Trust accounting compliance for Australian law firms
Every Australian law practice that receives money on behalf of a client must operate a general trust account in accordance with the Legal Profession Uniform Law (or the equivalent state Legal Profession Act). Trust money must be kept separate from firm money, recorded accurately, reconciled monthly, and audited annually.
Coverage
Any law practice in Australia that receives trust money — from small sole practitioners to national firms. Obligations apply in NSW, VIC, WA and the other Uniform Law and non-Uniform Law states, with minor procedural differences.
Legal basis
Legal Profession Uniform Law (Application Acts in NSW, VIC and WA) and the Legal Profession Uniform General Rules 2015. Equivalent trust accounting rules apply under state Legal Profession Acts in QLD, SA, TAS, ACT and NT. Regulated by each state or territory Legal Services Commissioner and the Legal Services Council.
The obligations
Maintain an authorised general trust account
Open and operate a general trust account at an approved authorised deposit-taking institution (ADI) in the name of the law practice and clearly identified as a trust account.
Deposit trust money promptly
Bank trust money into the general trust account as soon as practicable after receipt — normally the same or next business day.
Keep trust money strictly separate from firm money
Never mix trust money with office or firm money. Operational expenses must not be paid from the trust account and trust money must not fund the practice.
Maintain accurate trust records for each client
Record every receipt, payment and transfer in a trust cash book and a matter ledger for each individual client, showing the running balance at all times.
Reconcile the trust account monthly
Prepare a written reconciliation of the trust bank statement against the trust cash book and matter ledgers within 15 working days after the end of each month.
Only withdraw trust money in authorised circumstances
Trust money may only be withdrawn to pay it to or on behalf of the client, or to pay legal costs after a compliant bill and required notice period.
Issue trust receipts and keep supporting documents
Provide a written receipt for trust money received, and keep source documents (bank statements, cheque butts, electronic transfer records) for at least seven years.
Appoint and supervise authorised signatories
Only an Australian legal practitioner or approved clerk may authorise trust withdrawals. Dual authorisation controls should be in place for electronic payments.
Notify any irregularity or suspected deficiency
Report any deficiency, defalcation or suspected irregularity in the trust account to the designated local regulatory authority as soon as the firm becomes aware.
Submit to an annual external examination
Appoint an approved external examiner to audit trust records each financial year and lodge the examiner's report with the designated local regulatory authority.
What happens if you do not comply
Breaches of trust accounting obligations can lead to disciplinary action by the relevant state Legal Services Commissioner, suspension or cancellation of a practising certificate, civil penalties, claims against the Fidelity Fund, and in serious cases criminal charges.
Reporting requirements
An external examiner's report must be lodged annually with the designated local regulatory authority (typically the state Law Society or Legal Services Commissioner). Any trust account irregularity must be reported as soon as it is identified.
What firms should do today
- Document the firm's trust accounting policy and train every fee earner and support staff member on it
- Require dual authorisation for all electronic trust payments and keep a clear separation of duties between bookkeeping and signing
- Reconcile the trust account by the 15th of each month and have the reconciliation reviewed by a principal
- Engage an approved external examiner early and give them clean records well before the annual deadline
- Retain trust records — including emails authorising transfers — for at least seven years in a searchable format
Compliance with Quillio
Quillio runs entirely on Australian-hosted infrastructure and keeps client matter records, trust correspondence and file notes inside a sovereign environment — useful when regulators review how the firm stores records supporting trust transactions. See /resources/security.
This guide is general information about trust accounting obligations only and is not legal or compliance advice. The specific rules differ slightly between Uniform Law and non-Uniform Law states. Firms should obtain advice from their state regulator or an experienced trust accounting specialist.
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