{"id":20145,"date":"2026-10-19T16:19:14","date_gmt":"2026-10-19T10:49:14","guid":{"rendered":"https:\/\/befreeltd.com\/au\/?p=20145"},"modified":"2026-10-23T16:24:19","modified_gmt":"2026-10-23T10:54:19","slug":"australian-trust-accounting-rules","status":"publish","type":"post","link":"https:\/\/befreeltd.com\/au\/resources\/blogs\/australian-trust-accounting-rules\/","title":{"rendered":"A Practical Breakdown of Trust Accounting Rules Australian Law Firm Should Know"},"content":{"rendered":"\t\t
\n\t\t\t\t
\n\t\t\t\t\t
\n\t\t\t\t
\n\t\t\t\t\t\t\t\t\t

Trust accounting is one of the most sensitive parts of running a law practice because the money being held does not belong to the firm. At a broad level, trust money is money entrusted to a law practice in connection with legal services. The exact rules differ between states and territories (Trust accounting in NSW, Victoria and Western Australia falls under the Legal Profession Uniform Law, while other jurisdictions have their own legislation), but the principle is consistent: the firm must be able to show where the money came from, who it belongs to, how it has been handled, and what balance remains. For law firms, that means trust accounting needs to be treated as a separate control environment rather than an extension of ordinary bookkeeping.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

\n\t\t\t\t\t

Trust Money is Not the Same as Office Money\n<\/h2>\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\t\t\t\t\t

One of the first distinctions a law firm needs to make is whether money belongs to the practice or is being held on behalf of someone else. Where money is trust money, it cannot simply be treated as business income or used for ordinary operating expenses. It needs to be dealt with under the rules that apply in the firm’s jurisdiction.<\/p>

In NSW, for example, the Law Society explains<\/a> that trust money received by a law practice generally needs to be deposited into a general trust account unless a specific exception applies. The money must then be held for the person on whose behalf it was received.<\/p>
Type of Money<\/strong><\/td>How It Is Treated\u00a0<\/strong><\/td><\/tr>
Trust money<\/td>Money entrusted to a law practice in connection with legal services and subject to trust-money rules. This includes controlled money and transit money, which have specific handling and record-keeping requirements.<\/td><\/tr>
Office money<\/td>Money belonging to the law practice and available for ordinary business use<\/td><\/tr><\/tbody><\/table>

The key is to classify the money correctly when it is received. Fixing the treatment later is usually more difficult.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t

\n\t\t\t\t\t

Trust Records Need to Tell the Full Story<\/h2>\t\t\t\t<\/div>\n\t\t\t\t
\n\t\t\t\t\t\t\t\t\t

A trust account is not reliable simply because the bank balance looks right. The records should make it possible to trace each transaction back to the relevant client or matter. That includes money received, transfers made, amounts withdrawn, and the balance still being held. A sound record-keeping process should make clear:<\/p>