Trust Account Audits in Australia: How They Work and What Regulations Apply
If your business handles client money—like in real estate, law, or accounting—you’ve probably heard of trust accounts. You might even have one set up already. But are you sure it’s being managed properly? And more importantly, would it pass a trust account audit?
Don’t panic. This guide will break down what they are, how they work, and the rules you need to follow.
Let’s get into it—minus the jargon.
What Is a Trust Account, Anyway?
In Australia, trust account audits are more than a formality—they’re a legal requirement in many industries.
A trust account is a special kind of bank account used to hold money on behalf of someone else—usually a client.
Think of it like a holding bay. It’s not your business’s money. It belongs to your client, and it needs to be kept separate from your own operating funds.
Say you’re a real estate agent. A buyer pays a deposit on a property. That money doesn’t go into your business account—it sits safely in a trust account until the sale is final. That way, both the buyer and the seller are protected.
Other common examples include law firms holding client settlements or accountants managing pre-paid fees.
Why Are Trust Account Audits So Important?
Because it’s not your money.
Clients trust you to hold their funds securely and only use them for the right reasons. The trust account audit process is designed to confirm that you’re handling their money correctly.
Audits help to:
- Ensure legal compliance
- Prevent fraud or misuse
- Build trust with your clients
- Protect your licence and reputation
Skipping or failing an audit? That’s a one-way ticket to legal trouble, fines, and even losing your right to operate in some industries.
Who Needs a Trust Account Audit?
It depends on your industry and the state or territory you operate in. But some of the main sectors where trust account audits are common include:
- Real estate
- Legal services
- Accounting and financial planning
- Property management
If you hold money on behalf of clients, chances are you need to comply with trust account rules—and get those accounts audited regularly.
In Australia, audits are usually conducted by Registered Company Auditors (RCAs) who are approved by ASIC.
So, How Does a Trust Account Audit Actually Work?
Good question. Here’s a simple breakdown of the process:
- Appointment of the auditor
You’ll need to engage a registered auditor—ideally one with experience in your industry. - Review of records
The auditor checks your records to make sure all transactions (like deposits and withdrawals) are documented and authorised. - Bank reconciliation
They compare your trust account records to your bank statements and client records to make sure everything lines up. - Compliance check
The auditor looks at whether your trust account is being run according to the law. This includes checking:- Whether client funds are being kept separate
- That accurate records are maintained
- That transactions follow the rules for your industry
- Whether client funds are being kept separate
- Audit report
Once everything’s reviewed, the auditor issues a report. If all’s well, great. If not, the report will flag the issues—and you’ll need to fix them.
The Rules: What Regulations Apply?
Now here’s where it gets a bit tricky. Trust account rules in Australia can vary by industry and state. But some general regulations apply across the board.
Here are the basics:
- Client funds must be kept separate
You can’t mix client money with your business funds. That’s a big no-no. - Accurate records are a must
You need to record every deposit, withdrawal, and transfer—clearly and correctly. - You must audit the account regularly
Most industries require an annual audit of your trust account. Some may need more frequent checks. - Interest handling must follow specific rules
Any interest earned from trust accounts often has to be paid to a regulatory body, not kept by the business.
Each industry has its own set of legislation and rules. For example:
- Real estate agents in NSW must follow the Property and Stock Agents Act 2002
- Lawyers must comply with the Legal Profession Uniform Law (NSW)
- Accountants need to meet standards set by their professional body
So yes—it’s a bit of a maze. That’s why many businesses rely on professionals who understand trust account compliance inside and out.
Conclusion
Trust account audits aren’t just about ticking boxes. They’re about protecting your business, your clients, and your reputation.
The rules might feel like a pain, but they’re there for good reason. When you handle someone else’s money, you need to do it right.
With clear records, the right systems, and a bit of expert help, staying compliant doesn’t have to be a nightmare.
And remember—if you’re unsure whether your trust account is up to scratch, don’t wait for the audit. Get it reviewed now and avoid the scramble later.
Need help with your next audit? Reach out to a qualified trust account auditor who understands your industry. It’s one less thing to worry about—and a big step toward running a transparent, trustworthy business.