Unit Owners Association of Queensland Inc

The Sinking Fund budget is based on estimates of spending of a capital nature or non-recurrent nature and must allow for raising the necessary capital amount to provide necessary and reasonable spending for major works in the present financial year and create a reserve for anticipated major expenditure for the next 9 years. (total of 10 years)

1. A yearly inspection to determine the current condition of the building and common property is advisable to determine approximately when the maintenance needs to be carried out
2. All relevant items that will require replacement in the future need to be included
3. Take into consideration the age, location, construction and the past maintenance program of the building. ( ie painting: if the building has just been  painted estimate the cost of re-painting in approximately 10 years and set aside a tenth of the cost each financial year.
4. The sink fund forecast should take into account the existing bank balance, interest earned, tax payable, estimated replacement cost, allowance for inflation, recommended years of life and yearly contributions.
5. Review the forecast annually as some items may not need replacing due to good maintenance by the body corporate over the years.
6. It is necessary to ensure that money is available when required while at the same time ensuring that the fund balance does not get excessively high. Contributions, as well as the budget should be adjusted up or down depending on the needs.
7. A well-managed sinking fund forecast will ensure future repairs/maintenance are carried out when required, negating the need for a special levy.
8. A unit complex is like a motor vehicle it needs to be carefully maintained. By doing so it will add value to your investment by demonstrating to prospective owners that provision has been made for future repairs and that adequate funds are available.

These notes are for discussion purposes only and are not offered as and should not be taken as advice in any form. To obtain a more detailed understanding of the law, seek advice from a competent legal practitioner.