This article concerning the Sinking Fund and the Strata Administrative Fund Queensland has been provided by Kelly Borell, Tower Body Corporate.
One of the main questions that we often get asked by owners about their body corporate financials is – what is the difference between the Administrative Fund and the Sinking Fund in Queensland?
As an owner within a body corporate scheme, it is important for you to understand these differences.
Strata Administrative fund:
The Administrative Fund is for the everyday expenses of the body corporate; for example:
- building insurance
- building and pool maintenance
- gardens and grounds maintenance
- body corporate management fees
- common property electricity
- pest control
- regular fire servicing
- any other non-capital expenditure
It is important that the levies raised in the Strata Administrative Fund are enough to cover the total of the expenses for the year. This is to ensure that the balance of the Administrative Fund does not end with a deficit at the conclusion of the body corporate’s financial year.
If the balance of the Strata Administrative Fund is in deficit at the end of the year, money will need to be raised in the following year to clear the deficit.
Note: the legislation does not allow for the Body Corporate to transfer money from the Administrative Fund to the Sinking Fund, or vice versa.
The Sinking Fund is for the capital expenses of the body corporate; for example:
- internal and external painting of the building
- replacement of the roof
- replacement of lifts
- replacement of common area carpeting
- replacement of pool equipment and pool refurbishment
- replacement of fencing
- any other capital expenditure
The legislation around Sinking Fund Queensland requires bodies corporate to have a 9-year sinking fund forecast in place at all times. The forecast estimates what work will need to be carried out over the forthcoming years, and calculates what levy contributions will be required each year to cover those expenses when they are due.
For more information about Sinking Funds and Strata Administrative Funds for Queensland Body Corporates, please see the Queensland Government page – Budgets and Funds.
Question: Can money be transferred from the Strata Administration Fund to the Sinking Fund?
In a small block of units, if all owners approve, can money be transferred from the Administration Fund to the Sinking Fund?
Also, in Queensland, is there a limit on how much owners can reduce last years levies in view of a much lower budget if all approve?
Answer: It is illegal to transfer money between the Strata Administration Fund and the Sinking Fund
It is illegal to transfer money between the two funds.
- Section 146(7) Funds must not be transferred between the strata administrative fund and the sinking fund.
There is no limit on how much the levies may be reduced/increased from one year to the other.
What they do need to do is a budget for both funds, and ensure:
- That the strata administrative fund budget/levies cover all expenses for the year
- That the sinking fund budget/levies are in line with the sinking fund forecast which must be in place to cover at least the next 9 years.
- QLD: Q&A Solar panels and strata – which account do we debt?
- QLD: Q&A How do we review our Contribution Schedule Lot Entitlement?
Tower Body Corporate
Phone: 07 5609 4924
Email: [email protected]
This article has been republished with permission from the author and first appeared on the Tower Body Corporate website.
Looking to have some Maintenance carried out on your scheme? Search within our Strata Services Directory in the category Building Repairs & Maintenance QLD for the best list of contacts available.