Strata Trust Accounts in NSW: Why Class 1 Oversight Matters

How Sydney owners corporations can protect levies, payments and capital works funds

When owners pay levies, they are placing real trust in their strata manager

When an owner pays a quarterly levy, the transaction can look routine. A notice arrives, money is transferred and the amount appears in the scheme's accounts. But those payments are not ordinary business revenue. They are owners corporation funds collected for specific shared purposes: keeping the building operating, paying contractors and insurance, meeting statutory obligations and preparing for future repairs.

Across Sydney's Eastern Suburbs, Inner West and Lower North Shore, those collective balances can become substantial. A boutique six-lot Art Deco block in Randwick may be building reserves for roofing, windows or waterproofing. A coastal apartment building in Bondi, Bronte, Coogee or Maroubra may be planning for corrosion, façade repairs, concrete spalling or balcony remediation. A larger scheme in North Sydney, Neutral Bay, Kirribilli, Cremorne or Mosman may be funding lifts, fire systems, access control, mechanical services and major capital works.

The amounts vary, but the principle does not: this money belongs to the owners corporation. It must be accurately recorded, protected and used only with proper authority. That is why I believe committees should look beyond a management fee or sales presentation and ask who carries responsibility for the financial systems behind the service.

I have worked in property since 1992 and have operated an independent boutique agency since 2008. Experience has taught me that trust is not created by saying the right words. It is built through controls, records, supervision, transparent reporting and a willingness to remain personally accountable when decisions involve other people's money.

What a strata trust account actually means

The phrase 'strata trust account' is often used broadly, so it is worth being precise. Under the Property and Stock Agents framework, licensed agents who receive client money may be required to hold it in a regulated trust account. An owners corporation may also have accounts established in its own name under strata legislation. The exact banking arrangement matters because different authorisation rules can apply.

For agency trust accounts, the NSW Government's trust-account guidance explains that client funds cannot be used for another purpose and must be disbursed as the client directs. It also distinguishes a general agency trust account from separate accounts opened for strata plans or accounts established by owners corporations.

For an owner or committee member, the practical point is simple: the strata manager should be able to explain where the scheme's money is held, how the scheme is identified in the accounting records, who can authorise withdrawals, what evidence supports a payment and how the balances are reconciled and reported.

A professional answer should not be vague. It should connect the legal structure with the agency's day-to-day procedures. Good systems make it possible to trace levy income, invoices, approvals, payments and fund balances. They also make it easier for the committee to understand the scheme's financial position before approving a budget or major project.

Administrative funds and capital works funds are not interchangeable

Every Sydney building has its own financial rhythm. The administrative fund generally supports recurring expenses such as cleaning, gardening, utilities, routine repairs and ongoing services. The capital works fund supports major renewal and replacement over time. NSW guidance explains that levies are set at the AGM and paid into different funds covering administration, building costs and planned works. See NSW Government guidance on levies, finances and insurance.

The distinction matters. A healthy bank balance does not automatically mean the scheme is well funded if money that should be reserved for a future roof, lift or façade project is being consumed by recurring operating costs. Equally, an administrative fund that is set too low can create cash-flow pressure, delayed invoices and an avoidable special levy.

In older walk-up buildings across Coogee, Randwick, Waverley and the Inner West, capital planning may involve roofs, stormwater, brickwork, windows, timber structures and waterproofing. Around Bondi and Maroubra, salt exposure can accelerate deterioration. In North Sydney and the Lower North Shore, complex plant and vertical transport can make future expenditure both significant and technically demanding.

A good strata manager should help the committee read the numbers in the context of the physical building. Trust accounting protects the money; thoughtful budgeting helps ensure it is collected and allocated for the right reasons. The two disciplines work together.

Why Class 1 status matters - and what it does not mean

In NSW there are Class 1 and Class 2 strata managing agent licences. The NSW Government's strata managing agent licence guide describes Class 1 as the higher licence level. A Class 1 holder can perform all strata managing agent functions, work independently and be nominated as a licensee in charge of a business.

Class 2 strata managers can perform important management work. The difference is not that every task must be personally completed by a Class 1 principal. A well-run agency depends on capable managers, accountants and administrators working within clear roles. The distinction is that only an appropriately appointed Class 1 licensee can carry the licence-in-charge responsibility and, for an agency trust account, authorise withdrawals.

I describe my Class 1 status as a responsibility rather than a badge. It means supervision cannot be passive. Policies must exist, staff must understand them and financial processes must be monitored. When money is released, there must be a defensible basis for that payment and a record of the authority behind it.

