Compliance Guide · Updated 18 May 2026
Lawyer Trust Account Rules, Australia
Australian law practices must hold client trust money in a separate statutory trust account at an approved ADI, reconcile it monthly, appoint an annual external examiner, and report any breach to the regulator immediately. This plain-English guide covers the Legal Profession Uniform Law (NSW + VIC) and state Legal Profession Acts, controlled money, breach reporting, and the common audit findings.
Step 1, Know your framework
Uniform Law vs state Legal Profession Acts
Trust money rules in Australia are substantially harmonised but not identical across jurisdictions. NSW and Victoria operate under the Legal Profession Uniform Law; other states retain their own Legal Profession Acts. Where you practise determines which instrument you comply with.
Legal Profession Uniform Law (NSW + VIC)
The Uniform Law and the Uniform General Rules govern trust money in NSW and Victoria. The framework defines trust money, requires it to be held in an approved deposit-taking institution (ADI) in the practice state, prescribes recordkeeping, monthly reconciliations, external examinations, and the duty to notify regulators of trust account opening, closing, and breaches.
Legal Profession Act 2007 (QLD)
Queensland retains its own Legal Profession Act. The substantive trust money obligations mirror the Uniform Law closely, separate trust accounts, monthly reconciliation, annual external examination by an approved examiner, and prompt breach notification to QLS. Operated alongside Lexon-administered PII.
Legal Practitioners Act 1981 (SA)
South Australia operates under the Legal Practitioners Act 1981 and LPEAC Rules. Trust money obligations are broadly aligned with the national pattern: approved ADI, separate ledger, monthly reconciliation, annual examination, breach reporting to the Legal Profession Conduct Commissioner and the Law Society of SA.
Legal Profession Act 2008 (WA)
Western Australia operates under the Legal Profession Act 2008. The Legal Practice Board administers trust account compliance directly. External examination is mandatory annually; specific WA rules apply to controlled money, transit money, and disbursements.
Other states and territories
Tasmania (Legal Profession Act 2007), ACT (Legal Profession Act 2006), and NT (Legal Profession Act 2006) each maintain frameworks closely aligned with the Uniform Law. Regulator is the relevant Law Society. Mutual recognition of external examiners is available but rules differ.
Step 2, Classify the money correctly
Trust money vs controlled money vs office money
Misclassification is the most common root cause of trust breach. The rules below define the categories used across the Uniform Law and state Acts.
Trust money
Money received by the practice in the course of legal practice that is held on trust for a client, settlement funds, retainer deposits, money received pending instructions. Goes into the statutory trust account.
Controlled money
Money received by the practice that the client directs be held in a separately designated account (e.g. interest-bearing term deposit). Held under written client authority; recorded separately to general trust.
Transit money
Money received with instructions to pay it onward, typically within a short period (often 5 business days under Uniform Law). Recorded but generally not held in the general trust account.
Power money
Money handled under a power of attorney from a client. Held separately and recorded in accordance with the power's terms, not in the firm's general trust account.
Office money (NOT trust)
Money belonging to the practice, paid fees, reimbursed disbursements, retainer fees already invoiced and authorised for transfer. Held in the office (operating) account, never the trust account.
Mixed money
A single payment containing both trust and office components (e.g. a cheque for a bill plus a top-up retainer). Must be banked to trust first then transferred to office, not split at deposit.
Step 3, Annual external examination
Appointing your external examiner
Every law practice that has received trust money during the year must appoint an external examiner, an accountant approved by the regulator, to examine the trust records and lodge an annual report.
Annual external examiner appointment
Law practices that have received trust money during the year must appoint an external examiner (typically a chartered or certified accountant on the regulator's approved list). Appointment is reportable to the regulator.
Examination period
Most jurisdictions use a 1 April to 31 March year for trust examination. The examiner's report is typically due by 31 May. Late lodgement attracts fines and PC renewal complications.
Examiner's report content
Reports include statement on compliance, opinion on trust records integrity, identification of any irregularities, and notification of any reportable matters. Modified or qualified reports trigger regulator follow-up.
Statutory deposit / interest
Most states require a statutory deposit of a portion of trust money to a Public Purposes Fund (or equivalent), with interest accruing to fund legal aid and disciplinary functions. Computation is automated by most practice management systems.
Step 4, Reconcile monthly
Monthly trust account reconciliation
Monthly reconciliation is non-negotiable. The trust bank statement, the trust ledger control account, and the sum of all client trust balances must agree at the end of every month.
| Reconciliation step | What it checks |
|---|---|
| Trust bank statement vs trust ledger | Bank balance per the trust account statement must reconcile to the trust ledger control account each month. Differences must be investigated and resolved promptly. |
| Client ledgers vs trust ledger control | The sum of every client's individual trust ledger must equal the trust ledger control account at month end. A 'list of trust balances' produced from the system substantiates this. |
| Outstanding deposits and presentations | Bank reconciliation accounts for deposits not yet credited and cheques drawn but not yet presented. These should clear within reasonable time, long-outstanding items are an audit flag. |
| Sign-off and retention | Monthly reconciliations must be reviewed and signed by the principal (or delegate) and retained for the period required by state rules, typically 7 years. |
Step 5, Avoid the common findings
Common audit and examiner findings
Every year, external examiners and Law Society audits identify a similar pattern of findings. Most are technical and quickly rectified, but each one extends the engagement and can convert into a discipline matter if repeated.
