The role of the treasurer in body corporate committees

November 4, 2024

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The treasurer of the body corporate often plays a leading role in the committee and the body corporate community. It is a volunteer position which can be very rewarding, but also can take a significant investment of time and effort from the member.

Owners who become elected as treasurer often come into the role with:

A professional financial or accounting background
A good understanding of numbers
A commitment to being an active participant in the committee governance
Sometimes – just because no other owners put their hand up for the job

Even though the role typically attracts individuals with a particular skill or passion for numbers, there are no prerequisites for the job. Every building needs a treasurer, and every treasurer has a first time in the role.

What does the role involve?

Under the law, the body corporate must elect a treasurer, but the treasurer does not have any specific duties.

The body corporate, however, has strict duties about its financial management including:

Operating bank account/s in the name of the body corporate
Preparing annual budgets for each fund type
Forecasting future capital costs
Calculating and issuing levies
Monitoring the balance of every lot at all times
Issuing information certificates upon request
Maintaining a balance sheet
Maintaining income and expenditure statements for each fund
Ensuring no transfers occur between fund types
Calculating and applying levy discount
Calculating and applying penalty interest
Recovering overdue levies
Calculating and recovering levy recovery costs
Processing incoming payments
Approving outgoing payments
Paying creditors
Recording contracts
Providing financial statements to owners annually
Providing levy statements to owners upon request
Accounting for GST (if GST registered)
Lodging business activity statements (BAS)
Maintaining an ABN
Appointing a public officer for ATO purposes
Accounting for mutual and non-mutual income types
Advising owners about non-mutual income entitlements
Recovering insurance premium contributions from owners
Lodging an income tax return
Investing surplus funds in the way a trustee may invest funds
Keeping and making available records for audit
Operating an embedded cost recovery system for bulk utilities
Administering optional or opt-in
Mutually funded projects

These requirements must be managed by the body corporate committee, but not specifically by the treasurer. That said, the treasurer generally takes a supervisory and reporting role on these functions.

Tips for an effective treasurer

1. Use your body corporate manager

The treasurer’s duties are heavily supported by the body corporate manager. With the increasing size, complexity, and sophistication of strata communities, it would be impossible for a volunteer treasurer to properly administer all the financial functions of a body corporate without this assistance. In the 1990s it was rare for a body corporate to operate beyond a group of 6 apartments. Now, it is increasingly common to operate annual budgets in excess of $1 million.

BCsystems has a professional accounting department, in conjunction with the individual body corporate manager, to assist the treasurer and the committee manage the accounting functions.

2. Track spending

To ensure the body corporate accurately pays for completed work, it is best practice for the treasurer to approve all outgoing creditor payments. Given their ‘on the ground’ knowledge of the scheme’s activities, the treasurer should verify that the work has been completed before authorising payment. GST considerations can easily be managed by the body corporate manager’s accounting team.

The treasurer also typically collaborates with the caretaker or building manager to approve payments. This process can be streamlined using an online invoice approval system, which allows authorized personnel to review and approve invoices before payment.

BCsystems offers a flexible, free system that includes:

Single and multi-step approvals
Online viewing of PDF invoices
Online access to completed data entry
Online access to expense account codes
A 3-month history of approved invoices

Reviewing and approving each invoice before payment provides a better understanding of the body corporate’s financial statements and insights into its expenses.

3. Understand incomes

A body corporate generally has multiple income sources, all with different taxation streams and all reported separately.

Levy income
This is the primary funding for every body corporate. Levies are set and collected from each lot owner. This is considered ‘mutual income’ – where a number of people contribute to a common fund, created and controlled by them for a common purpose. It is not considered taxable income or ‘profit’. Levy income is reported on an accrual basis, with any levy arrears or levy pre-payments by owners shown as assets on the balance sheet.

Investment income
Most bodies corporate have one or more term deposit income streams. Income generated from term deposit is considered ‘non-mutual income’ derived from a body corporate asset (money). This is reportable tax income for the body corporate.

Other income
The increasing sophistication of body corporate schemes means income sources are also increasingly diversified. While a body corporate is legally barred from conducting business activities as a substantial function, it is entitled to receive other income to offset body corporate expenses.

These can include:

Exclusive use payments by benefiting lot owners
Lease fees from a telephone tower on the roof of the building
Lease fees from a sea-bed or marina lease
Transfer fee arising from the sale of caretaker/management rights
Payment for resumed land, for example road-widening or tunnel construction
Payment to operate equipment, for example communal washing machines
Other income types, excluding fixed costs such as lease fees, are generally reported on a cash basis.

4. Give owners confidence

Managing the finances of a body corporate can be complex. While the body corporate is required to provide owners with annual financial statements, this alone often falls short of effectively conveying your goals, priorities, and challenges.

Treasurers can make a difference by:

Including a cover note about the financials, budgets, and levies with the AGM papers
Make insightful comments at the AGM for the attending owners

This doesn’t have to be a daunting task – be diligent and keep updated with the finances throughout the year. Your body corporate manager can also help in preparing for this.

From our experience, owners are more likely to accept budgets and levies when they understand that thoughtful consideration and effort have gone into setting them, rather than seeing it as an arbitrary decision.

5. Don't worry about levy arrears

Body corporate legislation is very specific about levy collection, including:

The required number of days for distributing levy notices
The interval between notice distribution and the levy due date
Penalties for late payments
Interest accrual on late payments, including:
The method of interest accrual
Maximum interest rates
Daily interest calculations
The order of applying payments to debts
The maximum timeframe before initiating legal debt collection

With over 30 years of experience, BCsystems has an effective and robust process to ensure that more than 99% of levy arrears are recovered. This makes it rare for any debt to escalate to a solicitor.

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