A licence is not, by itself, proof that a business provides excellent service. Owners should still ask about systems, capacity, transparency and communication. But knowing who the Class 1 principal and licensee in charge is gives a committee a clear point of senior accountability.

The licensee in charge cannot treat payment approval as a rubber stamp

The NSW Government's guidance for licensees in charge states that only the licensee in charge may authorise withdrawals from an agency trust account. The licensee in charge must approve each specific release and cannot delegate the authorisation itself. Another person may physically process an electronic transfer, but only after written authorisation has been given.

That is an important distinction. Administration can be shared; accountability for authorisation cannot simply disappear into a team inbox. A sound process should enable the authorised person to understand which scheme is paying, who is being paid, what the invoice relates to, whether the work or service was approved, whether the amount is correct and whether there are any unusual details requiring further enquiry.

This matters especially when a Sydney scheme is undertaking remedial work. A balcony, roof or façade project may involve consultants, staged contractor claims, variations and retention amounts. Payment should follow the agreed process and evidence, not merely the arrival of an invoice. The same principle applies to ordinary expenditure: recurring invoices deserve controls too.

At principal level, I see oversight as the discipline of pausing when something does not look right. A changed supplier bank account, duplicate invoice, unfamiliar contractor, unexplained variation or payment outside an approved budget should prompt verification. Technology can speed up processing, but it does not replace professional judgement.

Financial records should tell a coherent story

Strong trust accounting is more than keeping the bank balance correct. The accounting records should tell a coherent story from the levy decision through to collection, allocation, invoice approval, payment and financial reporting.

NSW Government record-keeping guidance for strata schemes explains that annual financial statements must be prepared for administrative and capital works funds. They include incoming payments, expenditure, required levy contributions, outstanding levies, cash and overall fund balances. Invoices and receipts must also be retained.

For a committee, readable reports make better decisions possible. Members should be able to compare actual expenditure with the approved budget, see arrears, understand cash available, identify unpaid invoices and consider whether forecast contributions remain adequate. Reports should not require an accounting qualification to interpret.

Clarity becomes particularly important when a building is facing a major decision. A committee in Marrickville considering roof replacement, a Bondi scheme investigating concrete repairs or a Neutral Bay building reviewing a lift proposal needs current, reliable information. Without it, even a sensible maintenance recommendation can become difficult to fund or explain to owners.

Annual audits are a safeguard, not a substitute for daily discipline

Agency trust accounts are subject to audit requirements. NSW Government guidance states that the audit period ends on 30 June and the audit is due by 30 September. It also makes clear that the licensee remains responsible for ensuring the auditor's report is lodged correctly and on time.

An independent audit is an important safeguard, but it is retrospective. It does not replace daily checking, documented authority, accurate data entry, timely reconciliations or sensible separation of duties. Good governance has to operate every week of the year, not only when records are prepared for an auditor.

Committees should feel comfortable asking whether the agency's trust account is independently audited and whether any issues were identified. They can also ask how the agency handles reconciliations, unusual payments, supplier-detail changes and staff access. These are reasonable questions when the business may be managing many owners corporations and substantial collective funds.

In my view, a professional strata company should welcome informed questions. Transparency is not a threat to a well-run business; it is part of the service.

A recent NSW enforcement case shows why owners are asking harder questions

Trust-account obligations are not theoretical. In January 2026, NSW Fair Trading announced the disqualification of a strata agent following findings involving approximately $2 million taken from strata customers. The NSW Government enforcement release emphasised that strata funds must only be used as the owners corporation directs and that licensees in charge will be held accountable for reviewing and approving transactions.

I do not raise that case to suggest misconduct is common or to alarm owners. Most professionals in our industry take their obligations seriously. I raise it because the consequences for affected schemes can be profound, and because it demonstrates why committees should treat financial oversight as a central selection criterion rather than an administrative detail.

A low management fee cannot compensate for weak financial controls. A large brand name does not remove the need to know who is accountable. Equally, a boutique agency must show that personal service is supported by disciplined systems. Every provider should be assessed on evidence, not assumptions.

The best response to concern is practical due diligence: understand the banking arrangement, verify licences, read the agency agreement, review the proposed fees and authorities, ask about payment controls and insist on meaningful reporting.

Sydney buildings make financial stewardship especially important

Sydney strata is intensely local. Two schemes a few streets apart can have different construction, age, exposure, service contracts and risk profiles. That is why trust-fund management should not be separated from knowledge of the building.

In the Eastern Suburbs, we regularly see boutique blocks where a relatively small group of owners must fund significant work. An unexpected waterproofing or balcony project can place real pressure on household budgets. Coastal exposure around Bondi, Bronte, Coogee and Maroubra can bring forward façade, metalwork and concrete maintenance. Heritage character in parts of Randwick, Woollahra and Paddington can add complexity to repair planning.

