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Transferring funds from Capital Works to Admin Fund

Transferring funds from Capital Works to Admin Fund

Transferring funds from Capital Works to Admin Fund – is this possible?

Terry’s question relates to transferring funds from Capital Works to Admin Fund

Under what circumstances can funds be transferred from the Sinking Fund to the Maintenance Fund? For example if the Sinking Fund has +$200,000 and the Maintenance Fund is in arrears. Could a proposal to transfer a proportion (as long as it is not already committed in the 10 year plan) to the Maintenance Fund be approved at an AGM?

Hi Terry,

At each AGM, the owners corporation must estimate how much money it needs for actual and expected expenditure for both the administration fund and capital works fund (formerly called the sinking fund).

This year, a number of admin funds suffered a blow because of increased energy costs. The energy cost has doubled in a lot of circumstances. This was somewhat unforeseen and needs to be accounted for in the next budget.

Another area to watch out for is expenses charged to the wrong fund. This is rather common and easy to do. An accounting correction is quite OK with a transfer back to the appropriate fund. Items like painting and plumbing are often expensed to the admin fund whereas the right place may have been the capital works fund.

Read related: The Pros and Cons of Apartment Living

In your circumstance, it would appear that the administration fund has been over spent and you have surplus funds in the capital works fund.

Section 76 of the Strata Schemes Management Act 2015 allows you to transfer money from one fund to another but with a strict caveat. The owners corporation must, no later than 3 months after the transfer, determine a levy contribution to be re-paid to the fund.

So, in principle, the transferring funds from the Capital Works to Admin Fund is possible but it is actually a loan and the owners corporation must determine a levy, within 3 months, to re-pay the transferred amount. This repayment is often taken care of when the next quarterly levy comes in or a special levy will need to be determined.

Transferring funds from Capital Works to Admin Fund – what’s the solution?

Option 1

At the AGM, set contributions to the administration fund that covers the shortfall and the estimated expenses for the year ahead. In line with your ten-year plan you may set contributions to the capital works fund to zero.

This approach gets you back in the black while depleting the capital works fund for a year.

Option 2

This option is a little bit more complicated and highly unusual. At the AGM, pass a unanimous resolution to distribute surplus capital works funds to owners based on unit entitlements. At the same time, levy the same amount back to the administration fund.

Section 77 deals with this. And section 81 explains the setting of contributions.

This website does not give legal advice or any other professional advice. You should obtain legal advice before you take any action or otherwise rely upon the contents of this article

About the author

Daniel Laforest

Daniel Laforest

Daniel is the Strataville Publisher. Being a long-term chairman of a large scheme in NSW, he developed Strataville as a resource for owners to navigate the complexities of strata living. Daniel manages editorial while also engaging and managing Strataville’s partners and clients. He welcomes feedback from readers and encourages those that are keen to submit an article to get in touch. Strataville is a division of Cloud High.

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  • Interestingly Daniel. I see people choosing not to see this section under the NSW Act and ignoring the requirement to repay, in relation to Option 2:”a unanimous resolution to distribute surplus capital works funds to owners based on unit entitlements” . This is certainly an option but I would encourage all owners prior to this option to seek their own independent taxation advice as to how this distribution of surplus would be treated for income tax purposes. There may be various types of income exhibiting certain characteristics, some of which may be taxable in the hands of the individual lot owner.


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