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The cost of holding client money is going up
Trust accounts were designed for a paper era. In 2025, they’ve become a magnet for administrative load, audit complexity, and regulatory exposure. Across Australia, agencies that receive and hold client money must comply with specific state or territory trust account rules and annual audits, on top of day-to-day reconciliations and record-keeping. For example, NSW, Victoria and Queensland each prescribe audit and reconciliation requirements, with penalties for non-compliance.
At the same time, the Tranche 2 anti-money laundering and counter-terrorism financing (AML/CTF) reforms will bring many real estate professionals inside Australia’s AML regime from 1 July 2026. What does this mean for agents in practice? Under the new rules, they have to implement more robust processes for monitoring customer activity and transactions and enrol with Australia’s financial intelligence agency, Australian Transaction Reports and Analysis Centre (AUSTRAC).
They must conduct Know Your Customer (KYC) checks and rigorous due diligence. A notable new expectation is for agents to identify suspicious transactions – a responsibility that traditionally fell on banks.
This will add identity checks, transaction monitoring, reporting, and seven-year record retention to their workload.
Put simply: If you keep running a traditional trust account, your operational costs (time, staff, audits) and regulatory costs (controls, monitoring, reporting) are poised to spike.
What makes trust accounts so resource-intensive?
1. Mandatory reconciliations and frequent audits
State and territory frameworks require regular reconciliation and formal audits to confirm that trust ledgers equal the balance of the bank account, that withdrawals are permitted, and that records meet statutory standards. Some states require annual trust audits and set out monthly reconciliation and verification obligations. These processes demand skilled staff, documentation, and back-and-forth with auditors. All of this eats up time and resources and requires unnecessary additional effort.
2. High manual workload and error risk
End-of-month often means line-by-line checks to match bank statements with ledgers, investigate dishonours or reference errors, fix misapplied receipts, and redraw reports. The more payment methods and parties in your ecosystem, the more exceptions and rework.
3. Enforcement exposure and reputational risk
Missed audits, shortages or record-keeping issues can trigger disciplinary action, fines or licence consequences – costly in time and reputation. Besides, the spate of recent trust account abuse and misappropriation of hundreds of thousands of dollars by a few rogue agents across Australia demonstrates how quickly failures around trust account management escalate.
4. Duplication with upcoming AML/CTF obligations
With Tranche 2, many agencies will need to do the following:
- Customer due diligence (CDD).
- Ongoing monitoring and assessment of customer activity for potential signs of money laundering.
- Analyse transactional patterns to identify suspicious payments.
- Long-form record-keeping. If you already maintain trust account records and then layer AML artefacts on top, your compliance stack, administrative workload, and costs multiply.
The rising regulatory bar: What Tranche 2 will require
From 1 July 2026, designated Tranche 2 sectors – including companies that conduct services related to the sale, purchase, and transfer of real estate – must implement an AML/CTF program. Core elements include:
- Enrolment and governance: Adopt a risk-based AML/CTF program with senior oversight.
- Customer due diligence: Verify clients’ identity and, where relevant, beneficial ownership; perform ongoing due diligence.
- Transaction monitoring: Detect unusual patterns; investigate and, where necessary, report suspicious matters.
- Reporting and record-keeping: Enrol with and submit prescribed reports to AUSTRAC and retain records for up to seven years.
Guides for real estate professionals encourage early preparation because building controls, training, and reporting pipelines take time.
A better operating model: Trust-free, automated rental payments
There is now a credible alternative to trust accounts: a trust-free property management model, where the agency does not receive or hold client money. Instead, a regulated payment platform like Managed orchestrates rent collection and disbursements directly between tenants, owners, and tradies using modern rails like fast bank transfers (via Osko), BPAY, credit cards, and direct debit. The platform records and reconciles every movement as it happens, with ledgers updating in real time.
Managed uses a payment gateway and banking security and practices to ensure that our customers are protected. It does KYC as well as AML checks on users. Bank accounts are never exposed but tokenised and held in payment card industry (PCI) compliant vaults.
Why this architecture matters
- No end-of-month manual reconciliation: There is no agency-controlled trust account to reconcile against a ledger; transactions are matched at source and posted automatically.
- Programmable disbursements: Rent is split (owner proceeds, fees, tradie invoices) via pre-defined rules, reducing exceptions and delays.
- Audit-grade data: Each payment is time-stamped, linked to a verified party, property, and tenancy, with immutable logs for auditors.
- Risk reduction: Removing agency custody eliminates a major control point for fraud/misuse, and it narrows the scope of trust account obligations imposed by states and territories because the agency is not holding client funds.
Note: Always confirm specifics with your auditor/regulator.
Tranche 2 AML/CTF readiness
Traditional model: You will need to build or upgrade customer due diligence, monitoring, reporting and retention on top of the trust account processes – creating parallel compliance workstreams.
Managed (trust-free + automated):
- Customer due diligence: Digital onboarding and identity verification link each payer and payee to transactions, supporting ongoing customer due diligence.
- Transaction monitoring: Real-time visibility of flows, anomalies (e.g., unusual amounts of rent paid, rapid reversals, new payee details), and alerts make continuous monitoring practical.
- Reporting and record-keeping: Exportable, immutable logs and standardised reports help satisfy seven-year retention and stricter reporting requirements.
- Governance and access controls: Role-based permissions, maker-checker approvals, and payee whitelisting align with AML/CTF program governance.
- Early preparation: Because records are structured and centralised, your AUSTRAC enrolment and program documentation are easier to implement ahead of 1 July 2026.
Talent, scalability, and owner experience
- Recruitment and retention: Removing the “month-end grind” reduces burnout and helps retain experienced staff in a tight labour market.
- Scale without headcount: Automation reduces back-office load and enables property managers to grow their rent roll.
- Happier owners: Faster, predictable disbursements and clear statements lift satisfaction and reduce “where is my payment?” tickets.
Side-by-side: Trust account versus trust-less platform
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Note: State trust account and audit rules remain relevant where the agency does hold funds; always confirm your operating model with your auditor/regulator.
What to do next
- Map how money flows today. Identify where you “receive” or “hold” funds and the manual steps that create exceptions.
- Engage your auditor early. Explain the trust-free flow and confirm how state trust account obligations apply if you don’t hold funds. Use their guidance to update your procedures.
- Plan for Tranche 2. Draft your AML/CTF risk assessment and program outline, leaning on platform data for CDD, monitoring, and retention. Target readiness ahead of 1 July 2026.
- Pilot, then scale. Run a controlled rollout; measure exception rates, time saved, and owner satisfaction.
Compliance headaches quashed with trust-free property management
Continuing to operate a traditional trust account means absorbing rising operational costs (manual reconciliation and audit effort) and new regulatory costs (Tranche 2 AML/CTF). A trust-free, automated platform like Managed has compliance built in. It removes the reconciliation burden, streamlines audits with exportable, audit-grade data, and embeds the controls you need to meet AML/CTF obligations from 1 July 2026 – all while improving staff experience and owner outcomes.
To find out if Managed can help drive your rent roll growth book a discovery meeting
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