The Essential Guide to Real Estate Trust Account Audits in NSW Australia 2025

Real estate agents in Australia are legally necessary to maintain a trust account for client funds. These accounts keep money from customers – such as rent deposits, sales deposits or advertising fees.

To ensure that these funds are managed properly, the Australian law makes the independent Trust Account Audit mandatory. These audit are important:

• Fraud prevention
• Transparency in customer fund management
• Clear Policies and Procedures for the Management of the Trust Account
• Separate Agent’s Fund and Trust Account Funds
• Proper Records of All Trust Account Transactions
• Reconciliations of Trust Account Regularly
• Regular Audits of the Trust Account

To streamline compliance and reduce risk, many agencies engage specialised trust account audit services that provide independent testing, timely online lodgement, and clear remediation guidance, helping meet statutory deadlines and avoid licence issues.

If the legal trust account auditor finds any problems with the trust account, they will report these to the relevant authorities, such as the Real Estate Institute of Australia or the state government. The agent may then be required to rectify the problems, such as repaying any missing funds or changing their policies and procedures.

In this article, we will cover all those things that you need to know about the Real Estate Trust Account Audits – their objectives, requirements, audit checklists and how to comply.

What is a Real Estate Trust Account?

A Real Estate Trust Account is a dedicated bank account where client money, not the agency’s own funds, is held securely, including amounts such as rent, advertising contributions, upkeep/maintenance funds, and sales deposits, with the agent acting as a custodian to ensure money is only used for its intended purpose under state legislation.

Depending on business needs, an agency may operate one or multiple trust accounts (for example, separate accounts for sales and rentals), provided each account is correctly named, banked with an authorised deposit‑taking institution, and supported by accurate receipts, ledgers, and monthly reconciliations to meet inspection and audit obligations and avoid penalties for breaches like commingling or delayed banking.

If an agent receives a $10,000 buyer deposit, it must be deposited into the trust account and preserved for settlement or an approved disbursement, not used for agency operating expenses, ensuring funds remain available for clients when needed and are fully traceable in the records. Keeping these monies separate helps prevent fraud, builds client confidence, and makes regulatory compliance easier because regulators can review trust records at any time to confirm deposits, withdrawals, and reconciliations align with statutory rules.

Real Estate Trust Account Audit: Guidelines in 2025

Here are guidelines for maintaining transparency and efficiency in Australian real estate trust account audits:

• Take the initiative: Do not wait for the auditor to come to you. Instead, try to keep your records organised and up to date. This will help the audit process go more smoothly and minimise surprises.
• Be open and honest: Inform the auditor about all of your dealings straightforwardly and honestly. Nothing should be hidden. The auditor’s job is to assist you in ensuring everything is correct, not to catch you doing something incorrectly.
• Please be cooperative: Respond to the auditor’s inquiries wholly and swiftly. Give them whatever paperwork they require. If you are supportive, the audit will go more quickly.
• Submit audits within the required deadline for the jurisdiction to avoid penalties or licence issues.
• Perform monthly reconciliations and promptly clear unexplained items to demonstrate control.
• Ensure proper authority for every withdrawal/transfer and maintain a clear audit trail from client instructions to bank entries.
• Bank trust funds promptly and never route client money via non‑trust accounts.
• Keep secure digital and physical records, with backups and restricted access for the legal retention period.
• Conduct periodic internal reviews and provide staff training on receipts, approvals, and banking practices.
• Stay updated on regulatory changes issued by state regulators and industry bodies.

What is the Purpose of Creating and Auditing a Real Estate Trust Account?

A trust account audit ensures that trust money is managed accurately and transparently. This verification that the records are properly maintained, identifying any anomalies, and highlights losses, deficiencies or failures in accounting practices.

