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New trust account audit rules 

Information for property agents 

Amendments to the Property, Stock and Business Agents Act 2002,will commence from 1 July 2013. These amendments will change the way licensees fulfil their responsibilities in relation to the auditing of trust accounts.

Existing laws 

Currently, licensees who have held or received trust money during their audit year are required to have their trust accounts audited and lodge the audit returns with NSW Fair Trading whether the audit was qualified or not. 

Licensees who did not hold or receive trust money during their audit year are required to lodge a statutory declaration with Fair Trading to that effect.

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New laws from 1 July 2013 

The amendments to the Property, Stock and Business Agents Act 2002 will commence from 1 July 2013.  The amendments provide a new framework for how licensees handle their trust account auditing responsibilities under the Act, commencing from the 2012/2013 audit year. The changes include: 

  • While all licensees who held or received trust money during their audit year will still need to have their trust accounts audited, only those audits which are qualified by the auditor are required to be lodged by the auditor and licensee with Fair Trading.
  • The term 'qualified' is now defined in the amendments to the Act.
  • The list of persons who are qualified to audit trust accounts under the Act is extended to include authorised audit companies, members of a Professional Accounting Body as defined under the ASIC Regulation 2001 (ie. CPA Australia, Institute of Chartered Accountants in Australia and Institute of Public Accountants) holding a Public Practising Certificate with one or more of those bodies.
  • A requirement on the auditor to forward a copy of the trust account audit (if qualified) to Fair Trading within 14 days after providing the report to the licensee.  A maximum penalty of 50 penalty units ($5,500) is provided for a breach of this requirement.
  • Licensees who did not hold or receive trust money during the audit year will no longer lodge a statutory declaration to that effect.  Instead, licensees will be required to note whether or not they did so when they next re-apply for their licence.
  • Licensees are now required to hold a copy of their trust account audit (whether qualified or not) at their registered place of business, for at least 3 years, and make it available to Fair Trading inspectors for examination if required.

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What is a qualified audit report? 

The amendments define 'qualified' as a discovery by the auditor of a breach of the Act or Regulations, any discrepancy relating to the trust account or a failure to keep records in a manner that enables them to be properly audited.

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What do licensees need to do? 

Licensees who held or received trust money during their audit year of 2012/2013 need to download a copy of the trust account audit forms and cover sheet, as well as the explanatory documentation and provide it to their auditor.  Remember that the qualifications of persons who can now conduct audits has been expanded, making it easier to find an auditor. 

Licensees who did not hold or receive trust money during the audit year (the majority of licensees in NSW), need now not do anything until they renew their licence.  Full information will be provided at that time.

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Other important amendments to the Property, Stock and Business Agents Act 2002 

A number of other important amendments to the Act will also commence from 1 July 2013.  These amendments further clarify and streamline the Act and significantly reduce red tape for real estate agents.  These other provisions are as follows:

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Stock auctioneers 

The amendment to section 11 of the Act clarifies the present legislation to ensure that holders of certificates of registration who are employed by a stock and station agent will be able to conduct stock auctions to gain training and experience while under the immediate supervision of a licensee who need not be their licensee in charge.  The supervising licensee must have their licence endorsed to be able to conduct stock auctions.

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Entitlement to commission 

This amendment will allow the NSW Civil and Administrative Tribunal (NCAT) or a Court to award licensees’ commission or expenses to be paid for work done by them even if there is a minor breach of the agency agreement requirements contained in the Regulations to the Act. At the present time, the Tribunal or Court does not have this discretion, except in relation to minor breaches made in the service of the agency agreement on the client. 

However, the Tribunal or Court will only be able to award commission or expenses if:

  • the failure is minor
  • there is no loss suffered to the consumer as a result of the breach, and
  • failure to award the commission or expenses would be unjust.

Note that the amendments made to the Act with respect to recovery of commission or expenses do not apply to agency agreements entered into before the commencement of the amendments on 1 July 2013.

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Opening of trust accounts 

These amendments will require licensees to formally notify NSW Fair Trading each time they open a trust account with an Authorised Deposit Taking Institution.  The licensee will provide Fair Trading with a copy of the form they currently provide to the Institution advising that the account they are opening is a trust account. 

For more information about opening trust accounts, go to the Trust accounts page on the Fair Trading website.

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Closing of trust accounts 

Similarly, this amendment will require licensees to formally notify Fair Trading each time they close a trust account with an Authorised Deposit Taking Institution. Notification will be in a form approved by the Director-General.

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Section 86 (6) Exemptions 

The amendments exempt separate trust accounts kept on the instructions of a client of a licensee or firm of licensees for the exclusive benefit of the client, or a separate trust account opened by a licensee for the exclusive benefit of both the vendor and the purchaser of land from the notification requirements.

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Section 112A Random audits of trust accounts 

This amendment provides for the random auditing of trust accounts by authorising the Director-General to appoint a qualified person to audit the trust account at any time. The amendments create a penalty amount of 50 penalty units ($5,500).

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The handling of unclaimed trust money 

Presently, unclaimed trust money has been handled under provisions in the Property, Stock and Business Agents Act 2002.  This will change from 1 July 2013.

NSW Fair Trading will no longer handle unclaimed trust money.  Responsibility for handling unclaimed trust money will be transferred to the NSW Office of State Revenue.

The Unclaimed Money Act 1995 (the Act) is amended so it can apply to unclaimed money held in a trust account under the Property, Stock and Business Agents Act 2002.

The Act provides that: 

  • money that has been held by a licensee for more than 2 years in a trust account kept by the licensee is unclaimed money for the purposes of the Act.
  • a licensee must make reasonable efforts to locate the owner of any money held after more than 2 years, with a maximum penalty provision of 50 penalty units ($5,500) for an offence.
  • amounts of unclaimed money held by a licensee that are under $100 are unclaimed money for the purposes of the Act and the licensee is required to remit these amounts to the Chief Commissioner of the Office of State Revenue.

Please note that as licensees have already fulfilled their responsibilities in relation to the handling of unclaimed trust money for 2012, the new provisions for handling unclaimed trust money will not commence until 1 July 2014. 

Licensees who have unclaimed money in their trust accounts will not be required to lodge their unclaimed trust money statement with the Director-General in January 2014.  

The new provisions will apply, and information will be provided to the Industry prior to 1 July 2014 when licensees will observe the requirements of the Unclaimed Money Act 1995.

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Trust money held by former licensee or personal representative 

A new Part 2A provides that money held in a trust account by a former licensee or the personal representative of a deceased licensee is unclaimed money but section 10 of the Unclaimed Money Act (Return and Payment of Money to the Chief Commissioner) does not apply to the money. 

It further provides that a former licensee, or the personal representative of a deceased licensee, who holds unclaimed money must within the required time for compliance with this section lodge with the Chief Commissioner a return relating to the unclaimed money in a form approved by the Chief Commissioner, and also pay the amount of the unclaimed money to the Chief Commissioner. 

The amendments provide that the required time for compliance with this section is 3 months after the date on which the person ceased to be a licensee or became the personal representative of the deceased licensee (or such longer period as the Chief Commissioner may in a particular case allows).

The amendments further provide that a former licensee, or the personal representative of a deceased licensee, who fails to comply with this section is guilty of an offence and is liable to a penalty not exceeding 50 penalty units ($5,500), and to a further penalty not exceeding 5 penalty units ($550) for each day after the period within which it was required to comply.

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