Across the Inner West, converted warehouses, terraces within strata schemes and older brick apartment buildings can present their own mix of roofing, drainage, fire-safety, access and shared-service issues. In the Lower North Shore, high land values do not guarantee healthy scheme finances. Older towers and larger apartment communities may face expensive lift, façade, fire, plumbing and mechanical projects.

These local realities affect budgets and reserves. They also affect the quality of financial conversations a committee needs from its manager. Owners deserve more than a balance on a page; they need a clear explanation of what the money must achieve for their particular property.

What transparent financial management looks like in practice

Transparent management does not mean every owner approves every invoice. The owners corporation and committee make decisions within the framework of the legislation, delegations, approved budget and agency agreement. The manager then administers those instructions and reports clearly on what occurred.

In practice, I believe committees should expect several fundamentals:

Scheme money is clearly identified and accounted for.

Payments are supported by invoices or other appropriate records.

Authority and spending limits are understood and followed.

Supplier bank-detail changes are independently verified before payment.

Administrative and capital works fund transactions are correctly allocated.

Financial statements are produced regularly and explained when required.

Levy arrears, unpaid accounts and cash-flow concerns are brought to the committee's attention.

Fees, commissions and conflicts are disclosed clearly.

The committee knows who carries licence-in-charge responsibility.

Questions every Sydney strata committee should ask a prospective manager

When a committee seeks a new strata manager, it often concentrates on the annual fee, meeting allowance and response times. Those questions matter, but financial governance deserves equal prominence. I recommend asking:

Who is the nominated Class 1 licensee in charge for the strata business?

Where will our scheme's funds be held, and in whose name?

Who can authorise withdrawals and who can physically process payments?

What evidence and approvals are checked before an invoice is paid?

How are new contractors and changes to supplier bank details verified?

How often are accounts reconciled and financial reports produced?

Is the relevant agency trust account independently audited each year?

How are administrative and capital works fund transactions separated in the records?

What access will the committee have to invoices, statements and scheme records?

Does the agency receive insurance commissions, referral fees or other benefits?

What happens if the committee questions or disputes a proposed payment?

How are records and funds transferred if the owners corporation changes managers?

Why independence and owner-led accountability matter to me

Ellouise Tyrrell Strata Management is locally based in Coogee and independently owned and operated. I value the fact that clients know who is responsible for the business and can reach senior leadership when an issue requires attention.

Our Sydney service extends across the Eastern Suburbs, Inner West and Lower North Shore. We work with buildings of different sizes rather than forcing every scheme into the same model. That local and owner-led approach shapes how I think about financial responsibility: a trust ledger may contain numbers, but behind those numbers are real buildings, real maintenance needs and owners making real household decisions.

We do not receive insurance commissions. For me, transparency around remuneration is part of financial trust. Committees should understand what their strata company is paid, what routine services are included and what additional services may attract a separate fee. The signed management agreement should make those arrangements clear.

Good strata management is collaborative. The owners corporation remains the decision-maker and the committee provides direction within its authority. Our role is to provide reliable administration, experienced advice, disciplined financial management and the records that allow decisions to be understood and defended.

Warning signs a committee should not ignore

Most accounting questions have an ordinary explanation. A delayed allocation, timing difference or coding error does not automatically indicate serious wrongdoing. What matters is whether the manager investigates promptly, explains clearly and corrects the record where necessary.

Committees should nevertheless pay attention when financial information is repeatedly late, balances cannot be explained, invoices are missing, contractors appear unfamiliar, payments do not align with approvals, supplier details change without verification or requests for records are persistently avoided.

NSW Government guidance notes that strata managers are licensed, must act in accordance with lawful owners corporation instructions and are bound by rules of conduct. It also outlines avenues for raising concerns with the manager, the committee, the licensee in charge and NSW Fair Trading. See complaints about a strata or building manager.

The aim should be early clarification, not accusation. A committee that regularly reviews reports and asks sensible questions is more likely to identify a minor problem before it becomes a major one.

Trust is built before the first levy is collected

The right time to understand a strata company's financial controls is before appointment. Read the proposed agency agreement. Identify the delegated functions and spending limits. Review additional fees and disclosures. Confirm the licence details. Ask who supervises the people performing the work.

Price remains relevant, but the cheapest proposal may not represent the lowest risk or the best value. Conversely, a higher fee does not automatically prove stronger governance. Committees should compare the substance of the service: capacity, systems, senior oversight, reporting, local knowledge and transparency.

