ARCHERS - connecting strata communities

When the Howard Government introduced GST on 1^st July 2000 its effects were wide ranging and felt by many.  

The Body Corporate industry was not immune and to this day the majority of schemes continue to lodge BAS every quarter.

A recent issue that has been brought to our attention is regarding a body corporate's insurance valuations. Many schemes are still deducting the GST from the building insurance in the belief that it is fully recoverable, or never payable. This poses serious problems in the event of a major or total loss.

To give you an example:

Say your building is registered for GST purposes and its replacement cost, including GST, is $11 million - if your scheme has reduced its building value by the GST so the maximum payout is only $10 million and a total loss occurs, the insurer can again reduce the $10 million by the GST proportion, resulting in a payoutt figure of $9.09 million. The resulting shortfall of the required building costs of $1.91 million, which will need to be raised by owners, could have been avoided if the scheme was properly insured.

Another consideration is whether the building sum insured was adjusted following the introduction of GST. If the building sum insured was not adjusted at this stage then some schemes, if they have not had a subsequent valuation conducted, could find they are grossly underinsured.

To help eliminate inadequate insurance cover, in 2008 the QLD Government introduced changes to the Body Corporate and Community Management Act which require a body corporate to have an insurance valuation carried out a minimum of every 5 years. Archers have implemented procedures to ensure that all schemes under their management comply.

If you worried that your scheme may be underinsured we would recommend you obtain a valuation by a licensed quantity surveyor. Archers has a licensed quantity surveyor on staff to provide you with an accurate and independent valuation. 

To obtain a quotation please contact your local Archers office