Body Corporate sinking fund - QLD

There are two types of funds required by a Body Corporate (scheme). These must be kept seperate by law.

1. Adminstrative
The administrative fund is used to cover costs relating to maintaining and administering the scheme. These include Body Corporate management fees and insurance levies -: Painting the building, tiling, updating common area furniture etc. Major structural repairs to common property, maintenance repairs, common property fences and Lift maintenance etc.

2. Sinking
The sinking fund is to cover up to 10 years' worth of capital expenditure, such as needing to replace assets, undertake repairs, and other significant non-recurring major expenditure. The sinking fund can only be used to pay for spending of a capital or non-recurrent nature-: Painting the building, tiling, updating common area furniture etc. Major structural repairs to common property Maintenance repairs Common Property Fences Lift maintenance etc.

The Sinking Fund Budget

Every financial year, Body Corporate Committees must prepare a Sinking Fund budget for your scheme.

This is to ensure the sinking fund has sufficient finances to provide necessary and reasonable spending for the upcoming financial year. This is also necessary to ensure an amount is reserved to cover likely future spending for at least 9 years after the current financial year. Building up funds reduces the likelihood of having to ask lot owners to make a large, one-off payments to sinking fund levies via a special levy, although it does not totally remove the possibility of this occurring.

https://sskb.com.au/what-you-need-to-know-about-sinking-funds-qld/

Who must do the forecast?

A Sinking Fund budget must allow for raising a reasonable capital amount from contributions to provide for necessary and reasonable spending for the current financial year, and also to reserve an amount to meet likely spending for at least the next nine [9] years after the current financial year, having regard to:
likely spending of a capital or non-recurrent nature.
replacement of major capital items.
other costs that should reasonably be met from capital.

The legislation does not specifically state who must compile this forecast/budget. The task usually goes to a Quantity Surveyor.

If you have a Body Corporate with a mix of long term owners, investers, or even a developer, the choice of who gets to estimate the sinking fund budget matters.

The admin or sinking fund can have a negative balance, but for the scheme to be solvent, it still has cash in the bank to pay its bills.

https://www.lookupstrata.com.au/qld-transferring-money-between-funds-standard-module/

Classifying Expenditure

There is no definitive list classifying expenditure items into the admin or sinking fund. There is always some room for interpretation when categorising expenses to one fund or the other. Speak to a hundred body corporate managers about this, and you will probably get a hundred different answers.

https://www.lookupstrata.com.au/qld-transferring-money-between-funds-standard-module/

What is included in the report

Typically you would receive a report with a 15 year forecast that states the year, Total Recommended Contributions, Estimated Expenditure, Interest Earnt and Estimated Fund Balance.

The supporting information would itemise the estimated expenses across years.

Relevant legislation would be noted. Images of the property may be included.

A reasonable report is easy to understand for both professionals and unit owners.

Changing Sinking Fund Budgets

A body corporate can only adjust a proposed budget at an annual general meeting if:

• the amount of the adjusted budget is not more or less than 10% of the budget originally proposed
• the adjustment is because of a decision at the meeting on a motion (on the agenda) to approve spending
• the adjustment is approved by a majority of voters present and entitled to vote

Disputing budgets and levies

If you (as an owner) believe the proposed budgets and levies are too high, you can vote against any motion to approve the budget.

You can also propose a different sinking fund or administrative budget. You can do this by submitting a motion for owners to vote on at the annual general meeting.

Even if the annual general meeting decides to approve a budget, you can submit an alternative budget to be considered at an extraordinary general meeting.

Source: https://www.qld.gov.au/law/housing-and-neighbours/body-corporate/finance-insurance/managing/body-corporate-budgets

Whilst you can apply for dispute resolution if you think the budget is unreasonably high - you should try all other means to resolve your dispute before applying for formal dispute resolution.