In summary: Under the Body Corporate and Community Management Act 1997 (Qld), a body corporate must never transfer money between its administrative fund and its sinking fund — no resolution can authorise it. A body corporate bank account that runs into negative territory is not a grey area either: overdrawing is borrowing, and it needs the same resolutions and approvals as any other loan. Both issues can come up in the day-to-day management of Queensland schemes, and both carry real consequences for bodies corporate, and their body corporate managers, who get the mechanics wrong.
Key takeaways
- Transferring money between the administrative fund and the sinking fund is expressly prohibited by section 167(7) of the Standard Module, and equivalent provisions in all other Regulation Modules — in both directions, and regardless of how many bank accounts the body corporate holds.
- No body corporate resolution can override that prohibition, including a resolution without dissent.
- An ’overdrawn’ body corporate account is legally a borrowing under section 171 of the Standard Module, requiring an ordinary resolution — or a resolution without dissent once the borrowing exceeds the relevant per-lot limit.
- Having a term deposit at the same bank does not change this analysis. What matters is whether the transaction account itself is overdrawn, not whether the body corporate has other money sitting elsewhere, including (on the books) in the same ‘fund’.
- Correcting a genuine bookkeeping error is not the same as a fund transfer. Moving money between budget lines within the same fund is not a fund transfer either — but it will usually necessitate an ordinary resolution to amend the budget.
Two scenarios body corporate managers see all the time
Every body corporate manager in Queensland has, at some point, dealt with one of two recurring cash flow problems. The first is the overdrawn account. A body corporate has put sinking fund money on term deposit — sensibly, because it is not needed yet — but cash flow forecasting has not kept pace with actual spending. A payment is presented, there isn’t enough in the transaction account to cover it, and the bank pays it anyway. The account sits in negative territory until either the term deposit is recalled to cover the shortfall, or enough levies come in to bring the balance back into credit. The second is the inter-fund transfer. Here, the bank account itself stays in credit, but the body corporate uses sinking fund money to cover an administrative fund expense (or the other way around), so that one fund’s notional balance goes into deficit while the bank account balance looks fine. Both scenarios feel like minor administrative hiccups. Neither is. Queensland’s strata legislation treats them very differently to each other, and far more strictly than most people expect.
Transferring money between funds is not allowed — full stop
Section 167 of the Standard Module requires administrative fund money and sinking fund money to be paid into the body corporate’s financial institution account(s), and section 167(7) then draws a hard line: ‘Funds must not be transferred between the administrative fund and the sinking fund.’ A few points flow from that wording that all body corporate managers should have front of mind:
- It doesn’t matter whether the body corporate operates one bank account or several — the prohibition applies regardless of the banking arrangements.
- It cuts both ways. Moving money from the sinking fund to the administrative fund is prohibited, and so is moving money the other way.
- No resolution can fix it. A motion approving a transfer — even a resolution without dissent, the highest bar a body corporate can clear — is void, because it is directly contrary to section 167(7).
The underlying design is that administrative fund money and sinking fund money are meant to be quarantined from one another: each fund receives its own money (sections 167(2) and (3)), each fund can only be spent on the purposes specified for it (section 169), and there is no lawful overlap between the two.
What the case law says
The Commissioner for Body Corporate and Community Management’s adjudicators have applied these rules consistently:
- In Brookwater Home Owners Club [2009] QBCCMCmr 376, it was held that a transfer between funds cannot be ordered at all, because section 167(7) expressly prohibits it.
- In Pier One Hervey Bay [2018] QBCCMCmr 238, borrowing from one fund to use for another was found to itself be a prohibited transfer — not a technical breach, but the real thing. The remedy identified was for the body corporate to raise a special levy to cover the shortfall and use the proceeds to reimburse the fund the money was taken from.
- In Royal Pines South Shields [2015] QBCCMCmr 363, it was held that simply paying an expense out of the wrong fund is itself a form of prohibited transfer — it makes no difference whether the liability is met directly from the wrong fund, or money is shuffled between funds first and the expense paid ‘properly’ afterwards.
A genuine bookkeeping correction is different
Not every adjustment between funds is a prohibited transfer. If money was allocated to the wrong fund in the first place — a genuine misallocation — then correcting that entry is not a ‘transfer’ because the money was never properly received into (or paid out of) the correct fund to begin with.
Moving money within a fund is a different question
An intra-fund transfer — for example, reallocating money from one line item in the sinking fund budget to another line item in the same fund — does not breach section 167(7), whether it happens physically between accounts or only in the body corporate’s books. It will, however, usually amount to an amendment of the body corporate’s current budget, which requires approval by ordinary resolution: see Mariners Village 3 [2006] QBCCMCmr 56.
An overdrawn account is a borrowing, not a technicality
There is no provision in the Act, or any of the Regulation Modules which says, in so many words, that ‘a body corporate must not overdraw its bank account’. That does not mean the position is unregulated. What is actually happening when an account goes into negative territory is that the financial institution has advanced money to the body corporate so it could make a payment it otherwise couldn’t afford — in other words, the body corporate has borrowed money, which is squarely regulated by section 171 of the Standard Module. That has real consequences:
- Borrowing requires an ordinary resolution. A committee has no power to authorise it on its own.
- Once total borrowing exceeds the relevant threshold — for a scheme under the Standard Module, currently $250 per lot — approval must step up to a resolution without dissent.
- It makes no difference that the body corporate has a term deposit sitting at the same bank. The term deposit is a different account. What determines whether there has been a borrowing is whether the transaction account is overdrawn — not whether the body corporate has other money elsewhere that could theoretically cover the debt.