Late transfers from trust to office
Funds transferred to office without first issuing the bill or obtaining client authority. Even a 24-hour timing mismatch can be a deemed defalcation.
Missing or out-of-date client authority
Trust-to-office transfers require written client authority (often satisfied by a properly worded costs agreement). Examiners regularly find authorities that don't extend to the matter as it evolved.
Incorrect ledger entries
Errors posting to the wrong client ledger, double-entries, or unallocated receipts sitting in 'sundry' accounts. Most are honest mistakes but each one extends the audit timeline.
Trust account overdraft
An individual client ledger going into debit (overdrawn), i.e. the firm has paid out more than the client deposited. Strictly prohibited and a serious finding.
Failure to report breach within timeframe
Breaches must be reported to the regulator immediately, often within 7 days, sometimes within 14 days. Late breach reporting compounds the underlying breach.
Inadequate signing controls
All trust account signatories must be approved (typically Australian legal practitioners) and the firm must maintain segregation of duties around bank reconciliation and ledger entry.
Practical tips for principals and bookkeepers
Treat trust like a separate business
Mentally and operationally, the trust account is not your firm's money. Even a single accidental commingling can be a deemed defalcation. Many firms colour-code their trust statements and dashboards differently from office to make the separation instinctive.
Build the transfer workflow once
The safest trust-to-office workflow: deliver the bill, give the client the prescribed notice (e.g. 7 days), confirm authority is in place, then transfer. Practice management software can enforce this sequence and produce the audit trail automatically. Setting up trust is step five in our guide to starting a law firm in Australia.
Reconcile within 5 business days of month-end
Don't let reconciliations stack up. The longer between month-end and reconciliation, the harder it is to investigate discrepancies, and a small error today becomes a multi-month puzzle by audit time.
When in doubt, ring the regulator
State regulators have trust account inquiry lines staffed by experienced compliance officers. A 10-minute phone call before you act is always cheaper than rectification after the fact. They cannot give legal advice, but they can clarify interpretation of the rules.
Frequently Asked Questions
Do I need a trust account if I only do legal aid or in-house work?
No, if you never receive trust money, you don't need a trust account. The trigger is receipt of trust money. Many in-house counsel, government lawyers, legal aid solicitors, and barristers do not operate trust accounts. The moment you take a retainer deposit or hold settlement funds, however, you must have a trust account opened and notified to the regulator.
What is the difference between trust money and controlled money?
Trust money is held in the firm's general trust account at an approved ADI and recorded on individual client ledgers. Controlled money is held in a separately designated account (commonly an interest-bearing term deposit) at the client's written direction, typically for amounts that will earn meaningful interest over a longer holding period. Both are still 'on trust' for the client; the difference is the account location and the explicit client authority required for controlled money.
How often do I need to send trust statements to clients?
At least annually. Under the Uniform Law and most state Acts, a written trust statement summarising receipts, payments, and the closing balance must be provided to each client whose trust funds have been moved during the year, plus at matter completion. Many firms send statements quarterly or on every transfer as a client communication best practice.
What's the process when a breach happens?
Step 1: stop the bleeding, investigate, document, and rectify the breach (e.g. immediately deposit a shortfall from office). Step 2: report to the regulator within the prescribed timeframe (typically 7 to 14 days depending on state). Step 3: notify your external examiner. Step 4: notify the affected client, with appropriate legal advice on what to disclose. Step 5: notify your PII insurer if there is any prospect of claim. Concealment is treated more seriously than the original breach.
Can a non-lawyer (e.g. office manager) handle trust account banking?
Day-to-day data entry and bank reconciliation can be delegated. However, every withdrawal must be authorised by an Australian legal practitioner who is an approved trust account signatory. The principal (or another approved signatory) retains ultimate responsibility, delegation of execution is not delegation of accountability.
Which trust records does a law practice retain, and for how long?
Trust account records (receipts, payments, transfer authorities, monthly reconciliations, examiner reports, client ledgers, bank statements) must be kept for 7 years from the date of the entry or transaction. Records must be accessible, paper or electronic, and produced on demand to the regulator or examiner.
Run the rest of your practice in one place
OneBookPlus does not yet include statutory trust accounting, keep your dedicated trust product for that money. OneBookPlus handles everything else for Australian law practices: matter management, time recording, engagement quotes, GST-compliant invoicing, and client portals.
Rather look before you sign up? Open a live demo account with real data in it, or compare the AUD plans on the pricing page.
Reviewed by Bishal Shrestha
About the author
Bishal Shrestha
Founder & CEO, OneBookPlus
Bishal spent a decade running digital projects for Australian small businesses before founding OneBookPlus. He writes and maintains these pages, and publishes what OneBookPlus does not do alongside what it does.
Read the founder bioHow this page was researched
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