If you work as a GP or are involved in running a general medical practice you would be aware of the various state revenue offices reviewing the payment methods of GP practices and the application of payroll tax legislation regarding those payments.
TRUST ACCOUNT AUDIT
MANAGEMENT RIGHTS AND TRUST ACCOUNT AUDITING
You have purchased a Managements Rights Business and signed on the dotted line. The business has the promise of great returns if all goes to plan.
Your new owners trust you enough to sign the letting appointment. But their trust isn’t where it should be. Not yet. A single mistake can end the relationship before it begins. The good news is you’re smart and take your Trust Account seriously.
WHAT IS A TRUST ACCOUNT?
A Trust Account is a specific type of bank account. A Real Estate Agents’ licence allows the Agent to operate a trust account in which money is held on behalf of trust creditors, such as property owners.
Once the trust account has been opened, the business must comply with the Agents Financial Administration Act 2014 and Regulations which is administered by the Office of Fair Trading. Any breaches of the Act and Regulations may lead to cancellation of the Agents licence and disqualification of the right to operate the trust account, both of which could be devastating to the business.
A Trust account is required to be audited and an annual audit report to be submitted to the Office of Fair Trading for review. An audit report is prepared by the external auditor after reviewing the trust account records. An audit report includes the auditor’s opinion, stating whether the operation of the Trust account and associated record keeping complies with the Act and Regulations for the audit period.
The main point to remember is the money in the trust account does not belong to the Agent!
WHAT CAN GO WRONG?
Over the many years performing trust account audits, we have seen both unintentional and intentional issues, from simple mistakes (such as incorrect input of GST on a charge), to outright theft. Fortunately, theft is extremely rare as most people want to do the right thing.
Below is an example of a trust account disaster:
A Brisbane letting agent was fined over $20,000 and banned from working in the real estate industry for five years.
“The tribunal heard that the Agent committed several offences including failing to disburse rental monies to owners and collecting $7,032 for hired carparks within the complex which was used for the agent’s own personal use…. The agent also charged owners for unauthorised cleaning services and linen hire totaling $1,086”
THE BIG PICTURE
Agents should understand that operating a trust account correctly is a key aspect of their business. A properly kept trust account reduces stress for the Agent, reduces audit costs, builds trust with owners and, most importantly, removes risk of fines and loss of licence.
The Agent should seek advice from their Auditor before an issue arises or request assistance to rectify an error once one has occurred. Everything is fixable so long as there is transparency around the actions taken.
At Eagle Accounting our audit team assists clients through the entire process - from engagement and notifying the Office of Fair Trading that you have opened a trust account, appointment of us as auditor, directions on how to keep records (either in paper or electronic format), through to closing your trust account on sale or cessation of your business
If you require further information or assistance, please contact our office and we will be happy to assist.
FOR MORE INFORMATION