All real estate agents must have a trust account for holding money received from clients.
Trust account requirements vary from state to state, but if you hold a license in Victoria, then any trust accounts must be set up and maintained in accordance with the:
- Estate Agent Act 1980 (‘the Act’); and
- Estate Agents (General, Accounts and Audit) Regulations 2008 (‘the Regulations’).
Consumer Affairs Victoria are responsible for administering this Act and Regulations. They can inspect any trust account records and are responsible for imposing penalties for any breaches of the law.
Auditing Trust Accounts
If you hold a trust account you are required to have the account audited each year:
- Within three months after 30 June;
- By an approved auditor; and
- Using the audit report form approved by Consumer Affairs Victoria
This means, that your annual audit deadline is looming fast and must be completed by the 30th September. An agent must lodge a copy of the audit report with Consumer Affairs Victoria within 10 business days of receiving it from the auditor.
The Audit Process
An auditor is required to issue an opinion on whether or not the licensed estate agent has, in all material respects, maintained the Trust Account(s) in compliance with sections 63 and 64 of the Act and the Regulations for the period.
A trust account audit typically involves reviewing trust accounting records along with relevant sales and rental files documents to ensure compliance with the above. An audit should not be viewed as merely a compliance task, but an opportunity for the agent to discuss any areas for process improvement in relation to the operation of their trust account and compliance with the trust accounting requirements.
If there have been any deficiencies in a trust account or trust ledger, an agent is required to notify Consumer Affairs Victoria and their auditor within three business days of becoming aware of it (unless accidental, or an error caused by the financial institution AND it was rectified within two business days of becoming aware of it). Timely disclosure and communication is the key to ensuring a smooth and effective audit.
If you need assistance with establishing or operating a trust account, or require an audit of your trust account, please contact the Davidsons Team on 03 5221 6399 or email us at firstname.lastname@example.org for more information.
Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.