The five tiers of Victorian owners corporations, explained

Since 1 December 2021, owners corporations in Victoria have been divided into five tiers under the Owners Corporations Act 2006. The tier decides how much formality the owners corporation has to apply to its committee, its financial reporting and its maintenance planning — and it replaced the older concept of a ‘prescribed’ owners corporation.

How a tier is decided

A tier is set by reference to the number of lots in the subdivision and the fees the owners corporation levies in a financial year. The Act sets the bands, and they are reviewed from time to time — so the reliable figure is the current one in the Act, not a number remembered from a management proposal. Two owners corporations in identical buildings can sit in different tiers if they levy different amounts.

What tiers 1 to 3 must do

• Elect a committee at the annual general meeting. Committees must have at least three and no more than seven members unless the owners corporation resolves to allow up to 12.
• Prepare annual financial statements in accordance with the Australian Accounting Standards and present them at the annual general meeting.

What Tier 1 adds

• An audit. Tier 1 owners corporations must have their annual financial statements audited by a registered or authorised auditor, or an accredited accountant.
• A manager. Tier 1 owners corporations must appoint a manager unless they opt out by special resolution. The other tiers may appoint one, but are not required to.

What tiers 4 and 5 must do

Electing a committee is optional. Tier 4 owners corporations must prepare annual financial statements for any financial year in which they levy annual fees; the smallest owners corporations carry the lightest obligations, which is the point of the structure.

Why a small block should still care

Because two things move in opposite directions as an owners corporation grows. The obligations get heavier — more reporting, an audit, a compulsory manager — but so does the building: more lots, more shared services, more ways for a small committee to be out of its depth. Knowing the tier tells a committee what the Act expects of it, and gives owners a benchmark for what they should be receiving from their committee and their manager.

What committees should check

• Which tier the owners corporation is in, and whether that has been re-tested as the building has grown.
• Whether the financial statements are being prepared to the right standard, and whether an audit is required.
• Whether the committee has been properly elected, and its size is within the limits.
• Whether the maintenance plan is current and costed — the tier system ties plans and funds together.

Where to go next

The underlying definitions — committee, annual general meeting, special resolution, lot liability — are in our owners corporation glossary, with links to the regulator’s guidance. The shorter version of these questions is answered on resources.