NSW: Preparing the financials for the AGM [Includes sample timeline]

This article is about preparing financials for an owners corporation’s AGM, including a sample timeline for preparing for the end of your financial year.

Table of Contents:

• QUESTION: Can our financial year be moved from calendar year to align with the date of the approved budget? Our strata manager says no.


• QUESTION: When preparing the budget, do we need to include amounts that need to be expended in future years? e.g., an amount for fencing that is accrued over 10 years?


• QUESTION: We usually have our AGM in January. It is now the end of February, and notice for the AGM has yet to be received. Levies are due in March. What happens if we are late?


• QUESTION: What financial information should the strata manager provide to the treasurer and the strata committee?


• QUESTION: I manage our OC. Due to timing of our EOFY and my overseas holiday, can I issue the AGM agenda 10 days before the EOFY with an interim Financial Report to be updated at the AGM?

Question: Can our financial year be moved from calendar year to align with the date of the approved budget? Our strata manager says no.

I am the treasurer of a 16-unit townhouse development. At our last AGM, a budget for the ensuing year was approved. I requested that financial reports no longer be based on a calendar year but commence from the date of the approved budget with balances brought forward from the previous period as opening balances in the new “budget year”.

The strata manager has given reasons why they cannot comply with my request, which have no logical basis. Is my request reasonable, or is there an alternative to how financial reports should be constructed so they can accurately report on the status of owners’ funds?

Answer: The financial year for an owners corporation is set by the Act as the registration date of the owners corporation. The financial year of an owners corporation can be amended at a AGM of owners.

Rod Laws TINWORTH & CO E: RodLaws@tinworth.com P: 02 9922 3660

This post appears in Strata News #693.

Question: When preparing the budget, do we need to include amounts that need to be expended in future years? e.g., an amount for fencing that is accrued over 10 years?

I am the treasurer for our owners corporation. Each year, I prepare a budget for approval at the AGM. From our capital works budget, I have included amounts budgeted for in our capital works plan that will be expended in that financial year. Should I also include amounts that need to be accrued over several years and expended in future years, e.g., an amount for fencing that is accrued over 10 years – 1/10th accrued each year?

Answer: Your annual capital works fund budget should only include expenses you expect to pay in that financial year.

Your annual capital works fund budget should only include expenses you expect to pay in that financial year. However, you need to consider costs that will occur in the future when you set your capital works fund levy.

In NSW, the Strata Schemes Management Act 2015 requires two different types of maintenance, repair and replacement expense planning documents (many other states also have a similar system):

your 10-year capital works plan (called a sinking fund forecast, maintenance schedule, etc., in other states), and your annual capital works fund budget.

The two documents have different purposes.

Document 1: 10-year capital works plan

Section 81 of the SSMA 2015 requires your owners corporation to prepare a capital works fund plan.

• The capital works plan must list the major anticipated maintenance, repair and replacement expenditure for a minimum 10-year period. (Most professional capital works plan consultants provide 15-year plans.)


• Your capital works plan must show the year (or years) in which each listed item of maintenance, repair and replacement work is forecast to occur, as well as the cost of the work in the years it happens.


• The capital works plan is also required to state how the work is expected to be funded.

The capital works plan is a longer-term cash flow planning document. While it may assist you in compiling your annual budget, it is not intended to directly act as the annual budget for a particular financial year.

Document 2: annual capital works fund budget

Your annual capital works budget lists the maintenance, repair and replacement expenses you expect to incur during the subject financial year.

Once approved at the AGM, the capital works budget determines the type and level of expenditure that the owners corporation is authorised to incur in the subject financial year.

When you prepare your annual capital works fund budget, you only include work items that you expect will be required during the year for which the budget is being prepared.

You can use your capital works plan as a checklist to remind you if there are major expenses, such as painting or lift replacement, that you need to consider for inclusion. But the capital works plan may only give you part of the expense picture. Depending on how recently your capital works plan was prepared,

• there may be a repair or replacement expense of a type the capital works plan did not predict would be required,


• your infrastructure may be wearing better than anticipated, and some of the forecast repairs and replacements may not yet be needed, or conversely, some work may be required earlier than forecast in the capital works plan,


• if you already have quotes for the work, you will need to use the quoted price, not the estimated cost in the capital works plan or


• you may have decided to acquire a new asset for the first time or upgrade the existing infrastructure, which is not usually listed in your capital works plan.

What lot owners may find confusing is the relationship between the costs shown in their annual capital works budget and the total capital works levy collected for that budget year.

Most owners corporations fund the capital works in their capital works plan by ‘smoothing’ the cost of major expenses over multiple years. To use your example, if your capital works plan lists fencing work recurring every 10 years, you will raise 1/10th of the expense every year (adjusted for inflation). That means in years when there are large expenses, such as external painting, the incoming capital works fund contributions will be much lower than the outgoing capital works fund expenditure. Conversely, in low-expense years, the incoming contributions may be much higher than the total outgoings.

