Trust accounting is the part of running a real estate agency that most principals wish was someone else’s problem. It isn’t optional, it isn’t something you can approximate, and it doesn’t care how busy settlement season is. Every state and territory in Australia has legislation that dictates exactly how client money must be held, recorded, and reconciled — and the penalties for getting it wrong run from licence suspension to criminal prosecution.
This post covers the specific bookkeeping obligations that make real estate agency finances different from any other small business: trust accounting, commission reconciliation, property management disbursements, and payroll under the Real Estate Industry Award 2020. If you’re a principal trying to understand what’s actually required — or a property manager who’s been handed the trust account reconciliation with no real training — this is the practical breakdown.
What trust accounting actually requires — state by state
The legislation differs by state, but the core obligations are consistent across Australia. If your agency holds money on behalf of clients — rental receipts, sales deposits, bond monies, or any other client funds — you must maintain a separate statutory trust account. This account cannot be used for agency operating expenses. Not even temporarily. Not even if you’re short on float.
The governing legislation by jurisdiction: Property and Stock Agents Act 2002 (NSW), Estate Agents Act 1980 (VIC), Property Occupations Act 2014 (QLD), Real Estate and Business Agents Act 1978 (WA), Land Agents Act 1994 (SA), Property Agents and Land Transactions Act 2016 (TAS), Agents Act 2003 (ACT), Agents Licensing Act 1979 (NT). Each requires a trust account audit within three months of financial year end, conducted by a registered approved auditor.
Monthly trust account reconciliation — what’s actually required
The reconciliation must balance three things against each other every month:
- Trust bank account statement balance
- Trust receipts and payments journal totals
- Individual client ledger trial balance (sum of all client balances)
All three must agree. Any discrepancy — even a few dollars — requires investigation and a written explanation before the reconciliation can be signed off.
Commission reconciliation — the GST problem most agencies get wrong
Commission income is not uniformly taxable in Australia, and the distinction matters for every BAS you lodge. Residential property sales commissions are input-taxed supplies under the GST Act — the vendor is not charged GST on the commission, and the agency cannot claim GST input tax credits on expenses directly related to those sales. Commercial property sales commissions are taxable supplies — GST applies at 10%, the agency charges GST to the vendor and can claim input tax credits on related expenses.
Property management fees are taxable supplies regardless of whether the property is residential or commercial. So a typical property management agency has two streams of income with different GST treatment running through the same accounts. Mixing them up on your BAS means either underpaying or overpaying the ATO — both create problems on audit.
Within the trust account, commission deductions work like this: when a sales deposit or settlement is received into the trust account, the commission is calculated, a fee authority is issued to the vendor, and the commission amount is transferred from the trust account to the agency’s operating account. This transfer must be documented with the correct authorisation at the time — it cannot be backdated or approximated.
⚠ Common error
Coding all commissions as taxable
Agencies that sell both residential and commercial property frequently code all commissions as taxable supplies and collect GST from residential vendors — which they’re not entitled to charge. The ATO can require the agency to remit the incorrectly charged GST whether or not they can recover it from the vendor. Separate income codes for residential and commercial commissions from day one.
Property management end-of-month: where the reconciliation pressure is highest
End-of-month is the most operationally intensive part of real estate agency bookkeeping. Rental receipts have been coming into the trust account throughout the month. At end of month, each property’s ledger needs to show: total rent received, management fee deducted (at the agreed percentage), any maintenance invoices paid on behalf of the landlord, advertising or letting fees, and the net disbursement amount remitted to the landlord.
Every one of those line items must be in the trust account journal with the correct client reference before the disbursement run. Then the disbursements go out, the landlord statements are generated, and the trust account reconciliation is performed for the month. In a busy agency managing 200+ properties, this is not a light process — and it happens every month, not once a year.
The ATO’s position on residential rental management fees is that they are taxable supplies. Management fees are subject to GST. The rent itself that flows through the trust account is not the agency’s income — it’s the landlord’s money passing through. Only the management fee is the agency’s revenue.
The annual trust account audit — what the auditor actually checks
The annual audit is not a formality. Approved auditors are required to check every reconciliation performed during the year, test a sample of individual transactions, verify that receipts were banked promptly, confirm that fee authorities existed before commission deductions were made, and check that the trust account was never overdrawn and no client’s ledger went into debit.
Auditors file their reports with the relevant state regulator — NSW Fair Trading, Consumer Affairs Victoria, the Queensland Office of Fair Trading, and equivalents in other states. An adverse audit finding is not a private matter between the auditor and the agency. Regulators can investigate, issue licence conditions, or refer matters for prosecution.
The agencies that sail through audits do one thing consistently: they maintain clean monthly reconciliations throughout the year. The agencies that scramble are the ones who treated trust accounting as a backlog item and tried to reconstruct months of records in the weeks before the audit deadline. There is no shortcut that fixes that retroactively — the dated journal entries and dated reconciliation sign-offs either exist or they don’t.