For a small building in Coogee or Randwick, this can mean confidence that every levy contribution is being accounted for and future repairs are not being overlooked. For a larger scheme in North Sydney or Mosman, it can mean robust controls around a high volume of invoices and major contracts. For an Inner West building entering remedial work, it can mean clear tracking of approvals, claims and variations.

Trust begins with the questions a committee is willing to ask and the quality of the answers it receives.

My responsibility as a Class 1 principal

As a Class 1 principal, I do not view owners corporation funds as an abstract pool of money. They represent contributions made by individual owners for the care, compliance and future of their shared property.

My responsibility is to support systems that respect that purpose: capable staff, documented procedures, lawful authority, clear records and appropriate review. It is also to create a culture in which questions are raised rather than suppressed and mistakes are addressed rather than hidden.

The phrase 'trust account' is well chosen. The law creates formal duties, but the relationship also depends on everyday trust between the owners corporation, committee, manager and principal. That trust is earned through consistent conduct.

If your Sydney owners corporation is reviewing its current management or considering a change, ask about the people and controls behind the proposal. Your scheme's finances support the building today and determine how well it can respond tomorrow. They deserve experienced oversight, transparent reporting and genuine accountability.

Frequently asked questions

1. What is a strata trust account?

It is an account used to hold money on behalf of clients or a strata scheme under a regulated arrangement. The precise structure may be an agency trust account, a separate account for a strata plan or an account established in the owners corporation's own name. The manager should explain which arrangement applies and how the scheme's money is identified and controlled.

2. Is the administrative fund the same as a trust account?

No. The administrative fund describes the purpose of owners corporation money used for recurring expenses. A trust account describes a legal banking and custody arrangement. Administrative and capital works fund balances must be recorded correctly within the scheme's financial accounts, regardless of the applicable banking structure.

3. Who can authorise withdrawals from an agency trust account in NSW?

Only a Class 1 agent currently appointed as the licensee in charge may authorise withdrawals from an agency trust account. The authorisation cannot be delegated, although another staff member may physically process an electronic transfer after receiving the required written authority.

4. What is the difference between a Class 1 and Class 2 strata manager?

Both licence classes can perform strata management functions. Class 1 is the higher licence level and allows the holder to work independently and be appointed as a licensee in charge. A Class 2 holder cannot be the licensee in charge or independently authorise trust-account withdrawals.

5. Are strata agency trust accounts audited?

Licensed agents who receive or hold trust money are generally subject to annual trust-account audit requirements. The standard audit period ends on 30 June and the report is due by 30 September. Committees can ask a prospective manager to explain the audit arrangements relevant to the proposed banking structure.

6. What financial reports should an owners corporation receive?

The scheme must prepare annual financial statements for its administrative and capital works funds. Good ongoing reporting should also help the committee understand income, expenditure, cash balances, levy arrears, unpaid accounts, budget performance and the position of each fund.

7. Can a strata committee ask to see invoices and financial records?

Yes. Financial records, invoices and receipts form part of the owners corporation's records. Access and inspection must follow the applicable strata legislation and processes, but a manager should provide committees with meaningful information needed to oversee the scheme.

8. Why does local Sydney experience matter to financial management?

Budgets need to reflect the actual building. Coastal exposure in Bondi or Coogee, older brick buildings in Randwick or Marrickville, and lifts or complex services in North Sydney or Neutral Bay create different capital needs. Local experience helps connect financial planning with realistic maintenance risks.

9. What should we request when comparing Sydney strata managers?

Ask for a clear proposal and draft agency agreement, licence and licensee-in-charge details, trust-account and audit information, payment-approval controls, reporting arrangements, insurance commission disclosures, staffing support and a transparent schedule of routine and additional fees.

Authoritative sources

NSW Government - Strata managing agent licence

NSW Government - Licensee in charge responsibilities

NSW Government - Trust accounts and audit requirements

NSW Government - Strata levies, finances and insurance

NSW Government - Strata record-keeping requirements

NSW Government - Complaints about strata and building managers

NSW Government - January 2026 trust-account enforcement release

NSW Legislation - Property and Stock Agents Act 2002

NSW Legislation - Property and Stock Agents Regulation 2022

NSW Legislation - Strata Schemes Management Act 2015

Publication note

This article provides general information current at September 2026 and is not legal, accounting or financial advice. The applicable banking arrangements, delegations and agency agreement should be reviewed for each scheme. As this article is written in the first person, Ellouise Tyrrell should review and approve it before publication.

ETPG | ELLOUISE TYRRELL STRATA MANAGEMENT • SYDNEY