Property management trust accounting explained
Summary
- Trust accounting keeps client money separate and protected.
- Agencies must follow strict state legislation and complete regular reconciliations.
- Daily tasks include receipting, payments, disbursements and balancing ledgers.
- Errors create major compliance risks but can be prevented with systems and dashboards.
- MRI Property Tree and MRI’s property accounting services for agencies can simplify compliance.
Table of contents:
- What is a trust account?
- Why trust accounting matters
- Trust accounting rules
- Daily trust accounting tasks
- Trust account reconciliation
- Common trust accounting errors
- Trust accounting compliance checklist
- State trust account rules
- Ready to run trust accounting with confidence
- FAQs
Property management trust accounting is one of the most important responsibilities for real estate agencies. It applies to any agency that collects rent, holds bonds, or manages client funds for owners or tenants. Ensuring these funds are handled correctly is critical for legal compliance and for maintaining the confidence of clients who rely on the agency to manage their investments.
Trust accounting failures can lead to licence loss, fines, or reputational damage. This guide helps simplify key concepts so agencies can operate with confidence and protect client money effectively.
What is a trust account?
A property management trust account is a dedicated bank account used to hold money on behalf of clients. These funds can include rent, bonds, maintenance float amounts, or proceeds from property transactions.
Trust accounts must always remain separate from an agency’s operational accounts. This separation protects clients and ensures agencies never use trust money for business expenses or cash flow.
To learn more about the fundamentals, see this helpful overview.
Key features of a trust account:
- Holds client money only
- Must stay balanced at all times
- Requires strict recordkeeping
- Regulated by state legislation
Why trust accounting matters
Trust accounting protects landlords, tenants and trade suppliers. When client money is stored and tracked correctly, agencies reduce the risk of errors and fraud. Most importantly, accurate trust accounting ensures the agency meets legal obligations under state-based real estate legislation.
Trust accounting is central to transparent financial management across an agency. It builds lasting trust between property managers and owners, supporting long-term business growth.
Automation reduces errors and gives agencies time to focus on growth, not paperwork.
– Sean Fogarty, Director, Property Management
Trust accounting rules
Australian trust accounting rules vary by state, but all include similar core requirements. Agencies must:
- Maintain separate trust accounts for sales and rental activities
- Record all transactions promptly
- Issue receipts for all money received
- Complete monthly trust account reconciliations
- Retain detailed records for regulatory audits
- Notify the regulator of any discrepancies
Many state regulators, such as NSW Fair Trading and the Queensland Office of Fair Trading, publish clear compliance guidelines for licensed real estate agencies.
Real trust accounting confidence comes from strong systems and clear processes.
– Sean Fogarty, Director, Property Management
Daily trust accounting tasks
Compliance relies on a well-structured daily workflow. Agencies manage:
1. Rent receipting
Incoming rent is receipted into the trust account and allocated to the correct tenant and property ledger.
2. Invoice payments
When paying trades, you must ensure sufficient funds are available in the landlord’s ledger before authorising payment.
3. Owner disbursements
Agencies transfer cleared funds to landlords during scheduled disbursement cycles, ensuring statements and invoices are correct.
4. Bond handling
Bond lodgements must comply with local bond authorities and be transferred correctly.
Trust account reconciliation
Reconciliation ensures trust account accuracy. Agencies match the bank balance to the trust ledger balance and identify any variances such as unpresented cheques or pending EFTs.
Using automated reconciliation tools such as MRI Property Tree’s helps streamline matching and reduces manual data entry.
Steps in reconciliation:
- Compare bank statement with trust ledger
- Identify timing differences
- Review unallocated transactions
- Finalise the reconciliation with supporting documents
Common trust accounting errors
Trust accounting mistakes can lead to significant compliance breaches. Common errors include:
- Unallocated funds from unknown deposits
- Incorrect ledger allocations
- Overdisbursements due to insufficient property funds
- Late or missed audits
- Incorrect rent receipting or double allocations
Even small discrepancies can cause audit issues, so agencies must act quickly when errors occur.
Trust accounting compliance checklist
Use this quick checklist to maintain ongoing compliance:
Trust account setup
- Separate rental and sales accounts
- Banking with an approved financial institution
Daily tasks
- Accurate receipting
- Timely allocations
- Supporting documents uploaded
Monthly tasks
- Bank reconciliation completed on time
- Review exceptions and variances
- Issue clear owner statements
Annual tasks
- Audit completed by a registered auditor
- Records retained for five to seven years
- Internal policies reviewed and updated
A printable checklist helps ensure no steps are missed in busy periods.
State trust account rules
Each Australian state sets its own trust accounting legislation. For example:
- NSW: Property and Stock Agents Act
- QLD: Agents Financial Administration Act
- VIC: Estate Agents Act
- WA: Real Estate and Business Agents Act
Agencies must follow their regulator’s specific requirements for reporting timelines, reconciliation frequency, and audit submissions.
Ready to run trust accounting with confidence
Accurate trust accounting protects your clients and your brand. A reliable system helps minimise errors, streamline compliance and reduce administrative strain. Please click here to request a custom demo or call our team on 1300 657 700
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