Every building wears out. Roofs leak, paint fades, lifts reach the end of their life. In a strata scheme, those bills do not arrive politely spread out. They arrive when the thing breaks. The capital works fund is how a NSW scheme gets ready for them in advance.
For committees, this is one of the most important things to get right, and one of the most commonly neglected. A scheme that under-funds its capital works fund looks fine for years, then lands its owners with a painful special levy out of nowhere. This guide explains the fund, the planning behind it, and what committees should be budgeting for.
The framework below is general. The precise contribution rules, planning requirements and timeframes can change and can depend on your scheme, so confirm the current position with NSW Fair Trading or your strata managing agent.
Two funds, two jobs
A strata scheme generally runs on two funds. The administrative fund pays for the everyday: cleaning, insurance, gardening, electricity for common areas, minor repairs, and the cost of running the scheme. These are the predictable, recurring costs.
The capital works fund is for the big, infrequent jobs. Replacing the roof. Repainting the whole building. Upgrading the lift. Resurfacing the driveway. These do not happen every year, but when they do, they are expensive. The capital works fund exists so the money is already there. For how the two funds drive the levies owners pay, see our guide to admin and capital works levies.
What "the sinking fund" means
If you have been around strata for a while, you may know this as the sinking fund. That was the old name. The Strata Schemes Management Act 2015 uses the term capital works fund instead. Same idea, current name. If an older owner refers to the sinking fund, they mean the capital works fund.
The 10-year plan
Setting money aside is only useful if you know how much you will need and when. That is the purpose of planning for major works over a long horizon, commonly described as a 10-year plan.
The idea is straightforward. You look ahead at the major works the building will need over the coming years, estimate roughly when each will be due and what it will cost, and then work backwards to a steady level of contribution that builds the fund up in time. A scheme that plans well collects a manageable amount each year. A scheme that does not plan ends up reacting to crises. Confirm the current planning requirements for your scheme with NSW Fair Trading.
Why under-funding causes special levies
Here is the chain of events that catches schemes out. The committee keeps levies low to please owners. The capital works fund stays thin. Years pass with no problem. Then the roof fails, the quote comes in at a large number, and the fund has nowhere near enough.
At that point the owners corporation has to raise a special levy, which is a one-off charge on every owner to cover the shortfall. Special levies are unpopular, can land at a bad time, and hit some owners hard. The irony is that the money would have been far less painful collected steadily over the years. A healthy capital works fund is the kindest thing a committee can do for its owners' wallets.
What committees should budget for
- Major structural items: the roof, external walls, waterproofing and the building envelope.
- Building services: lifts, common-area electrical and plumbing, fire safety systems.
- Aesthetic and protective works: full repainting, driveway and path resurfacing, common-area flooring.
- Shared amenities: fences, gates, pools, gardens and any common equipment the scheme owns.
The committee recommends the contribution level, and the owners corporation approves it through the budget, usually at the AGM. We cover that meeting and how the budget is set in our strata committee member guide.
The link to insurance
Budgeting for major works sits alongside another big committee responsibility: making sure the scheme is properly insured for the cost of rebuilding. The two go together, because both are about being financially ready for the worst day. We explain the insurance side in our NSW strata insurance guide.
Your next step
Funding major works well is one of the clearest ways a committee protects its owners. Archer Institute's Strata Members CPD course covers the funds, the planning obligation, and good financial governance for committees, in plain English. It is online and self-paced, built for the volunteers who run NSW schemes.
