Avoid these top three trust account mistakes
Managing a trust account is one of the main responsibilities real estate agents, and all licensees should be aware of when it comes to meeting their obligations under the Agents Financial Administration Act 2014. The good thing about the common trust account mistakes we see here at the Office of Fair Trading (OFT), is that the errors are easy to avoid.
1. Forgetting to notify the OFT that you've opened a trust account
Even though they have followed most of the steps involved in opening a trust account, including selecting an approved financial institution and adhering to the rules for choosing an account name, some agents forget the last step - lodging a Form 5 with the OFT.
This needs to be done within two months of opening the account.
Detailed instructions for opening a trust account are on page 9 of the OFT's handy publication Trust accounts - a guide for property agents, motor dealers, debt collectors and their auditors. The guide and the Agents financial administration Form 5 can be downloaded from our website.
It is also important to remember to appoint an auditor and to notify the OFT of the appointment. Failure to do so could result in a maximum $26,110 fine or one year's imprisonment.
2. Reconciling your trust account too early
The second common mistake concerns the monthly trust account cash book reconciliation. Some real estate agents don't wait until the end of the month before completing the reconciliation.
The Act requires agents to reconcile the funds within five days after the end of the month.
Again, the Trust accounts guide should be your go-to for advice on completing these reconciliations.
Detailed instructions for this process can be found on page 29 of the guide.
3. Naming the trust account
The OFT has found that some licensees may be confused when it comes time to name their trust account.
If you intend to trade under a company structure, your company must have a corporate licence and the trust account must be in the company's name. If you're not using a company structure then the trust account must be in your name.
In both cases, the words 'trust account' must appear in the name of the trust account and also on all cheques drawn on the trust account.
Only a principal agent may open a general trust account. If you're trading under a company structure this will be the relevant officer of the licensed corporation, otherwise, it will be the individual licensee.
When you open a trust account you must also remember to supply the approved financial institution with written advice that it is a 'trust account' and show them a copy of your or your company's licence as applicable.
Also, don't forget to notify the OFT once the account is opened.
Trust account audit reports can now be lodged online via the OFT website. This is a great option to simplify the reporting process, as once you're logged in with an account some of the information required will be pre-filled from your licence details held by the OFT.
Your audit report must be lodged with the OFT within four months of your audit period.
Many auditors will submit the completed audit report to the OFT on your behalf as part of their service.
However, it's important to remember the licensee has ultimate responsibility for lodging trust account audit reports with the OFT - not the auditor.
An agent can be fined, have their licence suspended, or even be convicted of an offence if the audit report is not lodged.
If you have any questions about operating your trust account, including the disbursement of funds, we recommend you speak with your auditor.
For further information on how to avoid trust account mistakes, download a copy of the Trust accounts guide. To lodge an audit report online, please visit the OFT's website at www.qld.gov.au/fairtrading or phone 13 QGOV (13 74 68).
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