In keeping with our philosophy of providing information and advice to resident managers, property managers, licensees and real estate agents in our busy Industry, I spoke to Paul Gaffney of The MBA Partnership about the ‘ins-and-outs’ of trust accounts and auditing.
As you may be aware, in Queensland there are laws to protect how money is received by property agents and management rights licensees, and these agents must maintain their trust account in accordance with the following Acts and Regulations:
Paul admits to being asked these recurring questions on a regular basis:
Q: What is trust money?
Rental payments received on behalf of another person or deposits received on behalf of another person for the sale of a property.
Q: Who can operate a trust account?
A resident letting agent or a principal agent of a business who holds a full real estate licence. This licence is issued by the Office of Fair Trading (OFT).
Q: What words must be included in the name of the trust account?
You must include the words “Trust Account” in the account name.
Q: Who must notify the Office of Fair Trading of the opening or closure of a trust account?
Within two months (60 days) of the opening or closure of a trust account the agent must complete an Agents Financial Administration (Form 5) and lodge it with the OFT. Your auditor may also do this on your behalf.
Q: Do you have to appoint an auditor after the opening a trust account?
The agent must give written notice of the appointment of an auditor within one month (30 days) of the opening of the trust account. The notice must include the auditor’s name and address and provide evidence that the auditor has accepted the appointment.
Q: If an agent’s auditor resigns or the agent ends the appointment of the auditor what must be done?
Both the agent and the auditor must give written notice to the OFT immediately and the agent must engage a new auditor if the trust account is still operational.
Q: When should the end of month cash book reconciliation be completed?
At the end of each calendar month, the agent must reconcile their trust account cash book with their trust ledger and a bank statement from their financial institution. They must complete this within five days after the end of the month using the bank balance of the financial institution as at the end of the previous month.
Q: Who is responsible for lodgement of the audit report with the OFT?
The agent is responsible for the lodgement of their audit report however, auditors can lodge audit reports on an agent’s behalf. This process can be completed online.
Q: Who is responsible to ensure the trust account has had the two unannounced examinations by the auditor in the audit period?
It is the agent’s responsibility to ensure the trust account is audited in line with legislation.
Q: Does my auditor have to visit the site to complete my trust account examination?
No, legislation states the two unannounced examinations can be done remotely away from your office. The auditor is only required to be onsite for the final audit examination of your audit period.
Q: How long must trust records be retained?
Agents must keep hard copies of the trust account ledger, completed cash book reconciliations and audit reports for five years.
Q: When should rental bonds be lodged with the Residential Tenancy Authority (RTA)?
Bonds must be receipted and lodged with the RTA within 10 days from date of receipt. RTA bonds can now be lodged online.
Q: What experience should I look for when appointing my auditor?
An experienced auditor with a background (and preferably their own experience) in real estate and management rights is paramount when looking for an auditor for your business. An experienced auditor will identify and help you rectify any regulatory breaches before they become serious issues. It is an investment to protect the value you have bult up in your licence and your buisness.
Q: Does NSW have different rules and legislation for trust accounts?
Yes. In NSW, agents must maintain their trust account in accordance with the Property, Stock and Business Agents Act 2002. We look after many NSW agents and licensees so please contact our office for further specific information about the NSW requirements.
Q: Can my auditor help me with other things I need, like getting my tax, BAS and bookkeeping done?In some cases, yes. Most taxation and accounting organisations are able to offer you a range of services including trust account auditing, accounting and taxation, verifications, bookkeeping, data and telephony solutions and wealth management