This article discusses why small owners corporations usually prepare special purpose financial reports instead of full Australian Accounting Standards reports such as annual financial statements.
Question: To comply with accounting standards, is a strata manager of a four-lot owners corporation required to prepare annual financial statements?
Answer: Most OCs prepare special purpose financial reports and do not need to follow Australian Accounting Standards.
In Australia, an owners corporation (OC), including a 4-unit OC in Victoria, is generally not required to prepare financial statements in accordance with Australian Accounting Standards, unless certain conditions apply.
1. Special Purpose vs General Purpose Reporting
- Special Purpose Financial Reports (SPFRs): Used when the entity is not publicly accountable and financial reports are intended only for a limited group of users (like the lot owners). (Think small four-unit blocks)
- General Purpose Financial Reports (GPFRs): Required when the entity is publicly accountable or there are users dependent on general purpose reports to make decisions. (Think Telstra or BHP Billiton)
2. Owners Corporation Context
- Most OCs prepare SPFRs, because:
- They are not publicly accountable.
- The users of the financial statements (e.g. lot owners) can request additional information if needed.
- The financials are usually prepared for internal use, AGM presentation, and compliance with the Owners Corporations Act 2006 (Vic).
- They are not publicly accountable.
3. Minimum Legal Requirements
- Under the Owners Corporations Act 2006 (Vic), financial statements must be:
- Presented at the AGM.
- Include an income and expenditure statement.
- Include a statement of financial position (assets and liabilities).
- Presented at the AGM.
4. As the peak body in Australia and New Zealand for the Strata Industry and Stakeholders, what does the Strata Community Association (SCA) say:
SCA Best practise: The OC must resolve that it is a non-reporting entity to support the preparation and use of special purpose financials reports to meet the information needs of members/ lot owners.
In summary: Most OCs prepare special purpose financial reports and do not need to follow Australian Accounting Standards.
The Knight ella@theknight.com.au P: 03 9509 3144 This post appears in the October 2025 edition of The VIC Strata Magazine.Have a question or something to add to the article? Leave a comment below.
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