Sinking fund

Hi SRD,

A sinking fund is a fund established, and managed by, the strata company (or similar in your home state) that is put aside for major maintenance or upgrades of a strata company. Typically these repairs/upgrades are to external areas only as internal stuff is generally your responsibility.

A strata company is reponsible for the maintenance and upkeep of common property as designated in your respective state legislations and in the strata titles act as it relates to your complex.

Strata management fees (as distinct from sinking fund contributions) are fully tax deductible whereas sinking fund contributions are considered a capital expense and as such they offset any capital gians liabilities. I am a bit hazy on that one so you will need to check it out.

If buying into a s/hand strata managed unit ensure you check your would be unit is not in arrears for contributions (you could inherit the bill); ensure there are funds in the strata groups accounts commensurate with the age of the property – if not, why not – there may be perfectly valid reasons but you will need to check this out, check out the credentials of the appointed manager (I have just spent some time contacting owners in a group of units so we can sack the inefficient strata manager) and finally get involved with the strata group – they make decisions that do effect your investment.

Recommend you contact the REA Institute in your state – they’ll be able to point you in the right direction. There will also be a strata institute (or similar) in your state and there are government legislations that come into play in most (all?) states.

Derek
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