If you calculate your levies, your annual levy calculations need to quantify a proportionate amount of the expenses occurring in the following years. You also need to consider the capital works fund’s starting balance, as a compliant capital works fund should already hold most of the cost of foreseeable major repairs and replacements in the budget year, plus part of the cost of works in the following years. To do this properly, you will need to build a simple cash flow model that tracks your predicted income and expenditure over a minimum of 10 years, then adjust the annual levy amounts until you collect just enough to fully fund the expenses and end with a proportionately representative balance in the final year.

If a professional consultant such as Leary & Partners prepared your capital works plan, they should have calculated the ‘smoothed’ or ‘annualised’ capital works fund contributions for you. You should only need to adjust their recommended fund contributions if changes in required work or work costs have created a significant difference between the forecast and the actual fund balances.

Kaylene Arkcoll Leary & Partners E: enquiries@leary.com.au P: 1800 808 991

This post appears in Strata News #678.

Question: We usually have our AGM in January. It is now the end of February, and notice for the AGM has yet to be received. Levies are due in March. What happens if we are late?

We usually have our AGM in January. It is now the end of February, and notice for the AGM has yet to be received.

To allow everyone in the OC to vote, is the insurance renewal usually due around the same time as the AGM? Currently, only the committee vote on our insurance.

I read this Q&A, and it helped: Question: I manage our OC. Due to timing of our EOFY and my overseas holiday, can I issue the AGM agenda 10 days before the EOFY with an interim Financial Report to be updated at the AGM?

We have levies due in March, and I believe this is the start of our financial year. The strata manager has advised they can only send the March levies once we have held the AGM. What happens if we are late?

Answer: At the end of a financial year, some time will be required to review/edit and possibly audit the financial statements externally.

The timing of an annual general meeting (‘AGM’) factors in a few pieces of the legislation (the Strata Schemes Management Act 2015 (NSW) (‘the Act’)) as well as some practical elements. To summarise:

Legal elements

• Section 18 of the Act requires the AGM to be held once in each financial year of the owners corporation (owners corporations can have a financial year that is not necessarily the same as the calendar or tax year).


• Section 79 of the Act requires an owners corporation to estimate (budget) its revenue (levies etc.)/expenses at the annual general meeting for the financial year.


• Section 83 of the Act requires that owners receive their levy notices 30 days before the levy is due. Section 76 of the Interpretations Act 1987 (NSW) then requires an additional seven business days for a paper document to have been deemed “served” on an owner (as some owners are still receiving paper documents, as is their legal right).


• Section 81 of the Act requires levies to be determined at the same meeting at which the estimates are determined (i.e. the AGM).


• Schedule 1, clause 7 of the Act requires owners to be given the notice (agenda) of the AGM at least seven days before the meeting. Again, we have to add another seven business days to the notice period if owners are receiving paper notices.


• Schedule 1, clause 9 of the Act requires the AGM to have a motion to adopt the financial statements (for the previous financial year)

Practical elements

• At the end of a financial year, some time will be required to review/edit and possibly audit the financial statements externally. The review and editing can mostly take place before the end of the financial year, but auditing cannot take place until the year has ended. This might take 1-3 weeks, depending on complexity. During this time (or hopefully before the financial year end), the budget should also be drafted and reviewed by the treasurer or strata committee.


• Once the financial elements are addressed, the notice of AGM must be sent, usually about 21 days before the meeting when we factor in the seven days’ notice plus seven business days for posted agendas. If all owners receive notice by email, this can be shortened. Public holidays can also prolong the notice period for posted documents (but they don’t interfere with the seven regular days required for an owner to have received the notice).


• Levies are determined for the financial year and, therefore, cannot endlessly rollover. A determination must be made at the AGM each year, raising the importance of holding it in a timely manner. Some try to circumvent this by raising a fifth levy instalment due and payable into the following financial year (and therefore avoid the owners corporation having no levies due, thus diminishing cash flow). This isn’t necessary if the AGM is held on time, and provides an excuse not to do so. It also creates a situation where, if the owners corporation does bring the AGM into line, it may be issuing a levy notice for an amount, only to change that amount when the AGM is held.


• Once the levies are determined, it takes about 40-45 days before they can be due (as owners must receive them 30 days before they are due, and again we have to factor in the postal notices).

So to answer the original question:

1. The timing of the AGM should be based on the financial year end – not necessarily when it was previously held. Many owners corporations have been holding their AGMs at non-optimal times for generations.


2. There’s technically nothing wrong with holding the AGM a little later than the optimal period – after all, it is only required to be held once each financial year. However, it’s not practical to delay it as that delays the decision on levies (and delays the collection of those levies).


