Strata trust accounting: everything you need to know

What is Strata Trust Accounting?

Strata trust accounting is the process of managing funds collected from owners in a strata scheme through a legally regulated trust account. These funds are used for:

• Maintenance and repairs of common property
• Insurance premiums
• Administrative costs such as cleaning and gardening

Unlike a standard business account, a trust account is highly regulated to ensure owners’ money is safeguarded. Each strata scheme or owners corporation usually requires its own trust account or separation/reporting of balances within a pooled trust account. Managers must follow strict rules on how funds are deposited, withdrawn, and reported.

Contents:

• Why is Strata Trust Accounting important?
• Key compliance requirements
• Common challenges in Strata Trust Accounting
• How technology simplifies Strata Trust Accounting
• Best practices for Strata Trust accountants
• Key features to look for in Trust Accounting Software
• Ready to simplify your strata trust accounting?
• FAQs

Why is Strata Trust Accounting important?

Strata managers handle significant sums of money, often across multiple schemes. Mismanagement can lead to:

• Legal consequences: Non-compliance can result in fines or loss of license.
• Loss of trust: Owners expect transparency and accountability.
• Financial risk: Errors can cause shortfalls in maintenance budgets.
• Over-spending by Owners: Inaccurate balances/reporting could lead committees to make incorrect decisions about how best to utilise Owner funds.

Proper trust accounting ensures:

• Transparency: Owners can see where funds are allocated.
• Compliance: Adherence to state legislation such as the Strata Schemes Management Act (NSW) or Body Corporate and Community Management Act (QLD).
• Financial integrity: Prevents misuse or accidental mixing of funds.

Trust accounting is one of the most regulated aspects of strata management. Utilising a powerful trust accounting engine doesn’t just save time, it safeguards compliance and reduces the risk of costly errors that can damage both finances and reputation.

– Gavin Fuchs, MRI Software

Key compliance requirements

Compliance is non-negotiable. Common requirements across Australian states include:

• Separation of trust account records: Each strata scheme must have its own trust balances managed separately.
• Regular reconciliations: Monthly checks to ensure accuracy.
• Audit obligations: Annual audits by a qualified accountant (for applicable schemes/owners corporations)
• Detailed record-keeping: Every transaction must be documented and accessible for inspection.

Common challenges in Strata Trust Accounting

Managing trust accounts manually can be overwhelming. Common challenges include:

• Human error: Incorrect entries or missed reconciliations.
• Time-consuming audits: Gathering records for compliance checks.
• Multiple accounts: Large portfolios often require separate trust accounts for each scheme.
• Changing legislation: Keeping up with regulatory updates across states.
• Varying tax treatments across complex financial structures
• Handling adjustments, reversals and corrections for a variety of use-cases

These challenges increase the risk of non-compliance and can consume valuable time that could be spent on client service.

How technology simplifies Strata Trust Accounting

Strata management software, such as MRI Strata Master, offers tools that simplify trust accounting processes:

• Efficient reconciliations: Reduce manual errors and save time.
• Compliance alerts: Stay updated with legislative changes.
• Comprehensive reporting: Generate audit-ready reports in seconds.
• Flexible adjustments and financial treatment per scheme.

By leveraging technology, strata managers can focus on service delivery, knowing that their financials are accurate, ensuring compliance and efficiency when communicating with their owners.

Best practices for Strata Trust accountants

To maintain compliance and efficiency:

1. Use specialised software built for trust accounting: Avoid generic accounting tools.
2. Schedule regular reconciliations: Daily, Weekly or Monthly checks prevent discrepancies.
3. Train your team continuously: Ensure staff understand trust accounting obligations.
4. Stay informed: Subscribe to industry updates and regulatory changes.
5. Audit proactively, not defensively: Don’t wait until year-end—conduct smaller internal audits monthly or quarterly.
6. Document everything: Changes to ledgers, authorisations, bank statements, receipts and remittances.

These practices not only reduce risk but also build trust with owners.

Key features to look for in Trust Accounting Software

When choosing trust accounting software for strata management, look for these essential features:

1. Legislatively compliant accounting

Manage your property trust accounts with confidence knowing your software meets Australian compliance standards.

2. Transparent reporting

Ensure your software provides a digital paper trail for easy reporting, journaling, and transaction tracking, keeping you audit-ready at all times.

3. Simplified reconciliation process

Save time and reduce errors with a simplified bank reconciliation process covering all transactions.

4. End of month in minutes

Automated receipting and streamlined report generation make end-of-month processing fast and stress-free.

5. Information at your fingertips

A good trust accounting engine should give you an overview of trust trial balances, bank reconciliations, and other key financial data.

6. Always up to date

Your software should continuously update to reflect the latest accounting standards and compliance requirements.

7. Scalable for any size agency

Whether you manage a large portfolio or operate as a solo specialist, your solution should scale with your business needs.

Strata trust accounting is a critical responsibility for strata agencies. Compliance is non-negotiable, and errors can be costly. By adopting best practices and leveraging effective software solutions, managers can ensure transparency, accuracy, and peace of mind for owners.

Ready to simplify your strata trust accounting?

Book a custom demo of MRI Strata Master today and experience how our solution can transform your trust accounting processes.