Almost every self-managed scheme runs two separate funds, and almost every new treasurer gets caught out by the line between them at least once. Someone pays for the annual fire inspection out of the wrong account, or the committee dips into the long-term savings to cover a cash-flow gap, and a year later the accounts don't reconcile and an owner starts asking pointed questions. The split isn't bureaucratic box-ticking — it's the mechanism that stops this year's owners from spending money that was raised to replace a roof in 2032. This guide explains what each fund is for, what legitimately comes out of each, and how to handle the grey areas without breaching your scheme's obligations.
The two funds every scheme runs
Whatever your state calls them, a strata scheme keeps its money in two buckets:
- The day-to-day fund — for the recurring, predictable costs of running the building this year: insurance, cleaning, gardening, electricity for common areas, minor repairs, management costs, audit fees.
- The long-term fund — for major, infrequent, capital expenditure: replacing the roof, repainting the building, resurfacing the driveway, renewing lifts, fixing structural defects.
The names differ by jurisdiction (see the callouts below), but the principle is identical everywhere in Australia. The day-to-day fund is topped up and spent down within the year. The long-term fund accumulates over years so the cost of a big job is spread across all the owners who benefited from the asset's life — not dumped on whoever happens to own a lot in the year the roof finally goes.
Why the split exists — and why it matters to you
- Fairness across time. An owner who sells in 2028 has already contributed, through their levies, toward the roof that gets replaced in 2032. Pool the two funds and that fairness disappears.
- It's a legal requirement, not a preference. In most states the second (long-term) fund is mandatory, and spending from the wrong fund — or raiding one to prop up the other — can breach the legislation and expose the committee.
- It protects the treasurer. When the funds are clean and separate, your accounts reconcile, your audit is painless, and no owner can credibly accuse the committee of misusing money.
- It's what a buyer's conveyancer looks at. A healthy long-term fund is a selling point for every lot; an empty one shows up in a strata search and drags on sale prices.
What belongs in the administrative (day-to-day) fund
The recurring cost of keeping the building running for the year:
- Insurance premiums — building, public liability, and any statutory cover
- Common-area utilities — electricity for lighting and lifts, shared water, gas
- Cleaning and gardening — regular contracted services
- Minor and routine maintenance — a leaking tap, a blown light, a jammed gate motor
- Statutory inspections — annual fire safety, lift servicing, pool certification
- Administration — audit or accounting fees, postage, software, bank charges, meeting costs
The test is roughly: is this a normal, expected, recurring cost of operating the building this year? If yes, it's an administrative-fund expense.
What belongs in the capital works (long-term) fund
Major, non-recurrent works that renew, replace or substantially improve the common property:
- Roof replacement or major re-roofing
- Repainting the exterior of the building
- Resurfacing or replacing driveways, car parks and paths
- Renewing or upgrading lifts, pumps, intercoms and major plant
- Structural and remedial works — concrete spalling, waterproofing membranes, balcony repairs
- Replacing shared fixtures at end of life — fencing, common-area flooring, guttering
The test here: is this a significant, one-off (or once-a-decade) cost to replace or renew a capital asset? If yes, it belongs in the capital works fund — and ideally it was foreseen in your capital works plan, so the money is already sitting there.
The grey area: repair vs capital
This is where treasurers get tripped up, because a single job can look like either. A few rules of thumb:
- Patching vs replacing. Fixing one cracked roof tile is routine maintenance (admin fund). Replacing the entire roof is capital works.
- Restoring vs improving. Repairing a section of failed membrane to keep it working is arguably maintenance; ripping out and re-waterproofing an entire deck is capital.
- Cost and frequency. A cheap job that recurs most years leans administrative. An expensive job that happens once in the asset's lifetime leans capital.
- When genuinely unsure, resolve it at a meeting and minute the decision. A recorded committee decision on how a borderline item was classified is your best protection if it's ever questioned.
If a large, unplanned capital job lands and the capital works fund can't cover it, the answer is usually a special levy raised specifically for that work — not quietly funding it from the administrative fund.
The exact fund names, and whether the long-term fund is compulsory, are set by your state's legislation:
Western Australia — Strata Titles Act 1985
Western Australia uses an administrative fund and a reserve fund. Following the reforms that commenced on 1 May 2020, a scheme is generally required to establish and maintain a reserve fund where it has 10 or more lots, unless the owners resolve otherwise in the circumstances the Act allows. Smaller schemes may still choose to keep one.
The administrative fund covers recurrent operating costs; the reserve fund is for anticipated major expenditure of a capital or non-recurrent nature.
General information only — not legal advice.
