Casemore Valuation


Capital Works Fund Plan - sinking fund plan
Retrospective Valuations for Taxation Use and Capital Gains

Historic or retrospective valuations are often required, usually for Taxation purposes. These are typically to create a partition of value between owner occupancy and investment as of a certain date to assist in the calculation of Capital Gains Tax.

Capital Gains Tax Valuation report is used to help identify the capital increase or decrease of your property asset. A valuation can be conducted when a capital gains tax event occurs or you may choose to have a retrospective CGT valuation when you decide to sell the property.

The Capital Gains discount for foreign or temporary residents was abolished form 8th May, 2012. Those impacted must now meet eligibility conditions to apply for the CGT discount. Therefore a valuation for GST purposes as at this date confirms the value portion for which the CGT discount still applies to the benefit of the investor.

10 year capital work fund plans

From July 2009 all NSW Strata Schemes were required by law to have a 10-year capital work fund plan in place.

We receive many enquiries about 10-year capital work fund plans.

There are a combination of legislative provisions which are relevant. Section 75A of the Strata Schemes Management Act 1996 (“the Act”) explains the requirement to, and how to create a 10-year capital work fund plan. Section 75(4) of the Act provides:

 In estimating amounts to be credited to the sinking fund, an owners corporation that is required to prepare a plan under section 75A is to take into account anticipated major expenditure identified in the plan for the 10-year period to which the plan relates.” 

The interpretation of this section is pivotal in the determination of whether or not an owners corporation should have funds or raise funds in accordance with their plan.

A sinking fund is set up by the Owners Corporation typically to cover the costs of future capital expenses which include for example painting, common area carpets, roofing and guttering, lift overhaul etc. The Owners Corporation can prepare the plan or engage an outside expert, such as us, to have one prepared.

The report will list numerous items which require long term maintenance or full replacement. We then decide on a cyclical time frame for repair, maintenance or replacement of these items and produce a table with the annual contributions required.

In some instances the cyclical replacement of some items may be preferred by the owners earlier than a typical schedule. For example the Owners Corporation may have decided to replace the driveway or fencing completely in say 3 or 5 years. This is permissible, however all pending major works need to be notified to the valuer prior commencement of the plan so they can be installed in the schedule.

Whilst there are no penalties in the legislation for Owners’ Corporations who do not have a 10-year plan, it is widely considered a signature of a well-managed complex that is meeting its financial obligations.

Two Lot schemes that are physically detached buildings and no buildings are situated outside the Lots of the Scheme may be exempt from the requirements for a sinking fund plan if decided by a unanimous vote.

Rent Reviews

Why is there is a need for rental determination or rental review and is it very important? Your lease document will invariably describe the terms and mechanism for a rent review or lease option. Reading this is an essential first step to answering the question. Current leases will stipulate an experienced API Registered Valuer is required and thats we we are able to assist. We have full API registration and experience we can determine a fair market rent and assist you in such an important procedure. 

The lease document may spell out assumptions and basis of the valuation. For example the lease may give directions the valuer must follow, appropriate legislation e.g. Retail Leases Act, assumptions they should make, matters they must take into account, and matters they should disregard e.g. sometimes it is required to exclude from the review assessment the benefit of the tenants’ fit out.

Please feel free to call me direct (just click here to call from your smart phone). I would be pleased to share our wealth of knowledge when you need a valuation for capital gains tax or you need a capital works fund plan, Mark Casemore