The mere mention of the word ‘strata’ is enough to have some agents running for the hills. But with the increase of apartment living in Australia, agents may wish to start looking at strata as another area to expand their business.
So what is different between strata trust accounting vs normal real estate trust accounting?
When it boils down to it, not really that much. It’s still money in, money out. However, there are some differences that you need to be aware of, particularly in NSW.
We’ll explain some of the characteristics of each to help provide an understanding and make strata sound a little less scary.
Real Estate Trust Accounts
The top key unique identifiers of a real estate trust account include:
- The account name is in the name of the Corporation license. It will contain the words ‘trust account’. For example: My Real Estate Pty Ltd T/as Best Agency Trust Account
- Each trust account is registered and has a UID number from Fair Trading.
- A trust account does not earn interest for the agency or its clients. Interest earned on trust accounts is used for the relevant statutory Compensation Fund.
- The account is subject to mandatory annual audits. They are performed on each trust account, such as rental and/or sales trust.
- Reconciliations must occur within prescribed time frames. Check your State legislation for deadlines.
- Landlord receive monthly statements from the trust account software.
- Receipting is performed daily to keep up with the volume of transactions in and out of the trust account.
The top key unique identifiers of a strata trust account include:
- The account name is held in the name of the Owners Corporation (OC) or Body Corporate and managed by the agency.
- The type of account is a ‘joint account’ similar to an IBD account. This means the interest goes back to the Owners Corporation – not the Compensation Fund.
- The account does not contain the words ‘trust account’. You would generally see something similar to: My Real Estate Pty Ltd ATF: Strata Plan 123456
- There’s no ‘end of month’. You do not remit funds like you do in Property Management. However may still need to do a ‘close period’ on your monthly reporting. This is also dependent on the software package you use.
- Levies are typically sent on a quarterly basis to lot owners. This is also dependent on which state you are in and the agreement between the Owners Corporation.
- Receipting occurs on a quarterly basis. There may be other items that you need to receipt on an ad-hoc basis, including purchase of keycards or garage remotes.
- You still need to reconcile each OC account that you manage within the prescribed timeframe. Again, check your State legislation.
- Audits are mandatory where there are more than 100 lots, or the annual budget is above $250,000.
- In NSW, the OC may vote and elect to have the account audited by an independent auditor. This is at their own cost.
- The agency may need to complete an audit on their overall trust accounting practices. An auditor may randomly select 10 Strata Plans and conduct an audit on the practices of all the accounts. This can include checking timeframes for reconciliations, maintenance of records, banking of cheques etc.
- Individual OC accounts do not need an UID registration. Each individual agency however may need a UID to meet compliance in NSW.
If you are looking to expand your business and upgrade your license to include a strata license in NSW, contact our friends at ACOP. They will be more than happy to get you on your Strata way.
– Jane Morgan is the Director of End of Month Angels, a consultancy firm specialising in Trust Accounting. Jane knows the legislative requirements of running a successful Real Estate office through her 20 years industry experience. Don’t trust just anyone with your trust accounting. Book an appointment with an End of Month Angel today.