The association is responsible for ensuring there are enough funds to run the scheme. This page outlines the contributions an association may collect from members and the requirements for managing those funds.
On this page:
Contributions
How are contributions calculated?
A budget must be provided to set the contributions to be levied on association members. The budget also outlines the existing financial situation and provides an estimate of payments expected to be made and received.
The budget must be:
- distributed when notifying members of the upcoming annual general meeting (AGM), or
- tabled at the meeting before voting on the levy motion.
The motion to set the contributions must show the amount for each fund and be approved by a majority vote. The contribution can be paid by instalments, and the payment amount and due date varied. The association may vote by resolution to give a 10% discount where a contribution is paid before the due date.
When is a special levy used?
Associations can vote to introduce a ‘special levy’ when there are insufficient funds to cover expenses such as large capital works or unforeseen work.
Special levies are calculated according to the unit entitlement of each association member.
Levies must be paid within 30 days of the issuing of the notice. However, associations can request payment of levies in 14 days, instead of 30 days, where the levy is for necessary repairs to address a serious or imminent threat to residents’ health or safety.
What are the penalties for unpaid contributions?
An unpaid contribution attracts interest at the rate of 10% simple interest a year if not paid within 1 month after it is due. The association cannot change the rate of interest but can make a resolution to waive the interest.
When can payment plans be used?
The association can choose to enter into a payment plan with a lot owner who is in arrears so the lot owner can pay off their overdue contributions in instalments. The payment plan must be in writing and contain specific information, including:
- the full details of the lot owner
- outstanding amount details, including any interest accrued
- how the outstanding levies are to be paid, and it is
- limited to a maximum period of 12 months unless a further plan is agreed to by the association by resolution.
How can associations recover unpaid contributions?
The association can apply to the NSW Civil and Administrative Tribunal (Tribunal) for an order that compels a lot owner to repay:
- unpaid contributions
- the interest payable on an amount
- any expenses the association incurred in recovering the unpaid funds.
If also seeking other orders – for example, to issue a penalty for a by-law breach – the association can apply to the Tribunal instead to recover the unpaid contributions as part of the one application.
Administrative and capital works funds
What is the purpose of the administrative fund and capital works fund?
All community, precinct and neighbourhood associations must establish an administrative fund and a capital works fund. This allows the association to administer the finances of the scheme.
The administrative fund is used to manage the day-to-day expenses of running the scheme, such as maintaining and repairing association property, recurring expenses, and insurance.
The capital works fund enables major work to be undertaken on association property. The fund ensures there is enough money to pay for capital expenses when work is required.
Contributions are not refundable when a member later leaves the scheme, even if the money has not yet been spent.
Can money be transferred between the administrative and capital works funds?
Yes, the association can transfer money from one fund to the other Where this happens, an association must hold a general meeting within three months of the transfer or payment to decide:
- whether to reimburse part, all or none of the money paid or transferred, and
- the amount to be transferred from the other fund or levied as a contribution to the fund.
The association does not have to repay the money within the three months.
Decisions must be made at a general meeting by resolution (majority vote).
Financial statements
How often do associations need to prepare financial statements?
The association must prepare full accounting financial statements and a statement of key financial information for each reporting period.
The first reporting period for an association begins the day the association is created and must end in the two months before the first AGM. How long the first reporting period lasts depends on how long a scheme is in its initial period.
Subsequent reporting periods start the day financial statements for the previous reporting period are finalised. They must also end in the two months before the next AGM.
What needs to be included in the statement of key financial information?
The statement of key financial information provides all association members with an overview of the financial management of the scheme.
It must be prepared in the form approved by Fair Trading, and be sent out when notification is given of an upcoming AGM. The statement of key financial information must include the following information:
- name of fund
- reporting period
- balance carried forward from the previous reporting period
- particulars and amount of each item of expenditure
- total income received during the reporting period
- total interest earned by the fund during the reporting period
- total contributions paid during the reporting period
- total unpaid contributions payable for the reporting period
- total expenditure for maintenance during the reporting period
- total expenditure for administration costs during the reporting period
- list of principal items of expenditure proposed for next reporting period
- any unpaid arrears or outstanding balance owed to the fund
- balance of fund at end of the reporting period.
Records which associations are required to keep must be kept electronically from 11 June 2024. This applies to new records created from this date. This does not stop a scheme from also keeping physical records if they wish.
Account audits
Are associations required to have accounts audited?
For schemes with a budget of over $250,000, the financial accounts must be audited annually to meet the Australian Auditing Standards. Other schemes may choose to have their accounts audited.
Works over $30,000
Where an association is approving work valued at more than $30,000, it must obtain at least two independent quotes for that work. This helps ensure schemes get value for money.
This requirement does not apply where the work is for emergency repairs, such as burst or blocked water or sewerage pipes, serious damage caused by a fire or storm, unexpected electrical or security system failures, and broken glass that affects the security of a building.
Pet fees and bonds
Associations must not charge a resident a fee or bond or require insurance for a pet kept on a lot.