The body corporate has a number of financial powers and responsibilities under the Unit Titles Act.
- levying contributions to cover general administration, maintenance and insurance
- levying contributions for any of the funds that the body corporate may have
- borrowing money
- investing money
- recovering money owed
- charging penalty interest
- paying the body corporate’s expenses
- keeping financial records
- preparing annual financial statements.
The body corporate must keep accounting records, which detail all the financial transactions of the body corporate, and use these records to prepare a financial statement. The most recent financial statements must be sent with any notice that calls an AGM.
The form and minimum content of financial statements are prescribed in regulations.
The body corporate must arrange for the audit of its financial statements at the end of the financial year, unless it decides by special resolution this is not required.
The body corporate must establish an operating account. The operating account is used to meet operational expenses that relate to:
- managing and governing the development (e.g. costs associated with holding meetings)
- providing services and amenities for the benefit of the development (e.g. central air conditioning or centrally metered water provision)
- statutory or regulatory compliance costs
- ground rental or licence fees relating to the underlying land
- maintenance costs for the development incurred at least once a year (e.g. pool cleaning or maintaining gardens).
From time to time, the body corporate will determine the contributions payable by unit owners. The contributions are used to maintain the various funds of the body corporate and to fund the operating account from which the body corporate’s general expenses are paid.
The body corporate will determine the date on which fees must be paid and may charge interest on any unpaid amounts.
An owner’s contribution to the amount levied by the body corporate is determined by either utility interest or ownership interest.
- For the operating account, the long-term maintenance fund and the optional contingency fund, each owner contributes according to their utility interest.
- For the optional capital improvement fund, each owner contributes according to their ownership interest.
By default, the utility interest of a unit is the same as the ownership interest. The body corporate may, however, decide to apply a different method of calculating utility values. For example, the body corporate could decide it is more appropriate for all unit owners to contribute equally amount and change the relative utility interests accordingly.
The utility interest is used to calculate how much each owner contributes to operational costs of the body corporate.
Ownership interest is determined according to the relative value of each unit as a share of the development as a whole. The value must be set by a registered valuer.
Ownership interest is used to determine a range of matters including:
- the unit owner’s beneficial interest in the common property
- the extent of the each owner’s liability if the body corporate is sued or sues someone else
- the unit owner’s share in the underlying land if the unit plan is cancelled.