3. The insurance renewal does not necessarily have to align with the AGM. The strata committee are not prohibited from deciding on the placement of insurances. A statutory motion will be listed on the AGM agenda to reconsider those insurances (whether to confirm, alter or take out more insurance). Having all owners involved in that decision could be laborious. Insurance renewal dates can also change – currently, a lot of strata schemes are only able to take out 6-month policies, for example.


4. Until the owners corporation has its AGM, there are no levies due and it will have to push back the due date of the first levy (which may cause cash flow issues). The sooner you can hold the AGM, the better.

Tim Sara Strata Choice E: tsara@stratachoice.com.au P: 1300 322 213

This post appears in Strata News #469.

Question: What financial information should the strata manager provide to the treasurer and the strata committee?

Answer: Look at what your agreement says and what you’ve agreed with the strata manager, but as a minimum, once a quarter.

Under the Property Stock Agents Regulations section 37, there’s a report that’s required to be provided to the treasurer once every three months. This financial matters report must state the name and address of the owners corporation for which the report is prepared and talk about funds, (moneys coming in, money going out), and so forth.

We provide a set of financial statements to our treasurers each quarter. In addition to that, a lot of strata managers now have online portals with up-to-date financial information, and for some of our buildings, we email them financial reports each month because that’s part of the terms of our agreements.

Look at what your agreement says and what you’ve agreed with the strata manager, but as a minimum, once a quarter under the Property Stock Agents Act.

Rod Smith The Strata Collective E: rsmith@thestratacollective.com.au P: 02 9879 3547

This post appears in the February 2023 edition of The NSW Strata Magazine.

Question: I manage our OC. Due to timing of our EOFY and my overseas holiday, can I issue the AGM agenda 10 days before the EOFY with an interim Financial Report to be updated at the AGM?

I am an Owner, Chairperson and Strata manager of our Owners Corporation in NSW. Our strata financial year ends on 30 November. We have to hold an AGM before I go overseas in early December and this doesn’t allow me to give the required 7 days’ notice to hold the AGM meeting on the 6 December.

Would I be able to issue the AGM agenda 10 days before with an interim Financial Report and then re-issue the final financial report on the 1 December and also present it at the AGM?

All committee members agree but we want to ensure we aren’t breaching the Strata Scheme AGM Notice Requirement.

Answer: Interim financial statements will not suffice, as the Act requires the full financial statements to be given with the notice of the AGM.

For most strata and community schemes in New South Wales, the optimal time to hold an annual general meeting (‘AGM’) is around 4-8 weeks after its financial year has come to an end. Each strata and community scheme will have its own financial reporting period – they do not all align with the normal tax year or calendar year.

For strata schemes:

1. Schedule 1, clause 9 of the Strata Schemes Management Act (‘the Act’) requires the notice of an AGM to include copies of the last statements of key financial information, the auditors report (if applicable) and financial statements (as well as a motion to adopt them).


2. Section 79 of the Act requires the owners corporation to decide on its budget and levies at each AGM (for the ensuing financial year).


3. Schedule 1, clause 7 of the Act requires that owners be given the notice of a general meeting (including the AGM) 7 days before the meeting.


4. Section 76 of the Interpretations Act requires that a further 7 working days (i.e. not a Saturday, Sunday or public holiday in the place to which a letter is addressed) be allowed for those owners who still receive notices by post (and there is often at least one in any strata scheme).


5. Section 80(3) of the Act requires that owners be given 30 days notice that a levy is due (and another 7 working days must be allowed for those receiving their notice via mail).

Similar legislation applies now for community schemes.

Timeline: Preparing your NSW strata scheme for the end of financial year

When put into practise, we have a timeline that would look something like:

1. Budget is prepared leading up to the beginning of the new financial year.


2. Financial year ends, financial statements can be referred to the auditors (if necessary). The audit can take 2-3 weeks to complete.


3. Financial statements are audited or finalised. The notice of AGM is issued to all owners allowing 3 weeks.


4. The AGM is held. Minutes are distributed within 7 days.


5. Levy notices are issued (giving at least 30 days notice to all owners, plus 7 working days for those receiving them via mail).

Smaller strata schemes that choose not to audit their financials can therefore hold their AGM in as soon as 3-4 weeks from the end of its financial year. Larger strata schemes requiring audits will take a few extra weeks.

To answer the original question:

• No, it is not practical to hold the AGM before the financial year ends, as the financial statements for the financial year aren’t finalised at that point (and therefore cannot be adopted yet).


• No, interim financial statements will not suffice, as Schedule 1, clause 9(a) of the Act requires the full financial statements to be given with the notice of the AGM (i.e. you cannot table them at the meeting).

I would recommend holding your AGM around early to mid January. This will give you time to end the financial year, finalise the financial statements, give the owners sufficient legal notice and hold the AGM and decide on new levies (as per a new budget) relatively early on in the new financial year.

Tim Sara Strata Choice E: tsara@stratachoice.com.au P: 1300 322 213

This post appears in the December 2022 edition of The NSW Strata Magazine.

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