Payroll under the Real Estate Industry Award 2020
Real estate agency staff — sales agents, property managers, leasing consultants, and administrative staff — are covered by the Real Estate Industry Award 2020 (MA000106). This award includes base rates, commission structures, car allowances, overtime penalty rates, and junior employee wage scales.
Commission-based arrangements for sales agents require careful setup. A sales agent who earns commission only must receive at least the award minimum base rate for any pay period in which commissions don’t exceed that minimum — the shortfall must be made up. Commission drawn in advance against future settlements is not wages; it’s a drawing arrangement, and how it’s accounted for in the books affects both payroll and P&L.
Car allowances under the Real Estate Industry Award are payable to agents who use their own vehicle for work purposes. The allowance rate is set by the award and updated annually. Using a flat annual figure from three years ago is a common error that creates underpayment liability. From 1 July 2026, Payday Super requires superannuation to be paid every pay cycle rather than quarterly — agencies running commission-based payroll need their processes ready before that date.
What FreeMyCloud handles for real estate agencies
Trust Account
Monthly reconciliation, client ledgers, audit-ready records year-round
Commissions
Correct GST split across residential and commercial transactions, BAS-ready
Disbursements
End-of-month PM disbursements processed, landlord statements prepared
Payroll
Real Estate Award rates, car allowances, commission structures, STP Phase 2
Choosing software that handles trust accounting properly
Property management platforms — Property Tree, Console Cloud, PropertyMe, and Palace — have trust accounting built in. They generate the trust journals, produce the reconciliation reports, and create the audit trail automatically. The accounting software (Xero, MYOB, or QuickBooks) sits alongside the property management platform and handles the agency’s own P&L: management fee income, commission income, operating expenses, payroll, and BAS.
The connection between the two systems matters. Disbursement reports from the property management platform need to flow into the accounting software accurately and on time. Management fees, letting fees, and other agency income need to land in the right income accounts with the right GST treatment. A bookkeeper who works across both platforms — not just one — is what makes that integration reliable.
If you’re running a sales-only agency without a property management book, the trust accounting obligations are simpler (sales deposits and vendor payments) but the commission reconciliation and GST treatment remain exactly the same. Xero handles this well with tracking categories set up for residential versus commercial transactions. Our bookkeeping service for real estate agencies covers both sales and property management structures.
What goes wrong when trust accounting isn’t done properly
The most common failures aren’t dramatic fraud — they’re administrative drift. Reconciliations that fall a month behind. Commission deductions made without a signed fee authority. Maintenance invoices paid from the trust account and not recorded against the correct landlord ledger. A bank fee debited to the trust account (which is not permitted — bank fees must come from the operating account). Each of these is a technical breach under state legislation, even if no client money was actually lost.
Regulators have become more systematic about auditing agency trust accounts, particularly in NSW and Victoria. An adverse audit report triggers a compliance investigation regardless of whether there was any financial harm. Licence conditions, additional audit requirements, and public register entries are real consequences. The reputational damage in a small-agency market where vendors and landlords check these things is significant.
The fix is consistent process, not heroic end-of-year recovery. Monthly reconciliations signed off within a few days of month end. A clear separation between trust account transactions and operating account transactions. A bookkeeper who understands real estate agency compliance — not just Xero. Use the savings calculator to see what outsourcing your agency bookkeeping costs, or contact us to discuss your specific setup.
Any licensed real estate agent in Australia who holds money on behalf of clients — rental receipts, sales deposits, bond monies, or other client funds — must maintain a statutory trust account under their state’s legislation. Agencies that only provide consulting or advisory services and never hold client funds may be exempt, but this is uncommon in practice. Check the requirements under your state’s licensing legislation.
Monthly, under the legislation in all Australian states and territories. The reconciliation must balance the trust bank account statement, the trust receipts and payments journal, and the individual client ledger trial balance. Any discrepancy must be investigated and documented. A dated, signed-off reconciliation for every month of the year is what the annual auditor expects to see.
It depends on the property type. Commissions on residential property sales are input-taxed — GST does not apply, and the agency cannot charge GST to the vendor. Commissions on commercial property sales are taxable supplies — GST applies at 10%. Property management fees are taxable supplies regardless of whether the property is residential or commercial. Getting this wrong on your BAS creates ATO liability.
The Real Estate Industry Award 2020 (MA000106) covers sales agents, property managers, leasing consultants, and administrative staff at real estate agencies. It includes base pay rates, commission structures, car allowances, overtime penalty rates, and junior employee wage scales. Commission-only arrangements must still meet the award minimum for any pay period where commissions fall short of that minimum.
A registered approved auditor reviews every monthly reconciliation, tests a sample of individual transactions, checks that receipts were banked promptly, verifies that fee authorities existed before commission deductions were made, and confirms the trust account was never overdrawn. The audit must be completed within three months of financial year end in most states, and the auditor’s report is filed with the relevant state regulator.
