A sinking fund (also called a capital works fund, maintenance fund or reserve fund) is money set aside by a strata scheme to pay for major repairs, replacements and long-term maintenance of common property — things like roof replacement, exterior painting, lift upgrades and driveway resurfacing.
It is designed for significant costs that do not arise every year. The name varies across Australia: NSW calls it a capital works fund, Queensland and the ACT use sinking fund, Victoria uses maintenance fund, and Western Australia uses reserve fund. Owners contribute through levies so the scheme can pay for future major work without relying entirely on a large unexpected special levy.
A sinking fund is money collected and held by a body corporate or owners corporation for future capital expenses. Unlike an administrative fund, which generally pays for regular operating expenses, a sinking fund is intended for major or non-routine work involving common property. Queensland bodies corporate generally maintain a sinking fund for anticipated expenses such as improving common property, replacing common property components, purchasing assets and painting common property structures.
A capital works fund is the term used in NSW for the fund that pays for major capital expenses associated with common property. The NSW Government describes it as the scheme's fixing and maintaining fund. It was previously called a sinking fund and is used to pay capital expenses when they arise. NSW strata schemes must prepare a 10-year capital works fund plan identifying and budgeting for the repair, maintenance or replacement of major common property assets. Since 1 April 2026, schemes must use the prescribed standard form when preparing or updating that plan.
They perform broadly the same function: saving for major future expenditure on common property. The main difference is the terminology used under different state and territory laws.
The exact expenses that can be paid from the fund depend on the applicable legislation, the approved budget or plan and the nature of the common property work.
The owners corporation, body corporate or strata company estimates future capital expenses and includes contributions in the scheme's budget. Each owner then pays their required share through strata levies. Depending on the scheme and state, contributions may be calculated using unit entitlement, lot entitlement, a method approved under legislation, or expected future expenditure identified in a maintenance or capital works plan. The money is accumulated over time so funds are available when major work becomes necessary.
A long-term plan identifies major common property assets, estimates when they will need repair or replacement and forecasts how much money the scheme should collect. The plan usually covers the assets, their current condition, expected repair or replacement dates, estimated costs, annual owner contributions, expected fund balances, timing of major projects, and inflation assumptions. NSW strata schemes use a 10-year capital works fund plan. ACT owners corporations must maintain a sinking fund and approve a plan covering a 10-year period. In Victoria, tier one and tier two owners corporations must have a maintenance plan and maintenance fund. In Western Australia, strata companies with 10 or more lots, or a replacement value of at least $5 million, must have a 10-year maintenance plan and reserve fund.
If a major expense arises and the fund is insufficient, the owners corporation or body corporate may need to raise a special levy, increase future capital works contributions, stage or postpone non-urgent work, use approved borrowing or finance, or reassess the scope and timing of the project. Delaying necessary work can sometimes result in greater damage and higher repair costs. Urgent safety, structural or compliance work may still need to proceed even when the fund is underfunded.
There is no single amount suitable for every strata scheme. The fund should be assessed against expected future expenditure rather than judged only by its current balance. For example, a fund containing $300,000 may appear substantial, but it may be inadequate if the building expects a $1 million facade project within two years. Conversely, a smaller, newer scheme may reasonably require a lower balance.
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