Low-Risk Ways to Strengthen
Your Capital Works Fund

With interest rates rising and strata costs increasing, many Owners Corporations are asking a simple question: Is our Capital Works Fund working hard enough for us?

While the fund’s primary purpose is to ensure future building repairs and improvements are covered without needing special levies, it doesn’t mean the money should sit idle. So what options are available to committees—and what responsibilities do they carry—when it comes to investing these funds more wisely?

The Role of the Committee

In NSW, the Owners Corporation ultimately controls how funds are used. But in practice, it’s the strata committee that acts as custodian between meetings. While your strata manager can assist, they are not permitted to provide financial advice or make investment decisions unless specifically licensed.

That means decisions about moving money into higher interest-bearing accounts, such as term deposits or call accounts, rest with the committee. And with that comes a duty of care.

Under the Trustee Act 1925 (NSW), committees are expected to act with the same care, diligence, and skill as a prudent person managing another’s affairs. While maximising returns may be appealing, it’s important to balance interest gains with access, reporting requirements, and governance obligations.

What Can Be Done with the Funds?

Depending on the Owners Corporation’s banking arrangements and agency agreement, there may be limited low-risk options available when it comes to investing Capital Works Fund money. These include:

• Authorised Deposit-Taking Institutions (ADIs): Most commonly, this means banks, credit unions, and building societies covered by the Financial Claims Scheme (which guarantees up to $250,000 per institution).
• Term Deposits: A popular choice for their predictability, term deposits can often offer higher returns than savings accounts. Some even allow early access with minimal penalties.
• At-call high-interest accounts: These provide some interest without locking up funds for long periods.

Can You Instruct Your Strata Manager?

Yes—but with conditions.

While your strata manager can facilitate transactions, they can’t act independently. In most cases, instructions must come via a formal committee resolution. However, where an AGM resolution has been passed authorising the Treasurer to provide investment instructions, written instructions from the Treasurer are sufficient. This arrangement simplifies decision-making while maintaining compliance with governance standards.

What’s the Prudent Approach?

If your building has a healthy Capital Works Fund, consider these practical steps:

• Review your 10-year plan: Align your investment timeline with future expected costs.
• Use multiple institutions: Stay under the $250,000 government guarantee limit per bank if possible.
• Minimise administrative hurdles: Choose deposit types that can be easily transferred or reinvested.
• Document decisions: Record committee resolutions, advice received, and investment timelines.

Practical Implications When Choosing a Bank

While many authorised deposit-taking institutions (ADIs) are available, not all offer solutions that are practical for strata use. In particular, some banks require direct involvement from company directors, such as attending a branch to open or manage accounts. This can result in delays, especially when signatories are unavailable, overseas, or otherwise challenging to coordinate.

Banks such as NAB and Macquarie are often preferred for their practical alignment with strata operations. Their systems:

• integrate with strata trust accounting platforms

• support secure dual-authority approvals

• enable clear and auditable financial reporting

• reduce administrative load for committees and managers

These features help ensure that funds remain visible, compliant, and easy to manage, especially when dealing with multiple term deposits, annual audits, or strata manager transitions.

Capital Works Funds: Practical Considerations for Committees

Your Capital Works Fund is a long-term safety net. That doesn’t mean it has to sit passively earning negligible interest.

With some careful planning and the proper governance, strata committees can make informed decisions that balance return, access, and compliance—without adding unnecessary complexity. This can help reduce the need for special levies and make every dollar stretch further.

After all, financial stewardship is just another part of good strata management.

Disclaimer:
This article is for general information only and does not constitute legal or financial advice. Owners Corporations and committee members should seek independent professional advice before making decisions regarding the investment of strata funds. Strata Plus does not hold an Australian Financial Services Licence and does not provide financial product advice.