Prominent functions of Trust Account Audit are included:

• Accountability: Confirm that all deposit, withdrawal and transactions are recorded correctly, with clear reconciliation to client ledgers and bank statements to evidence completeness and accuracy.
• Compliance: Agents following state and national rules ensure, including submitting audits within the prescribed deadline for the jurisdiction and using qualified, independent auditors where required.
• Prevention of fraud: Detects irregularities, mismanagement, or missing money by testing authorisations, bankings within required timeframes, and segregation from business funds.
• Industry Trust: Real Estate strengthens confidence in profession by demonstrating transparent handling of client money and readiness for regulator inspection at any time.

Failure to comply can cause punishment, penalty, or even license suspension, allowing audit for both agents and customers, so maintaining accurate records, monthly reconciliations, timely lodgement, and independent audit oversight is essential in 2025 to avoid adverse findings and enforcement action.

Who Can Conduct the Real Estate Trust Account Audit?

By law, audits must be performed by an independent qualified professional, not by the agency itself. Acceptable auditors include:

• Certified Practising Accountants (CPA Australia)
• Chartered Accountants (CA ANZ)
• Members of the Institute of Public Accountants (IPA)
• Registered company auditors or authorised audit companies (as defined under the Corporations Act 2001), where applicable in the jurisdiction, provided independence and eligibility requirements are met.
• Members of CPA Australia, CA ANZ, or IPA who also hold a current Public Practice/Certificate of Public Practice/Professional Practice Certificate, as required for assurance engagements.
• Auditors must lodge audit results via the regulator’s prescribed online portal where mandated (e.g., Auditor’s Report Online), and the licensee remains responsible for ensuring timely completion and submission.
• The auditor must be genuinely independent: not a related party, not recently employed by or in partnership with the agency within the applicable look‑back period, and not a shareholder in a closely held licensee entity where prohibited.
• Where state rules specify deadlines (e.g., submission by 30 September for periods ending 30 June, or 31 March for calendar‑year jurisdictions), the appointed auditor must meet the lodgement date; late or missing audits can affect licence status.
• If non‑compliance is identified, the auditor must report it, and the agency should implement remediation promptly to prevent penalties or licence impacts.

Restrictions: An estate agent, an employee of an estate agent, or a partner of the estate agent whose trust accounts are being audited are all prohibited from performing the audit. Additionally, they cannot currently hold any of the following positions: member, director, employee, or officer of an estate agency company; employee or partner of the estate agent whose trust accounts are being audited; or have custody of or control over estate agent trust accounts in the past two years.

Real Estate Trust Account Audit Checklist NSW (Step-by-Step)

Estate agents must ensure that their real estate accounting systems and record keeping for all real estate trust accounts are updated and accurate. Here are some pointers to help you prepare for an audit:

• Keep the audit deadline in mind: Reporting deadlines are stringent, so make sure you fulfil them. If you want assistance with these time frames, contact your auditor.
• Keep the necessary trust paperwork: Records must be up-to-date and interpretable. Inadequate or suspicious transactions create difficulties in the audit process.
• Make sure to submit your monthly reconciliations on time: The unexplained items or adjustments are part of the monthly reconciliation. This shows that record keeping could be maintained better, so the trust account is deficient.
• Transferring trust funds through non-trust accounts should be avoided: Trust funds are not transmitted through a non-trust account as they are ordinary business funds, which increases the danger of losing trust money.
• Quickly deposit the trust funds: Estate agents are not allowed to bank trust funds slowly since doing so increases the risk of losing trust money.
• Ensure proper authority for all transactions: Every withdrawal or transfer from trust account should be duly authorized, properly documented and supported with customer instructions. Unauthorized transactions raise red flags during audit audit.
• Maintain a clear audit trail: Auditors should be able to basically detect each transaction, from client instructions to bank deposits/withdrawal and final harmony. A transparent audit trail creates confidence and avoids controversies.
• Regular internal reviews: Do not wait till the official audit. Reviews to review internal mini-audits or trust records from time to time and reconciliation to quickly identify problems. This active step makes the outer audit very smooth.
• Safe Digital and Physical Records: In today’s environment, keeping electronic records is as important as paper documentation. Back-up digital files safely, restrict access to authorized personnel, and ensure that the physical record is securely stored for the legal retention period.
• Stay updated on regulatory changes: Law and audit requirements for real estate trust accounts can change from state to state and year. Review updates regularly from your regulatory authority or industry body to stay obedient.
• Provide staff training and oversite: If your team handles the trust funds, make sure they are trained on compliance rules, records and proper banking practices. Penal or license suspension can also occur as a result of mistakes caused by lack of awareness.

