Managing trust money
A law practice or an approved clerk that receives trust money must maintain a general trust account in Victoria. Penalties apply for failing to comply.
This requirement does not apply in which only controlled money or transit money (or both) are received, except where it is received in the form of cash. The trust account must be established and maintained in accordance with the Uniform Law, Uniform Rules and applicable regulations.
Can anyone else operate a trust account?
A law practice must not receive trust money unless a principal or legal director holds a practising certificate authorising the receipt of trust money.
If the authorised principal of the law practice or legal director is not available to sign a trust cheque or effect an electronic funds transfer, then any of the following may operate the trust account:
- An authorised Australian legal practitioner who holds an Australian practising certificate authorising the receipt of trust money
- Two or more authorised associates jointly (e.g. employed bookkeeper or practice manager).
The definition of ‘associate’ can be found in s6 of the Uniform Law.
Notifying the Board of a trust signatory
A law practice must give written notice of its associated who are authorised to sign cheques or effect electronic funds transfer.
When a law practice completes its annual trust examination it is required to give the Board written notice of the associates or Australian legal practitioners (including their names and addresses) who are authorised as at 1 July of that year to sign trust cheques or to effect an electronic funds transfer (see: rule 50(2) of the General Rules).
Statutory Deposit Accounts
Lawyers and approved clerks who maintain a trust account in Victoria must deposit a percentage of the trust money held into a statutory deposit account (SDA). This account is maintained within the Public Purpose Fund (PPF) and the amount is repayable on demand. The PPF generates income to pay for the regulation of the legal profession as well as providing an ongoing stream of funding support for a range of other legal bodies and programs. More information is available on our dedicated SDA page.
Deficiencies and irregularities in trust accounts
If a lawyer, associate of a law practice, approved clerk, external examiner or approved deposit-taking institution becomes aware of, or forms a belief that there is a deficiency or irregularity in any of the practice’s trust accounts or trust ledger accounts they must give written notice of this to the Board (see: ss 148 & 154 of the Uniform Law). This notification must include:
- the date on which the deficiency/irregularity occurred;
- the amount of money involved
- when/if it was rectified
- the reason it occurred
- any steps taken to reduce risk of it happening again
- any necessary supporting documentation.
A lawyer or an approved law clerk must also give written notice to us if they believe on reasonable grounds there is an irregularity in the trust account of a law practice or approved clerk that they are not associated with.
A lawyer, approved clerk or any other person is guilty of an offence if, without reasonable excuse, they cause a deficiency in any trust account or trust ledger account, or fail to pay or deliver any trust money.
These are serious offences carrying a maximum penalty of 500 penalty units or 5 years imprisonment or both.
Exemptions from trust regulations
The Board may exempt a law practice or an approved clerk from complying with any of the trust accounting obligations. See our Trust Account Regulations Exemptions Policy for further information.
You should apply in writing to the Board if you wish to apply for an exemption. Please note that in considering an application for exemption, the Board will take into account any adverse material known about your practice.
Guiding information to assist law practices prevent and deal with cybercrime is available on our dedicated preventing cybercrime page. This covers common types of cybercrime, what you can do to protect your business and what you should do if you experience cybercrime. There is also detailed information on multi-factor authentication, considerations around insurance and links to other agencies who can help.
Trust account recording-keeping
Records must be complete, up-to-date and compliant
Trust records should be kept in a complete, timely and accurate manner. Keeping proper records enables you to approach an audit or annual external examination with confidence and, more importantly, to give an accurate accounting for your handling of a client’s money.
Pick one format or the other
When it comes to the format of trust records, either a traditional paper ledger or specially designed trust accounting software are acceptable formats. However, we prefer and strongly recommend use of trust accounting software over paper ledgers.
An Excel spreadsheet or a Word document is not an appropriate format for trust records because of the ease with which such records can be altered. Keeping records in formats like these is in breach of Rule 40 of the Legal Profession Uniform General Rules 2015. You can use these tools to help you keep track of your office accounting, but not for permanent trust records.
Set yourself up for audit and record keeping success
If you have a digital practice management system that includes a trust accounting package, invest in training so that you can make the best use of it to save yourself time and confusion in the future.
There are several trust accounting software packages available. Before purchasing one of them, make sure it complies with Uniform Law requirements. Packages such as MYOB and Quickbooks do not comply with Uniform Law requirements for trust accounting due to the ability to alter records. However, you can use these packages for your office accounting.
The NSW Law Society has examined certain trust accounting software packages and certified them as compliant with the Uniform Law. We agree with that assessment. You can find details on their website.
Engage an expert who can convert your manual records to the computerised accounting system. This is a specialised task that, if not done properly, can result in inaccurate records and balances of client money from the manual records not matching up to balances in the computerised accounting system.
Work with your external examiner
Appoint an external examiner who is an expert in the record keeping format you want to use in order to save time and on the cost of your annual examination.
Keeping trust account records
Trust account records must be kept for a period of seven years after the last transaction entry in the trust record, or the finalisation of the matter to which the trust record relates, whichever is the later.