirely on historical data and does not aim to future-proof the scheme. Additionally, it fails to account for any shortfalls from the previous year, which can result in persistent financial gaps or a sudden, sharp increase in levies during a later financial year.
3. The ideal answer approach
A third strategy is known as the “ideal answer” approach, where trustees start with a target levy amount that they want owners to pay and then adjust expense line items to reach that number. The massive flaw in this logic is that the budget again is not based on the actual requirements of the individual expenses. Instead, the focus shifts to what owners wish to pay rather than what they should be paying to maintain the property. This prioritises owner "wants" over the actual "needs" of the scheme, creating long-term risk.
4. The informed approach
The most fool-proof approach, the informed approach, is to investigate every line item individually to determine the exact amount needed for the incoming year. This requires that each expenditure item be separately investigated and assessed by the trustees or a person duly authorised by the trustees to attend to same. To do this effectively, leadership must engage with various service providers to understand expected increases and seek out the most competitive quotes available. This level of detail also allows the body corporate to identify which specific items are likely to decrease in cost for the coming year.
One of the most dangerous errors in budgeting is to omit a known expense; therefore, every foreseeable cost must be thoroughly investigated and accounted for. While predicting unknown expenditures can be difficult, failing to plan for them can be devastating to the scheme's reserves.
Mastering maintenance
Maintenance is a common area where budgets fail, as it is often drastically under- or overestimated. To ensure accuracy, trustees should engage in deep discussions to understand all proposed projects for the upcoming year. Accuracy is further improved by establishing a 10-year maintenance plan, assessing the financial implications of that plan, and setting an appropriate reserve levy. Trustees must also regularly inspect and record the state of repair of the common property to obtain reliable estimates for any projected maintenance envisioned for the year.
Conclusion | Accurate financial planning is critical
Ultimately, accurate budgeting can make or break the financial wellbeing of a body corporate. A significant challenge to this security is the rise of levy arrears when owners fail to meet their contributions. For a deeper look at managing these challenges, you can read about solutions for unpaid levies in this article by Nicole Nel.
Contact us today on 061 536 3138 or at info@tvdmconsultants.com if you require more information on the above.
About the Author:
Sarah Sydenham is a Community Schemes Consultant at TVDM Consultants
Learn more about Sarah Sydenham here.