What is a Trust?
Unlike a company or an individual, a trust is not considered a legal entity or a person. It is, by definition, a relationship that is recognised and enforced by the court of law in the context of their “equitable” jurisdiction.
Australian courts very strictly enforce the nature of a trustee’s obligations to the beneficiaries. The trustee is the legal owner of the relevant property, and must use the property only for the benefit of the beneficiaries. Trustees have a fiduciary duty towards beneficiaries that is enforced rigorously by the courts.
Do Trust Audit Obligations Apply To You?
Under the Australian National Credit Act, a trust account must be maintained if:
- An individual holds a credit license that authorises them to provide a credit service
- During the course of this service, the individual or one of their representatives receives money on behalf of another person.
Examples of receiving money on behalf of another person in the course of providing a credit service include, but are not limited to:
- Collecting funds from a customer to cover valuation fees payable to the credit provider or valuation company
- Collecting application fees on behalf of the credit provider.
If the payment is made directly in favour of the other person (such as a cheque or money order) and you are only forwarding the means by which payment is being made, you are not required to maintain a trust account.
If you hold money on trust, but not in the course of providing a credit service (e.g. because of obligations under an Australian financial services (AFS) licence), the trust account obligations under the National Credit Act do not apply.
Completing and Lodging Your Trust Account Audit Report
For each financial year of operation, a trust is obligated to provide:
Form CL70 Australian Credit Licence – Trust account statement
Form CL71 Australian Credit Licence – Trust account audit report, prepared by an eligible auditor (section 100).
Completion and lodgement of these forms is a process with several steps. First, Part 1 of Form CL70 is to be filled out and signed, including trust account details for the financial year. This form must be given to your designated auditer.
After auditing Part 1 of Form CL70, the auditor should give you the completed and signed Form CL71.
After you have received the Form CL71 from your auditor, you must complete and sign Part 2 of Form CL70 and then lodge these two forms, together, with ASIC.
Forms must be submitted within three months after the end of the corresponding financial year.
What are the Auditor’s Obligations?
The auditor must meet the eligibility requirements set out in the National Consumer Credit Protection Regulations 2010 (National Credit Regulations). The obligations are:
Eligibility to be appointed as an auditor under the Corporations Act (regulation 18)
To not owe money to, or be owed money by, you or a related body corporate (regulation 18)
To not be an employee, director or partner in a business that engages in credit activities (regulation 19)
A firm of auditors cannot be appointed. Your auditor can either be an individual registered company auditor, including a partner of a firm, or an authorised audit company.
Comprehensive Auditing Services for Trusts
Brown Auditing Services is well-versed in compliance and audit norms related to all kinds of trusts in Australia. Contact us or visit our website to know more about our extensive work with trusts and our current clients.