Practice Management

A. The banks say cheques will clear in three to five days. We advise it’s best to know the status of the funds deposited before any trust payments associated with these funds are made.

• This may be done by purchasing a special clearance for the cheque, or
• Waiting the full five days for the cheque to clear then contact the bank to ensure this has occurred.

The cost of the special clearance can be passed onto the client if the client has requested the payout of the funds.

A deficiency will arise if the payment is made and the cheque is dishonoured. The practitioner is then responsible for the restoration of this deficiency.

A. These deposits are usually direct deposits by clients into the general trust bank account. They may be treated as follows:

• Record in the trust bank account reconciliation as Deposits Not in the Cashbook; or
• Receipt and record in the cashbook and allocate to a suspense account in the trust ledger. When the client details are ascertained, the deposit should be transferred to the correct account by the transfer journal.

A. No. Under Regulation 3.3.9 a receipt should be recorded as soon as practicable after the receipt of the trust money. A receipt does not have to be issued to the payer unless they request it.

A. Yes. Under Regulation 3.3.9(3)(b), a trust receipt is required for direct deposits of trust money. This should be made out as soon as practicable after the practitioner receives or can access notice or confirmation of the deposit from the authorised deposit-taking institution (ADI) concerned.

A. Yes, you can do this by arranging to have settlement cheques made payable to your client, and have clients provide settlement and disbursement cheques. This means that you will only ever receive transit cheques and therefore no trust money is required to be banked.

If you receive transit moneys you will not be required to open a general trust bank account, or have an external examination. However you are required to hold a practising certificate authorising you to receive trust money.

A. Cheques not presented on bank statements within 15 months are considered to be stale. They should be reversed in the cashbook and written back into the trust ledger.

If the client to whom these funds belong cannot be located, the funds should be treated as unclaimed moneys and sent to the State Revenue Office.

A. Dormant balances, which cannot be returned to clients because the clients cannot be located, should be treated as unclaimed moneys and sent to the State Revenue Office.

A. Information ad lodging particulars are found at the State Revenue Office website

Practitioners or firms may deduct reasonable expenses (advertising, bank fees, stationery and postage) from any claimant or from the balance when lodging with the Registrar.

A. The Law Institute of Victoria does not recommend any particular trust accounting software; the choice of the software is a matter for the practitioner.

There is a Trust account online package available online for the Law Institute of Victoria Limited. Order now (pdf)

A. Regulation 3.3.12(3) requires that cheques must be signed by:

• an authorised principal of the law practice; or
• an authorised legal practitioner associate, if a principal is not available; or
• an authorised legal practitioner who holds an unrestricted practising certificate authorised to receive trust money; or
• two or more authorised associates jointly.

“Authorised” means authorised by the law practice (Regulation 3.3.12(12)). See also section 1.2.4 of the Legal Profession Act 2004 (pdf) for the definition of an “associate”.

Remember: The principal or partner is ultimately responsible for trust moneys. Strong internal controls should be in place before the actual signing of the trust cheque.

A. No bank charges should be debited to the general trust bank account.

The bank should be contacted and asked to reverse the charges out of the general trust account.

An arrangement should have been made with the bank, when the general trust account was opened, providing for all charges associated with trust account transactions to be debited to your office or general account.

A. A deficiency is created in the general trust account, see section 3.3.21. You should write an office a/ccheque for the amount of trust money incorrectly banked. Deposit this in the general trust bank account as soon as possible. Report the deficiency to the Legal Services Board (section 3.3.22) advising the date of the incorrect banking, the amount, and the date on which the trust account deposit was made to restore the deficiency.

A. In order to receive trust money you are required to hold a practising certificate authorising the receipt of trust money.

To vary your current practising certificate you are required to complete a Variation to Practising Certificate Course approved by the Legal Services Board.

Upon completion you can vary your practising certificate to a practising certificate (authorising the receipt of trust money) and open your general trust bank account.

Your general trust bank account should include the name of the law practice and the expression “law practice trust account” or “law practice trust a/c”.

A. Under the Financial Transactions Reports Act 1988 and AUSTRAC Guideline No. 6, the onus is on the solicitor, the solicitor corporation or a partnership of solicitors to report transactions that are:

• suspicious,
• of $10,000 or more in cash or foreign currency equivalent, and
• feature instructions for international funds transfer.

These transactions should be reported on a form supplied by AUSTRAC.

Australian Transaction Reports and Analysis Centre (AUSTRAC)
PO Box 5516
West Chatswood NSW 1515
Phone 1800 021 037
Fax (02) 9950 0883

A. Under section 3.3.11 of the Legal Profession Act 2004, a general trust bank account can only be established in an authorised deposit-taking institution (ADI) in Victoria. The ADI must be party to an arrangement with the Legal Services Board under section 3.3.59. The following are ADIs:

• ANZ Bank
• Bank of Queensland Ltd
• Westpac Bank
• Bendigo Bank
• Macquarie Bank
• Commonwealth Bank
• St. George Bank
• National Australia Bank
• Bankwest.

Bank accounts in Victoria, in a foreign currency, are not authorised in Victoria.

A. No. You need to upgrade your practising certificate and open a general trust bank account.

A. Yes. You can withdraw the legal costs as per:

• S. 3.3.14 of the Legal Profession Act 2004, and
• Regulation 3.3.34.

A. A practitioner should maintain the following trust records:

1. Trust account receipts
2. Trust pay-in books
3. Trust account deposit records
4. Trust account ledgers
5. Cash books
6. Transfer Journal
7. Trust reconciliation statements
8. Cheque butts or cheque requisitions and bank statements
9. Controlled money client statements
10. Controlled money receipts
11. Controlled money written directions
12. Register of controlled money
13. Monthly statement of controlled money balances
14. Files relating to trust transactions
15. Register of Investments
16. Printed record of EFT (payments)
17. Register of powers and estates
18. Bills and client statements of account
19. Back-up of computerised trust accounting system

These records should be retained for seven years, as required by regulations 3.3.36 and 3.3.37.

A. Trust account record-keeping materials are available from the LIV Bookshop.

A. No. Under Regulation 3.3.12(2) & S 3.3.14A cash payments are prohibited.

A. Regulation 3.3.13 provides for practitioners using electronic fund transfers from the trust account, given the appropriate records are maintained.

Remember: The same internal controls must be implemented for electronic fund transfers, as those adopted when signing trust cheques. The control of password security by a practitioner is just as essential as signature security on a cheque.

A. The Regulations require that trust records be retained by a law practice for seven years (section 3.3.25 of the Act and regulations 3.3.11, 3.3.24, 3.3.36 and 3.3.37).

A. Yes. Under rule 36.1 of the Professional Conduct and Practice Rules 2005, a practitioner must ensure each part of the legal practice is carried on or effectively supervised by a legal practitioner at all times.

A. Details regarding statutory deposit requirements are contained in division 6 of part 3.3 of the Legal Profession Act 2004. They include:

• Section 3.3.63 – calculation of the statutory deposit.
• The requirement to carry out the calculation each quarter (a deposit is not required in a quarter if the calculation is less than $10,000).

The Legal Services Board can monitor the balance in your general trust bank account and the balance in your statutory deposit account and request further deposits if necessary. Questions regarding the statutory deposit should be directed to the Legal Services Board (phone: 03 9679 8000).

For more information, practitioners are recommended to refer to the Q&A Guide to complying with the Legal Profession Act 2004.