Under changes to the Owners Corporations Act 2006, which came into effect on 1 December 2021, a five-tiered system replaced prescribed owners corporations - ones that levy fees of more than $200,000 in a financial year or consist of more than 100 lots.
Under the tiered system, larger owners corporations will be subject to more stringent regulations than smaller owners corporations.
The five tiers
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Tier
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Definition
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1
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More than 100 occupiable lots (and not ‘services only’)
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2
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51 to 100 occupiable lots (and not services only’)
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3
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10 to 50 occupiable lots (and not services only)
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4
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3 to 9 occupiable lots (and not a services only)
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5
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Two lot subdivision or services only
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A services only owners corporation means an owners corporation for a subdivision that has no land or building that is designated as the common property and either—
- the initial owner of the subdivision has arranged for a utility company to install common meters that are designated as the common property; or
- the subdivision has a common supply or common service that is unmetered;
How the tier system works
The tiered system establishes different requirements for committees, financial reporting and maintenances plans, depending on the size and nature of the owners corporation.
Committees
Tier 1, 2 and 3 owners corporations must elect a committee at the annual general meeting. Tier 4 and 5 owners corporations may choose to elect a committee.
Owners corporation committees must have at least three, but not more than seven members, unless the owners corporation resolves to increase the committee to a maximum of 12 members, through an ordinary resolution.
Members of committees and sub-committees also have new duties to:
- act honestly and in good faith
- exercise due care and diligence
- act in the interests of the owners corporations when performing their function
- not make improper use of their position to gain a direct or indirect advantage for themselves or anyone else.
Owners corporation manager
Tier 1 owners corporations must appoint a manager, unless it opts out by special resolution.
Tier 2, 3, 4 and 5 owners corporations may choose to have a manager, but it is not compulsory.
Financial statements
Tier 1, 2 and 3 owners corporations must prepare annual financial statements in accordance with the Australian Accounting Standards and present them at their annual general meeting.
Tier 4 owners corporations must prepare annual financial statements for any financial year in which they levy annual fees.
Annual financial statements prepared under this section may be either general purpose financial reports or special purpose financial reports as defined by the Australian Accounting Standards Board.
Audits of financial statements
At the end of each financial year:
- tier 1 owners corporations must have their financial statements audited by a registered or authorised auditor, or an accredited accountant.
- tier 2 owners corporations must have their financial statements reviewed by an independent person who is a member of CPA Australia, the Institute of Public Accountants or Chartered Accountants Australia and New Zealand.
Tier 3, 4 and 5 owners corporations may choose to have their financial statements audited by either method.
A written report of the audit or review must be provided to the owners corporations. A review or audit cannot be conducted by someone with a direct or indirect personal or financial interest in the owners corporation.
Maintenance plans and funds
Tier 1 and tier 2 owners corporations must prepare and approve a maintenance plan.
Tier 1 owners corporations must prepare and approve a plan by 1 December 2022, while tier 2 owners corporations have until 1 December 2023.
Tier 3,4 and 5 owners corporations may choose to prepare and approve a maintenance plan, but it is not compulsory.
Maintenance plans can be amended by the owners corporations by an ordinary resolution.