This article is about strata investments in NSW and achieving a better return for your capital works fund.
Table of Contents:
- QUESTION: Is a term deposit the best option for surplus capital works funds, and can the owners corporation choose a bank?
- QUESTION: What do committees need to consider to invest funds in bank term deposits or bank at-call accounts?
Question: Is a term deposit the best option for surplus capital works funds, and can the owners corporation choose a bank?
We have surplus money in our capital works fund and want to invest it. Is a term deposit the best option?
If we decide on a term deposit, do we have to use the same bank that our strata manager uses, or can we choose a different bank and manage the term deposit ourselves?
Answer: The short answer is term deposits.
The short answer is term deposits.
To explain why, we start with the Strata Management Act 2015, where the investment of strata funds is dealt with very vaguely in Section 75(1)
- An owners corporation may invest any money in its administrative fund or capital works fund in any manner permitted by law for the investment of trust funds or in any investment prescribed by the regulations.
Could “Any manner permitted by the law” be any vaguer? And the strata regulations say nothing.
So we then refer to the Act governing strata agents and the management of trust accounts generally, Section 82(1c) of the Property and Stock Agents Act 2002.
“Trust money to be paid into trust account…until so paid or disbursed is to be paid into and retained in a trust account (whether general or separate) at an authorised deposit-taking institution in New South Wales and approved by the Secretary for the purposes of this Part.”
Key bit is “authorised deposit-taking institution in New South Wales”. And within that its ‘deposit taking’ entities, which rules out shares and managed funds and cryto, etc. This also rules out investments overseas, even with a bank.
You don’t have to arrange the term deposit with the same bank as the strata agent. The list of ADIs held by APRA is essentially a list of banks and credit unions. Banks and credit unions offer only term deposits as investment options. You can either instruct the agent or arrange the term deposit yourself.
Matthew Faulkner
Matthew Faulkner Accountancy PTY LTD
E: [email protected]
P: 0438 116 374
This post appears in the September 2025 edition of The NSW Strata Magazine.
Question: What do committees need to consider to invest funds in bank term deposits or bank at-call accounts?
I am wanting to ascertain the correct process to follow when investing a NSW owners corporation funds in bank term deposits or bank at-call accounts.
Answer: The Act requires the term deposit to be invested with an authorised deposit-taking institution.
As this involves financial products, the strata committee are required to make this decision as the manager will not have a financial services license. The Act requires the term deposit to be invested with an authorised deposit-taking institution.
Rod Laws
TINWORTH & CO
E: [email protected]
P: 02 9922 3660
This post appears in Strata News #751.
Have a question or something to add to the article? Leave a comment below.
This article is for reference purposes only and is not intended to be a comprehensive review of the developments in the law and practice or to cover all aspects of the subject matter. It does not constitute legal or other advice and should not be relied upon this way. Readers should take legal or other advice before applying the information contained in this publication.
Related Articles
- NSW: What Makes a Good Capital Works Fund Forecast?
- NSW: Q&A Owners Corporation Committee Decisions
- NSW: Q&A Defamation in Owners Corporations Communication
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As stewards of surplus strata funds, does the strata committee have a responsibility to the Owners Corporation to invest the surplus wisely?
Interesting question because in an article in the last LUS (#592) there was talk from a brief in Qld and it seems in Qld surplus funds are supposed to be returned to owners. There are provision in NSW to also do this but it is not required as it was implied it is in Qld.
Strangely enough it is by ordinary resolution that budgets are passed and surpluses develop but it by unanimous resolution those surpluses are distributed back to the owners. Go figure.
So that begs the question; which fund does this surplus belong to?
Surplus in the admin fund can be viewed as over levying, especially if the surplus has accrued over years to become a significant amount. That should perhaps be addressed by a motion to give it back.
If the funds are in the Capital Works fund then it isn’t really a surplus; it is saving up for expected expenditures. hopefully in line with the 10 year plan.