Sinking Funds – Who needs ‘em?

Sinking Funds - Who Needs 'em?

Why do we need a Sinking Fund? Surely we don’t need to set aside that much? Why is the building sinking? All questions I have received throughout my time in strata (yes, the last one is real).

Put simply, a Sinking Fund is a fund established by an entity, by setting aside revenue over time to cover capital expenses in the future. Simple, right? Now here is where it gets a bit more complex.

As the Original Owner, you will need to set the amount collected in the first year for the Sinking Fund. This amount will be outlined in the schedule of contributions, provided by SSKB for your disclosure material, and owners will be able to see what their contribution towards the fund is.  

How do I know what to collect in the first year?

Good question. You are required by legislation as the Original Owner to provide a Sinking Fund Forecast to the Body Corporate. This forecast projects when capital works are required for 10 years from the report date, and, outlines what the Body Corporate will need to collect each year to have the necessary funds for said capital works.

The beneficiaries of a strong sinking fund are the owners in the scheme. By setting aside the necessary funds for projected capital works, the Body Corporate alleviates any unforeseen major expenditure down the track. Further, if an owner is looking to sell, one of the first things buyers are going to look at is the state of the sinking fund. If you have prospective buyers reviewing your marketing material and querying their annual contributions towards the Sinking Fund, just remind them of the above! We will ultimately work with you to achieve a figure that is going to work for both you as the developer and future owners in the scheme.  Just remember, if your building does start to sink, you’ll want plenty in the Sinking Fund.

To learn more about your Sinking fund requirements, please do not hesitate to give us a call on the below.

Oliver McCall
Development Consultant
0411 352 409

Matt Dearlove
Development Consultant
0423 874 987

Tim Sheehan
0403 465 153

Bradley Jones
General Manager
0414655 284