New South Wales — Strata Schemes Management Act 2015
New South Wales requires both an administrative fund and a capital works fund. The capital works fund was previously known as the sinking fund and was renamed under the 2015 Act.
The administrative fund covers day-to-day recurrent expenses; the capital works fund covers capital and other non-recurrent expenditure. Owners corporations are also required to prepare and maintain a 10-year capital works plan estimating future major expenditure, which should inform how much the fund needs to hold.
General information only — not legal advice.
Queensland — Body Corporate and Community Management Act 1997
Queensland bodies corporate must maintain both an administrative fund and a sinking fund. Both are compulsory.
The administrative fund covers recurrent, day-to-day spending; the sinking fund covers capital and non-recurrent items such as painting, major replacements and provisions for anticipated future work. Bodies corporate are generally required to prepare a sinking fund forecast covering a period of at least nine years to guide contributions.
General information only — not legal advice.
Victoria — Owners Corporations Act 2006
Victoria's terminology differs. Owners corporations keep general funds for ordinary operating costs, and prescribed owners corporations (broadly, larger schemes above the thresholds set by the regulations) must establish and maintain a maintenance fund and a maintenance plan for major capital items.
Smaller schemes that fall below the prescribed thresholds are not compelled to run a separate maintenance fund, but many choose to set money aside for major works anyway — the fairness and cash-flow logic still applies.
General information only — not legal advice.
The other states follow the same shape. South Australia, Tasmania, the ACT and the Northern Territory all run an administrative-type fund alongside a sinking or reserve fund for major works, though the exact names, thresholds and forecasting requirements vary. Whatever yours is called, identify the two funds in your legislation before you set this year's levies.
Can you move money between the funds?
Sometimes — but carefully, and never as a casual habit. If the administrative fund runs short mid-year, the legislation in several states allows money to be borrowed from the other fund to cover the gap, provided it's repaid within a set period (commonly a few months) and the transfer is properly recorded. The key points:
- Treat it as a documented loan, not a merge. Record the amount, the date, and when it will be repaid.
- Repay it within the statutory window. Leaving it unrepaid turns a permitted cash-flow measure into a breach.
- Fix the underlying cause. If you're repeatedly borrowing from the capital works fund to cover operating costs, your administrative levies are set too low. Raise them at the AGM rather than eroding the long-term savings.
What happens when you get it wrong
- Your accounts won't reconcile, and the annual audit turns into an argument.
- Owners lose confidence. "Where did the roof money go?" is a hard question to answer if the answer is "we spent it on gardening."
- The scheme underfunds real capital works, and the shortfall reappears as a nasty special levy — the exact thing the capital works fund exists to prevent.
- The committee may breach its statutory duties, with the treasurer squarely in the frame if funds were misapplied.
None of this requires bad intent. It usually starts with one miscoded invoice and a fund that was never clearly separated in the first place.
Common mistakes
1. Running everything through one bank account
Two funds in the ledger but one bank account is asking for trouble. Keep the money genuinely separated — ideally in distinct accounts — so the balance of each fund is unambiguous at any moment.
2. Funding major works from the administrative fund
It feels efficient in the moment and quietly drains the money set aside for operating the building. Major works come from the capital works fund, or from a special levy raised for the purpose.
3. Setting the capital works levy by guesswork
Without a capital works forecast, contributions are a finger in the air — usually too low. The forecast tells you what the fund should hold; the levy is set to get it there.
4. Never revisiting the split
Costs and building condition change. Review both funds at each AGM against actual spending and the capital works plan, and adjust the levies accordingly.
Frequently asked questions
Do we legally have to keep two separate funds?
In most states, yes — a second (capital works, sinking or reserve) fund is mandatory, sometimes above a size threshold. Check the callout for your jurisdiction, and confirm the current requirement in your legislation before setting levies.
Which fund pays for a major unexpected repair we didn't plan for?
Capital works, if it's genuinely capital in nature. If the fund can't cover it, raise a special levy for that specific work rather than draining the administrative fund.
Can owners vote to spend the capital works fund on something else?
The capital works fund is restricted to capital and non-recurrent purposes; it isn't a general savings account the committee can redirect at will. Significant decisions about major expenditure usually need to be made properly at a general meeting, within the limits the legislation sets.
Our capital works fund is nearly empty — what do we do?
Build a capital works forecast, work out the annual contribution needed to fund the works it identifies, and raise the capital works levy at the AGM to match. If a big job can't wait, a special levy bridges the gap in the meantime.
This guide is general information for self-managed strata schemes in Australia. It is not legal advice. Fund names, thresholds and forecasting rules differ between states — always check the strata legislation that applies to your scheme, and seek professional advice for significant financial decisions.