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We have about $40,000 in sinking funds but no interest appearing in revenue. The strata manager will not provide bank statements. Should we be earning interest?
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Only if the EC/OC has instructed the strata manager to invest the funds. Note that the types of investment are limited, refer section 73 of the Act.
73 Can money in administrative fund or sinking fund be invested?
(1) An owners corporation may invest any money in its administrative fund or sinking fund in any manner permitted by law for the investment of trust funds or in any prescribed investment.
(2) Any interest received on an investment made under this section forms part of the fund to which the investment belongs.Sound advice scotlandx. I have been in Strata schemes where we invested surplus monies in Term Deposits. All worked out very well.
If major works are in the pipeline according to the Sinking Fund Forecast then keep this in mind when working out your Term or you may be caught short.
Ruthee, my view is that it is up to the OC to direct the strata manager where to deposit the money and for whose benefit.
If the strata earns interest it is liable to lodge a tax return and pay tax at the company rate. Many small OCs avoid earning interest to avoid the cost of a tax return and tax. Many strata managers and banks encourage this as they get interest free loans.
Based on there being $40,000 in sinking funds it may be that the Strata Manager is relying on OC inaction/ignorance to profit their fees (they also may not be).
Whatever the case the OC should be able to access their bank statements or details of where and to whose benefit the $40,000 is deposited. It doesn’t ‘smell’ right that the strata manager is denying the OC this information.
Your OC needs to make an informed decision about where best to put the $40,000 to benefit the OC. It may be that there has been a long standing agreement that the sinking funds interest is available to the strata manager on the basis that the cost of preparing and lodging a tax return wasn’t worth it. If so any such ‘agreement’ should be re negotiated.
I do our Strata’s tax return as the only income we have is from interest. It is simple. We only earn $390 in interest and pay just over $100 tax but every little bit helps!