Replacing the previous version from 2015, there are some VERY SIGNIFICANT CHANGES in this edition of the Trust Account Handbook. Last updated 29 November 2018, this is still hot off the press!
If you have not yet read the updated document, you can do so here:
We have taken the time to compare this guidance to the previous version and wanted to highlight to you the following significant changes. Please keep in mind that there are a number of items described in this handbook as 'recommended', 'suggested', 'should' or 'best practice'. In all cases, this should be interpreted as 'must do', even where it goes beyond the minimum requirements listed in the act.
The most significant changes are:
A new requirement for a consolidated trial balance if multiple trust accounting software is used
Updated guidance on trust account name best practice
Fees to be transferred to agent's general account at least weekly
Monthly bank reconciliation to be 'as at' close of business on the last day of the month
The following updated or changed requirements are extracted from the new handbook:
1:1 What is trust money?
Moneys collected by an agent for or on behalf of a strata company are also deemed to be [trust] moneys
Where multiple trust accounts are held, a consolidated set of accounts should also be maintained
1:4 What are the types of trust accounts?
When opening an interest bearing account for a client, the client should be advised to provide the bank with their tax file number to avoid tax being withheld at the top marginal rate.
1:5 Titling of trust accounts
Example account naming has been updated removing suggestion of including ABN, changing 'a/c' to 'account', and changing the order of the components.
If you have recently opened any new accounts, or if you have any accounts that have been open for a long time, now is a good time to make sure that your account name complies with the requirements.
1:11 What must an agent do on becoming aware that a trust account is overdrawn?
It is best practice for the agent to also notify the appointed auditor of the overdrawn amount.
1:12 Fees and disbursements
As best practice, fees should be transferred to the agent’s general account at least weekly but only after the agent is entitled to draw the fees.
2:1 Basic principles of trust accounting
accurate records are kept for all transactions and are written up by the end of the next business day;
unpresented trust cheques are followed up and presented as soon as practicable;
2:5 Balancing a trust account at the end of each month
The monthly trust account reconciliation must be:
as at the close of business of the last day of the month;
completed within 10 working days after the end of each month;
verified, signed and dated by the agent, or if the agent is a corporation, the person in bona fide control, even if there are no funds in the account; and
retained for auditing purposes.
2:6 Buffer account
Under no circumstances should agents maintain a surplus amount within the trust account to absorb any inadvertent deficiencies that may arise from dishonoured bank cheques or bank charges. Any bank fees or charges must be redirected to be drawn from the general trading account and must not be drawn from the trust account.
A buffer fund cannot be used to offset bank fees or for any other reason. Agents should regularly clear their commission or account fees to their general account. The Commissioner strongly recommends against the practice of retaining commissions and management fees in the trust account for an extended period of time.
The removal of these excess funds from the trust account is for the benefit of all parties. If an agent maintains a buffer in a trust account, they will not be aware when the trust account is overdrawn. This means they are less likely to identify poor trust account management practices or fraud by employees or unauthorised withdrawals by third parties. The person in bona fide control is responsible for checking each ledger account each month to determine if specific ledgers are overdrawn and to correct any errors.
4:3 What must an agent do on becoming aware of fraud or theft?
If an agent becomes aware that money has been stolen from the trust account, the agent must:
notify the Commissioner, advising the date on which the theft occurred, the amount involved, the reason for it and any action taken to correct it;
contact the auditor to conduct a special trust audit to attempt to quantify the amount of the misappropriation and possibly identify the culprit;
notify the police of the misappropriation of trust money and that a special audit is being conducted;
replace the misappropriated amount immediately; and
alert the agent’s professional indemnity insurer.
4:4 “Off-the-plan” properties
If an agent is appointed to sell properties “off-the-plan”, such as in a new subdivision, or a development yet to be built, the agent must comply with all of the relevant legislation. Particular attention should be paid to deposits and other moneys to be held in trust and when they can be released.
where the developer does not yet own the land, the seller, or developer, must warn buyers in writing that the developer does not own the land.
If there is no warning, or if time limits are not adhered to, the sales contract becomes illegal and void.
a deposit or other amount payable by a purchaser under a future lot contract must be paid to a deposit holder, such as a real estate agent, settlement agent or solicitor, and held in trust.
Real estate agents instructed by developers to act in the sale of “off-the-plan” units or land yet to be subdivided, must ensure that they comply with all of the relevant legislation, irrespective of instructions they might receive from their client or conditions which might be contained in the contracts for sale.