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Owning a property through a trust has many benefits. Still, there are legal requirements to maintain and continue in order to receive these benefits; therefore, before purchasing a property through a trust account, comprehend your obligations fully.

Trust accounts serve as a safeguard for funds related to property transactions. Real estate agents and agencies can manage the property financials through these accounts, but audits are required annually to prevent misuse and fraud.

We have broken down what real-estate trust audits entail, who requires them, the qualifications for auditors, deadlines, appointment procedures, and the consequences of non-compliance in NSW.

What is an Audit of Real Estate Trust Accounts?

An audit of a real-estate trust account is a formal examination conducted to verify the accuracy and completeness of the records and transactions associated with the trust account. This process ensures that funds held on behalf of clients are managed under relevant laws and regulations.

Who Requires a Real-Estate Trust Audit?

Under the Property and Stock Agents Act 2002, any NSW real estate agent or agency that operates a trust account for holding money on behalf of clients is required to have those accounts audited annually. This applies to agents selling, buying, exchanging, leasing, managing, or collecting rents on real estate properties.

Each trust account must have a unique identifying number. If a business maintains multiple trust accounts, each account must be registered separately with NSW Fair Trading.

If there have been no transactions during the financial year and the Trust account holds a zero balance, you must send an email with a copy of the bank statement for the full audit period to audits@customerservice.nsw.gov.au

It is important to note that although the auditor may lodge the audit report on the licensee’s behalf (corporation or individual), you remain responsible for lodging the audit report, not the auditor.

Who Can Audit the Real-Estate Trust Accounts?

Auditors must be qualified under section 115 of the Property and Stock Agents Act 2002.

A qualified auditor is someone who fulfils the following:

  • An individual registered as a company auditor under the Corporations Act 2001.
  • A member of a prescribed professional body, such as Chartered Accountants Australia and New Zealand (CA ANZ), CPA Australia, or the Institute of Public Accountants (IPA), with a current practising certificate and who meets the specific requirements set by the NSW Fair Trading.

AFP Accounting, Tax and Business Advisory can provide you with a thorough understanding of audits of real-estate trust accounts. We can help you understand the requirements when opening a trust account and under what conditions your trust account needs to be audited. We guide you through the process and can conduct the audit on your behalf.

To appoint an auditor, one must:

  • Identify a qualified auditor as defined by NSW regulations.
  • Agree on the terms of the audit, including scope, timeline, and fees.
  • Formally appoint the auditor in writing before the audit commences, ensuring the auditor accepts the appointment. Retain these records for the ATO as evidence.

When is the Audit Due?

The audit of a real-estate trust account must be completed within three months after the end of the financial year, which is 30 June. Therefore, the audit report submission deadline is 30 September each year.

Audits must be completed and submitted online by the auditor through the Auditor’s Report Online portal.

Consequences of Not Conducting a Real-Estate Trust Audit

Failure to have a real-estate trust account audited in NSW can result in severe consequences, including:

  • Fines and penalties imposed by NSW Fair Trading. From a $550 fine for a late lodged audit by an individual to $1,100 for a corporation.
  • Suspension or cancellation of the real estate agent’s licence.
  • Damage to the agency’s reputation and client trust.

Navigating Audits of Real-Estate Trust Accounts

To ensure compliance and a smooth audit process, maintain meticulous records throughout the year, choose a qualified auditor with experience in real estate trust accounts and start the audit process well before the deadline to allow ample time for any necessary adjustments.

With the right preparation and support, managing these obligations can be straightforward, safeguarding your business and maintaining the trust of your clients.

At AFP Accounting, Tax and Business Advisory, we understand the critical nature of compliance in the real estate sector. Our team of experts is equipped to assist with every aspect of real-estate trust account audits, from ensuring your records are accurate to facilitating the audit process with qualified auditors.
Contact us for personalised guidance and support tailored to your needs. Email us at enquiries@afpaccounting.com.au or call (02) 7804 1849.

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