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NSW Real Estate Trust accounts and audit requirements (due soon by 30 September 2023)


Real Estate Trust Accounts

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Payment of trust money into a trust account

Licensees under the Property and Stock Agents Act 2002 (the Act) must hold clients’ funds in a trust account.


Those funds cannot be used for any purpose other than for that client and must be disbursed as the client directs.


‘General’ trust accounts should not be confused with ‘Separate’ trust accounts opened on behalf of vendor/purchaser or strata plans or established by the owner's corporation of a strata scheme as required under the Strata Schemes Management Act 2015.


Licensees in charge to authorise trust account withdrawals.

Only a licensee in charge (LIC) of a business may authorise trust account withdrawals from a trust account.


This means that LICs are responsible for reviewing and approving all transactions for the trust account before they occur, including electronic fund transfers and payment of trust money by cheque.


There can also only be one LIC who is able to authorise withdrawals for a trust account.


Trust account audit requirements

Licensees' records in relation to the handling of trust money must be audited.


Who is required to have their trust accounts audited?

The following people must have their trust accounts audited if they received or held trust money during the financial year ending 30 June:

  • a licensee (corporation or individual)

  • a former licensee (corporation or individual), or

  • a personal representative of a licensee.

Generally, for licensed corporations, it is the corporation that receives and is responsible for trust funds and not an individual licensee. In these cases, the corporation must ensure the trust account audit takes place. However, if an individual licensee receives and is responsible for trust money, then they must ensure the trust account audit is done.


Who is required to submit an audit?

All trust account audits must be completed and submitted online by the auditor through the Auditor’s Report Online portal.


Audit lodgement deadlines

Audits for the year ending 30 June 2023 need to be lodged with Fair Trading by 30 September 2023.


Key dates

Submission details

​1 July 2023

  • Auditor's Report Online portal opens

  • Auditors can begin to invite clients and submit audits

1 July - 30 September 2023

On time audit submissions

1 October - 31 December 2023

  • All audits submitted during this period are classified as late, except with pre-approval

  • Fines may be imposed

1 January 2024

  • ​Auditor's Report Online portal closes for the year

  • No audits can be submitted online

Common questions in Real Estate Trust Audit

Q1: What if the trust account has ‘nil transaction’ but still has a balance for the audit period?


A: You must still complete an audit. The Act requires that all trust accounts that holds any monies during the audit period must be audited.

 

Q2: Does the Licensee entity maintain any trust System Controls records by means of a computer system?


A: It is not compulsory for licensee to use a computer software for trust accounting. Manual accounting system is only acceptable if the records are kept in accordance with the legislation. If Non-compliant computer software for trust accounting is used, breach recorded.

 

Q3: Does the Licensee Entity prepare monthly reconciliations and reviewed by the license in charge?


A: A licensee must, within 21 days after the end of each named month, prepare a trial balance statement of all ledger accounts current as at the end of that month.

 

Q4: Have all debit balances identified in the trust account, been notified to NSW Fair Trading within five (5) days of the licensee becoming aware of the overdraft?


A: Any debit balances or apparent deficiencies that were identified should have been rectified, and the corrections should be reflected in the bank statement, and documents illustrating how the debit balances were rectified.

 

Q5: What if a rental bond is lodged directly with the landlord or their agent instead of Fair Trading?


A: It may raise concerns about transparency and the security of the tenant's deposit. the agent remitted all bonds received to NSW Fair Trading within 10 working days after the end of the month.

 

Q6: Are there the required written procedures, checklist/s or review system in place?


A: Written processes are critical to put in place to ensure that tasks are carried out consistently and correctly.


Obtaining the Audit Report

From 2019, Audit Reports must be lodged using Auditor’s Report Online. Do not use the Auditor’s Report form obtained from the NSW Fair Trading website in previous years.


 

We are a professional accounting firm offering expert services in this domain. For any queries or assistance, please feel free to reach out to us. Your trust account management and compliance are of paramount importance; ensure you're well-prepared.


Our Audit & Assurance Team:

Eric Wang











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