In Victoria, real estate agents who hold or receive money on or behalf of others are required to open and maintain trust accounts.

Under section 64 of the Estate Agents Act 1980 (the Act), estate agents who have carried out business for any period during a financial year must have their trust accounts audited.

Auditors are required to complete the audit report issued by Consumer Affairs Victoria within three months of June 30 of the relevant year. Once the audit report is completed, it must be delivered to the estate agent.

What is a real estate trust account?

If an estate agent receives money from a client, they must deposit it into a trust account held by an authorised financial institution. This is a legal requirement.

The money may include sales deposits, rent, or fees for advertising or maintenance.

Estate agents may open one or multiple trust accounts, depending on their agency’s needs.

Records of the trust accounts must be maintained, and the government can inspect a trust account at any time. If there are any breaches of the law, penalties apply.

Purpose of the audit for real estate trust accounts

When it comes to auditing an estate agent’s trust account, the purpose of the audit is to report on whether accounting and other records that relate to trust money have been correctly maintained.

The audit will also report on if there is any loss or deficiency of trust money or failure to pay or account for trust money, and that there has been no failure to comply with a provision of the Act or the Estate Agent (General, Accounts and Audit) Regulations 2018 (the Regulations).

Who can conduct an audit for real estate trust accounts?

A practising public accountant must conduct the audit for real estate trust accounts, and they must be a member of at least one of the following professional bodies:

• CPA Australia
• Institute of Public Accountants, or
• Chartered Accountants Australia and New Zealand.

The person conducting the audit cannot be an estate agent or the employee of an estate agent, nor can they be a partner of the estate agent whose trust accounts are being audited. They also cannot have been, in the last two years, an employee or partner of the estate agent whose trust accounts are being audited; be a member, director, employee or officer of an estate agency corporation; or keep, control or have custody of estate agent trust accounts.

Tips for undergoing a real estate trust account audit

It’s important for estate agents to ensure their recording keeping for all real estate trust accounts are well maintained and accurate.

Here are some tips to prepare for an audit:

• Meet the audit deadline. The time frames for reporting are strict so ensure you meet the deadline. Speak to your auditor if you need guidance on these time frames.
• Maintain required trust records. Records must be kept up to date and be easily interpreted. If this is not done, inappropriate or suspicious transactions will not be identified in the audit.
• Avoid absence or repeated lateness of monthly reconciliations. This also includes unexplained items or adjustments in monthly reconciliations. This will indicate that record keeping is poor and may indicate that a deficiency in trust money has occurred.
• Avoid transferring trust money through non-trust accounts. It is unlawful to route trust money via a non-trust account and will increase the risk of loss of trust money as it can become mixed with general business funds.
• Bank the trust money promptly. Any delays in banking trust money by an estate agent is unlawful and increases the risk of loss of trust money.

Do you need an auditor for your real estate trust accounts?

Navigating audit processes can be complex, and legal requirements are precise.

LDB Group’s team of audit experts can advise on the best way to tackle real estate trust account audits and can offer guidance.

To find out more about our auditing services, phone (03) 9875 2900 or send us details via the contact form below.