This process not only meets compliance standards but also demonstrates strong professional governance in accounting for real estate developers and agencies.

Common Mistakes in Trust Account Audits and How to Avoid Them

Many agencies thwart the audit due to recurring and prevention of prevention errors. By becoming aware of these losses and implementing strong internal controls, estate agents can reduce risk and ensure compliance. Below are the most common mistakes – and how to avoid them.

1. Mixing Trust and Business Fund

Problem: Placing client trust money into business or personal accounts is one of the most serious breaches. It makes funds indistinguishable, increases risk of misuse, and violates legal requirements.

Solutions: Always maintain separate bank accounts for trust and business funds. Use your accounting software to track both independently and implement internal controls to prevent accidental mingling.

2. Trust fund deposited late

Problem: Holding client money before banking creates compliance violations and exposes the agency to risk of misplacement or loss.

Solutions: Deposit trust money immediately or within the legally required timeframe (varies by jurisdiction). Implement daily deposit routines and reconcile deposits against receipts.

3. Remember monthly harmony

Problem: Failure to reconcile bank records with trust ledgers each month means errors or irregularities may go unnoticed. This is a top cause of audit failures.

Solutions: Schedule monthly reconciliations without delay. Use automated reconciliation tools, and ensure any discrepancies are investigated and corrected immediately.

4. Incomplete or missing paperwork

Problem: Missing ledgers, unsigned receipts, or poorly documented transactions reduce

Solutions: Maintain a comprehensive audit trail for every transaction, with receipts, invoices, settlement statements, and supporting client documentation stored securely. Conduct periodic internal checks to ensure all records are present.

5. Unauthorized Withdrawals or Transfers

Problem: Withdrawing client funds without written authorization or proper documentation breaches trust account rules and damages credibility.

Solutions: Only process payments with clear client instructions, documented approvals, and supporting records. Always require dual authorization for withdrawals.

6. Poor Record Retention and Security

Problem: Losing historical records or failing to safeguard them (physically or digitally) makes it impossible to prove compliance.

Solutions: Follow statutory record retention periods (often 7 years). Use secure cloud accounting systems with regular data backups, along with safe physical storage.

7. Lack of Staff Training and Oversight

Problem: Errors often occur when staff handling trust accounts are unaware of regulations or proper procedures.

Solution: Provide regular staff training on trust account compliance, reconciliation processes, and record keeping. Monitor performance through spot checks and internal audits.

8. Ignoring Regulatory Updates

Problem: Trust account audit requirements can change depending on state or federal law. Failing to update compliance practices leaves agencies exposed.

Solution: Stay informed via regulatory websites, industry bodies, or newsletters. Assign a compliance officer or administrator to track legal changes.

Consequences of Non-Compliance

Trust account can result in failure to fulfill the account obligations:

• Heavy fine
• Loss of real estate license (temporary or permanent)
• Criminal allegations in serious cases

Especially in NSW, failure to submit a trust account audit may refuse to renew the license.

Requirements for Creating a Trust Account

The following conditions must apply when forming a trust account:

• Licensees must notify the authorised deposit-taking institution in writing that the account is a ‘trust account’ as defined by the Act.
• If a corporation holds a trust account, the account must be in the corporation’s name.
• Otherwise, the trust account must be in the name of the licensee or the firm.
• The licensee, firm, or corporation’s name must appear as a prefix of the account name, followed by any other necessary identifier of the trust account.
• The word ‘Trust Account’ should be added to any account made for a trust account or any cheque that draws the trust account.

Send all the audits to the Secretary before September 30 of the following year or within the three months after the audit period has ended. Licensees risk losing their right to retain or renew a licence if they fail to submit a trust account audit by the deadline.