A financial institution may only be willing to let an account run into deficit because it knows there’s a term deposit in reserve, but that commercial reality doesn’t change the legal character of the transaction. The body corporate still owes the bank the overdrawn balance, and that debt is still a borrowing that needed approval before it was incurred. The recent decision in Artique [2026] QBCCMCmr 43 reinforces how granular that approval requirement is. That case concerned a multi-drawdown facility taken out by a body corporate under the Accommodation Module. It was held that each individual drawdown needs its own approval, pitched at whatever level the resulting total indebtedness requires (in that case, a special resolution once a drawdown pushed borrowing past the $250-per-lot mark), and that a body corporate cannot validly pre-approve an entire facility limit in one go without reference to how the money will actually be spent.
What a compliant overdraft facility actually requires… post Artique
Applying these principles to a body corporate account that is permitted to run into overdraft, the body corporate needs to have in place — and a properly advised financial institution should be asking for:
- An ordinary resolution authorising the opening of the overdraft account, obtained before the account is opened.
- A further ordinary resolution each time the account is actually overdrawn, because each drawdown is treated as a new borrowing — an overdraft facility is, in this respect, no different to a multi-drawdown loan.
- Before any borrowing (or the running overdrawn balance) exceeds the applicable per-lot limit, the higher-threshold resolution required at that level — a resolution without dissent under the Standard Module.
- A certified copy of the relevant general meeting minutes, provided before the account is opened or the funds are advanced, as the case requires.
In practice, this is a meaningful amount of process to comply with. Bodies corporate are often already reluctant to approve borrowing of any kind, and the administrative work and cost of calling and running the necessary general meetings — in time to actually meet a cash flow gap — tends to make that reluctance worse, not better. Strictly applied, that friction produces one of two outcomes: schemes with a genuine, ongoing need for an overdraft facility invest the time and expense to do the approvals properly, and everyone else improves their cash flow forecasting so they don’t need the overdraft facility in the first place.
Where the problem usually starts — and where a manager can genuinely help
Overdrawn accounts don’t appear out of nowhere. They can arise because of cash flow advice from a body corporate manager that was on the one hand ignored, or on the other hand was poor, incomplete, or simply never given. It’s incumbent on body corporate managers to give timely and accurate assistance, and for committees to listen to and act on that advice. Some body corporate managers even go the extra mile. In Sanctuary Shores Resort [2000] QBCCMCmr 560, a body corporate manager had a practice of personally lending money to a body corporate it managed whenever that body corporate’s account ran overdrawn, charging interest on the amount advanced. When the body corporate later received penalty interest from a lot owner on unpaid contributions, the manager would net its own interest owed off against that penalty interest received. The body corporate challenged the arrangement, but the adjudicator did not disturb it. More power to that body corporate manager, but the goal should be that borrowing is never needed – that is the mark of a well advised and well run body corporate.
What this means for body corporate managers, in practice
For a body corporate manager advising committees day to day, the practical takeaways are straightforward:
- Treat cash flow forecasting as a routine part of the job, not an afterthought — it’s the single biggest lever for avoiding an overdrawn account in the first place.
- Never record, facilitate, or wave through a transfer between the administrative and sinking funds, no matter how the committee frames it or how confident everyone is that ‘it’ll balance out later.’ Section 167(7) doesn’t bend for good intentions, and no resolution can authorise a breach.
- If an expense has been paid from the wrong fund, or money has genuinely been misallocated, fix it with a proper correcting journal entry — and be able to explain, if asked, why it was a correction and not a transfer.
- If a committee wants to reallocate money between budget lines within the same fund, get the ordinary resolution to amend the budget before treating the reallocation as settled.
- Before any account is allowed to run into overdraft — or before recording an account as ‘overdrawn’ at all — make sure the right resolution has actually been passed, at the right threshold, and that certified minutes exist to prove it.
Frequently asked questions
Can a body corporate transfer money from the sinking fund to the administrative fund if everyone agrees?
No. Every Regulation Module prohibits transfers between the administrative fund and the sinking fund in both directions. Even a resolution without dissent cannot authorise it, because the resolution itself would be void.
Is an overdrawn body corporate account illegal in Queensland?
There’s no provision that names ‘overdrawing an account’ as a prohibited act. But an overdrawn balance is legally a borrowing, and borrowing without the required resolution — or beyond the approved limit — is not legal.
Does having a term deposit make it acceptable to run the transaction account into overdraft?
No. The term deposit is held in a separate account. What matters is whether the transaction account itself is overdrawn, regardless of what other money the body corporate holds elsewhere.
Can a committee approve borrowing on its own?
No. Borrowing requires an ordinary resolution of the body corporate at general meeting. A committee has no power to authorise it. Borrowing above the relevant per-lot threshold needs a resolution without dissent or special resolution, depending on the Regulation Module.
Is correcting a bookkeeping error the same as a fund transfer?
No. If money was genuinely misallocated to the wrong fund, a correcting journal entry is not a transfer, because the money was never properly in the correct fund in the first place.
Getting it right
The rules governing body corporate funds and borrowing in Queensland are unforgiving of shortcuts, however well-intentioned. For body corporate managers, that makes accurate record-keeping, proper resolutions, timely and honest cash flow advice to committees the difference between a scheme that runs smoothly and one that ends up in front of an adjudicator. If you have a body corporate account that has run into overdraft, or a committee asking about moving money between funds, get advice before the position becomes entrenched — it is far easier to fix a cash flow problem prospectively than to unwind an unlawful transfer or an improperly authorised borrowing after the fact.
This post appears in Strata News #810.
Michael Kleinschmidt
Bugden Allen
E: michael.kleinschmidt@bagl.com.au
P: 07 5406 1280
This article has been republished with permission from the author and first appeared on the Bugden Allen website.
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