Trust account discrepancies don’t announce themselves. They build quietly across twelve months of small oversights, timing gaps, and items nobody followed up. By the time your audit date arrives, what started as a minor variance can look a lot worse.
Here’s how to find and fix problems before the auditor does.
What Australian Law Actually Requires From You
Each state has its own framework for conducting a trust account audit, and they are not identical.
In Queensland, agents operate under the Property Occupations Act 2014 and must have trust accounts audited annually by a registered company auditor.
In New South Wales, the Property and Stock Agents Act 2002 applies, and agents must lodge their audit report with NSW Fair Trading within three months of their financial year-end.
Victoria operates under the Estate Agents Act 1980, with Consumer Affairs Victoria overseeing compliance. The audit must be completed within three months of 30 June each year.
NSW Fair Trading has made clear that trust accounts consist of funds belonging 100 per cent to consumers, making strict compliance non-negotiable. Twenty agents were fined up to $11,000 each, and eight had their licences cancelled in a single NSW enforcement sweep for failing to lodge trust account audits on time.
The Three Most Common Discrepancies Found in Real Estate Trust Accounts
Before you can fix a problem, you need to know where to look.
1. Timing Differences Between Bank Transactions and Ledger Entries
A rent payment hits your bank account on a Friday afternoon, but does not get receipted in your property management software until Monday. If your bank reconciliation runs on Friday, you have a gap.
These timing differences are usually innocent but compound quickly. The fix is straightforward: compare your bank statement transaction dates against your software receipt dates line by line.
2. Misallocated Funds Between Ledgers
A maintenance payment for Unit 4 at a complex gets posted to Unit 14. The total funds in your trust account are correct, but the individual ledger balances are wrong.
This type of error is hard to spot in a bulk reconciliation because the trust account still balances at the top level. You need a ledger-by-ledger review, not just a bank-to-total comparison.
A Morley, Western Australia agency was fined $5,000 for, among other breaches, failing to correctly balance its trust accounts at the end of each month and failing to keep full and accurate accounts of all monies received. The records were there; they were just wrong.
3. Outstanding Items That Were Never Followed Up
Uncleared cheques, pending EFT transfers, and credits held in suspense accounts are classic audit traps. If a cheque issued six months ago has never been presented to the bank, it is sitting as an outstanding item on your reconciliation, and your auditor will ask about every single one.
Our Tip on Outstanding Items
“We recommend treating any outstanding item older than 30 days as a compliance risk, not an accounting footnote. Cancel stale cheques, reissue them, and document the action. Auditors can accept an aged item with a clear paper trail. They cannot accept silence.”
A Step-by-Step Approach to Finding and Fixing Discrepancies
tep 1: Run a full bank reconciliation for every month of the audit period
Do not just check the current month. Work backwards and confirm each month reconciles cleanly. A discrepancy in March often hides in a January entry.
Step 2: Print and check every individual ledger balance
Your total trust account balance should equal the sum of all individual ledger balances. If it does not, you have a structural error. Most property management software has a trust account integrity report. Run it.
Step 3: Identify every outstanding item older than 30 days
Sort your outstanding items by age. Anything older than 30 days needs a documented explanation. Contact the payee, cancel and reissue if necessary, and document the process.
Step 4: Cross-check bond lodgement records against the relevant authority
In Queensland, bonds must be lodged with the Residential Tenancies Authority (RTA) within 10 days of receipt.
A Sunnybank Hills agency in Brisbane’s south received a 10-year ban and $30,000 fine after pleading guilty to 35 charges, including failing to bank cash into the trust account, converting trust funds, and failing to remit bonds to the RTA within the required timeframe.
Pull your lodgement confirmations and cross-reference them against every bond receipt in your system.
Step 5: Document every correction you make
This is the step most agencies skip. If you find a misallocation and correct it, write a brief note: what happened, why, and what you did to fix it. Your auditor will see the journal entry. Without an explanation attached, they will ask, and if you cannot answer on the spot, the audit gets complicated fast.
What We Tell Every Client Before Audit Season
“We always say: an undocumented correction is almost as risky as the original error. Auditors are trained to spot adjustments. A clear, dated note next to the correction tells them you caught it yourself and dealt with it properly. That matters.”
When You Find a Shortfall, Do Not Ignore It
A trust account must never be in debit. If you find one, you are legally required to top it up immediately from your agency’s own funds, not from another client’s money.
Misappropriating trust funds even temporarily, even by accident, is the fastest way to lose your real estate licence in Australia. Consumer Affairs Victoria has increased enforcement and filed criminal charges against multiple agents for trust account misuse, following a rising number of fraud cases across the state.
If the shortfall is the result of a legitimate error like a double-disbursement, correct it, document it, and be upfront with your auditor. Auditors understand human error far better than they understand evasion.
The Reconciliation Checklist Your Office Should Run Monthly
Check | Frequency | Tool |
Bank-to-ledger reconciliation | Monthly | PM Software |
Individual ledger balance audit | Monthly | Integrity Report |
Outstanding items review | Monthly | Aged Items Report |
Bond lodgement cross-check | Quarterly | RTA or State Bond Portal |
Full audit period review | Pre-audit | Manual and Software |
The Real Reason Audits Catch Agencies Off Guard
It is rarely one big mistake. It is twelve months of small ones that nobody reviewed.
NSW Fair Trading has described failure to lodge a trust account audit as a major red flag, noting it could indicate an agent has something to hide, and confirmed that trust account fraud is the number one offence real estate agents are prosecuted for in NSW.
The principals who sail through audits are not necessarily the most organised people in the office. They are the ones who reconcile monthly without exception, clear outstanding items before they age, and keep a short paper trail on every correction made throughout the year.
Start that habit now. Not the week your auditor calls.
Read more: Tips for a Successful Real Estate Trust Account Audit
Frequently Asked Questions
Can my regular accountant audit my real estate trust account?
No. The auditor cannot be an estate agent, an employee of your agency, or someone who has worked with your agency in the past two years, and they must be a member of a recognised body such as Chartered Accountants Australia and New Zealand. Your everyday tax accountant may not meet these independence requirements, so always confirm their eligibility before engaging them.
What happens if I find a discrepancy after the audit report has already been lodged?
You are still legally required to act on it. If an auditor detects a shortage, the licensee must notify the regulator in writing within five days and retain the auditor’s report with trust records for the full statutory retention period. Discovering it yourself post-lodgement does not remove that obligation; report it, correct it, and document the timeline of when you found it.
How long do I need to keep real estate trust account records in Australia?
In most states, you are required to keep a copy of each signed audit report for seven years, and most state regulations require the same retention period for supporting records, including bank statements, receipts, and ledgers. Treat this as a minimum, not a target. Regulators can request records at any point during that window.
Related Articles:
