Introduction

Financial Statements

• One very important role of the Committee is to manage the income and expenses for the Body Corporate.
• Every Body Corporate has a financial year end. The financial year end is determined by the date the scheme originally registered, if registered pre 13th July 1997 the year end falls on the end of the calendar month prior. In the case of registration post 13th July 1997 the year end will fall on the end of the calendar month of the same month. The Financial Year End of the Body Corporate is the trigger for the whole Annual General Meeting process.
• The Committee is responsible for setting budgets with the BCM (Body Corporate Manager and Resident/Building Manager) to be presented at each Annual General Meeting. It is imperative that all members have an understanding on how to read and understand Body Corporate financial statements.
• It is important to note that the acceptance of a budget at a General Meeting does not give the Committee authority to spend the monies outside their restrictions.

Notes to the Accounts

• The notes to the Accounts are signed off by an accountant. These notes provide a summary of how the Accounts are prepared and give further details of the debtors and creditors.
• Financial Statements consist of the following:
  • Notes to the Accounts
  • Balance Sheet
  • Statement of Income and Expenditure - Administrative Fund
  • Statement of Income and Expenditure - Sinking Fund

Balance Sheet

• The balance sheet is a summary of the Body Corporate's financial position.
  
• The balance sheet displays the actual cash at bank and any investment accounts together with any current assets or liabilities of the Body Corporate which may include:
  • Creditors
  • Debtors
  • Prepayments
  • Levies in advance / arrears
  • Petty Cash
  • Holding deposits i.e. Energex deposit etc.

Administrative Fund Expenses

• Expenses that are paid from the Administrative Fund are items which are of a recurrent nature for example:
  • Common Area Electricity
  • Management Fees (RUM, BCM)
  • Fire Control Contracts
  • Insurance Premiums
  • Bank Charges
  • General Repairs and Maintenance
  • Gardening
• The Body Corporate is required to ensure that enough funds are raised in the Administrative Fund to cover all expenses for that financial year.

Administrative Fund Income

• The income will reflect the actual levies and discount (if applicable), as well as any of the following:
  • Any interest (either from the Bank or from unpaid levies)
  • Any additional or sundry income e.g. vending machine income
  • Payment from another party for signage on the roof or payment for telecommunication towers
  • Recovery of any other costs

Sinking Fund Expenses

• The Sinking Fund is often referred to as the Body Corporate's 'savings account'.
• Sinking Fund Expenses are usually infrequent expenses and are of a capital nature.
• The Body Corporate is required to have a Sinking Fund Forecast which budgets for the current year and the next 10 years. This is usually prepared by a Quantity Surveyor and is an excellent guide as to what levies should be raised by the Body Corporate to have sufficient funds to pay for future capital expenses.
• Examples of Sinking Fund expenditure is as follows:
  • Purchasing assets
  • Major improvements to the common property of the scheme
  • Painting

Sinking Fund Income

• Sinking Fund Income includes all levies and discount (if applicable) as well as any of the following:
  • Interest on Sinking Fund investments
  • Any transfer fees paid by the Resident Unit Manager (RUM)
  • Compensation received as a result of an adjudicator's order

Adjusting Budgets at the Annual General Meeting

• The budget set by the Committee and presented to all owners at the Annual General Meeting may be varied at the meeting by no more or less than 10% of the original budget.
• There are stipulations that must be met should the Body Corporate wish to change the budgets and are as follows:
  • The change is only to increase or decrease amounts already included in the budget
  • New items can not be introduced
  • The spending must relate to that particular financial year
• The budget must be approved by a majority of voters present and entitled to vote at that meeting.

Bank Accounts

• The Body Corporate's bank account must be kept any solely in the name of the Body Corporate and with a financial institution.
• The Body Corporate may only invest surplus money in a way a trustee may invest trust funds.
• All monies received by the Body Corporate must be banked into the bank account for the Body Corporate and not via a third party.

Transferring Funds

• The Body Corporate must not transfer money from the Administrative Fund to the Sinking Fund or vise-versa.

Income Tax

• In the eyes of the taxation office, a Body Corporate is considered a company and therefore is assessable on any income. This includes interest lease payments and any other income however levies are considered non mutual income and are therefore not included as part of the income tax for the Body Corporate.

GST

• In the eyes of the taxation office, a Body Corporate is considered to be an entity that is carrying on an enterprise which makes supplies for consideration. The entity is legally obligated to register for GST when it meets the registration turnover threshold, which is currently $75k, but may elect to register if under the threshold.
  
  A registered Body Corporate will be required to include GST in any taxable supplies it makes, and pay the GST to the Australian Taxation Office. Such supplies include amounts levied on proprietors in the form of Administrative and Sinking Fund levies respectively.
  A registered Body Corporate will also be able to claim input tax credits for GST included in acquisitions of cleaning, gardening, repair and maintenance services, assuming the goods & services are acquired for a creditable purpose and a tax invoice is held for any expense over $55.00.
  

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