What is the difference between administrative fund and capital works fund?
The administrative fund pays for a strata scheme's day-to-day running costs — things like insurance, cleaning, gardening and minor repairs. The capital works fund (sometimes called the sinking fund) is a longer-term account set aside for major, infrequent costs such as roof replacement, repainting or lift upgrades. Both are compulsory under NSW strata law, and every owner contributes to both through their quarterly levies.
The Fuller Picture
Every strata scheme in NSW is legally required to hold two separate funds, each with its own purpose and its own levy contribution. The administrative fund covers recurring, predictable expenses that come up every year — building insurance, common area cleaning, gardening, pest control, strata management fees and small repairs. The capital works fund exists for the bigger, less frequent items a building will eventually need — a new roof, repainting the exterior, replacing lifts, upgrading fire safety systems or resurfacing a car park. Owners corporations are required to prepare a 10-year capital works plan that estimates when these costs will fall due and how much needs to be set aside.
In practice, the split isn't always as clean as it sounds. Some buildings run a capital works fund that's badly underfunded relative to their 10-year plan, which makes a special levy more likely down the track. Other schemes over-contribute to the administrative fund and under-contribute to capital works, which can look like healthy finances on paper while a major cost sits unfunded. Levy contributions to each fund are set separately at the AGM, based on the strata manager's or treasurer's recommendation, and owners can vote to adjust them — though NSW law requires capital works contributions to be adequate for the 10-year plan.
Under the NSW Strata Schemes Management Act 2015, both funds are mandatory for every strata scheme with more than two lots (schemes with two lots can sometimes opt out of a capital works fund by unanimous resolution). The strata plan's most recent AGM minutes and the capital works fund plan are both documents a buyer is entitled to request before purchase, and they form part of the standard strata search a conveyancer arranges.
What This Means for Your Purchase
Before you commit to a strata property, the balance and health of these two funds tells you a lot about what's coming. A thin capital works fund next to an ageing building is a signal that a special levy could land within a few years of settlement, on top of your regular quarterly fees.
If the fund balances look light against the scheduled works in the 10-year plan, that's worth raising with your solicitor or conveyancer before exchange, and in some cases can support negotiating on price. It's also worth checking whether any major works have already been approved but not yet levied — that cost may be heading your way even if it hasn't shown up as a special levy yet.
Contributions to both funds are set at the AGM and can increase from year to year, so the current levy isn't necessarily what you'll pay long-term. Buyers should budget for capital works contributions to rise, particularly in older buildings or those that have deferred maintenance.
How This Shows Up in the Illawarra
Strata buying is common across the Illawarra, particularly in beachside pockets of Wollongong, Thirroul, Corrimal and Shellharbour where apartment and townhouse stock has grown steadily over the past decade. Coastal buildings carry a particular capital works consideration — salt air accelerates wear on external finishes, balconies, render and metal fixtures, which means older beachside blocks often need capital works funding sooner and in larger amounts than an equivalent inland building.
Entry-level strata units in the Illawarra typically sit in buildings under 20 years old, where capital works funds are still building up, while older blocks near the Wollongong CBD or in Port Kembla can carry heavier deferred maintenance. A buyers agent working these markets regularly cross-checks the capital works plan against the physical condition of the building, since a well-kept exterior doesn't always mean the fund itself is properly provisioned.
Frequently Asked Questions
Which fund pays for a special levy?
Special levies are usually raised to top up the capital works fund when a major cost is due sooner than the existing balance can cover, though in rarer cases they can also cover an administrative fund shortfall.
Is the capital works fund the same as the sinking fund?
Yes. Sinking fund is the older term used before the Strata Schemes Management Act 2015 renamed it the capital works fund — you'll still hear both used interchangeably.
Do first home buyers need to worry about this as much as investors?
Yes, arguably more — a first home buyer typically has less financial buffer for an unexpected special levy, so checking fund health before buying matters just as much as checking the building itself.
When can I see the fund balances before buying?
Ask your conveyancer to obtain a strata report as part of your due diligence, ideally before you exchange contracts or, for auction properties, before auction day.
Can a poorly funded capital works fund affect the sale price?
It can. If the report reveals an underfunded capital works account against known upcoming works, buyers sometimes use that to negotiate on price or walk away, particularly if the works are urgent.
Does a buyers agent check this for me?
A buyers agent can review the strata report and fund position alongside your conveyancer, flagging anything that looks underfunded or inconsistent with the building's condition before you commit.
If you're weighing up a strata purchase and want a second set of eyes on the fund position before you commit, we're happy to talk it through. Reach out any time — there's no pressure, just a straight conversation about what you're looking at.
