Monday, 29 November 2021
Implications for trust money in eConveyancing matters (including PEXA)
The Guidelines for trust account operations has been prepared by the ACT Law Society as a general guide for Canberra law firms. The Society acknowledges that PEXA is currently the only Electronic Lodgement Network Operator (ELNO) used by the legal profession in the ACT. In the future there are likely to be other ELNOs and this document will be updated accordingly at that time.
The PEXA system allows all users to generate a Settlement Completion Record and this supporting document will clearly identify the destination of funds. It is recommended that this record is kept with your client file so that your external examiner and the Society’s random inspectors are in a better position to examine the money flow of a conveyance transacted using PEXA.
Section 42(5) of the Legal Profession Regulation 2007 requires EFT payments out of the trust account to be recorded with required particulars which include the name and number of the account to which the amount was transferred and relevant BSB number.
Although a law firm may record the one payment transaction out of the trust account to PEXA, it is important that a firm has the necessary information stored to confirm who the ultimate payees were from the PEXA platform. The PEXA payment will often comprise of individual payments to various recipients for Stamp Duty, PEXA fee, state revenue offices etc.
Law firms may also investigate whether their trust accounting software system allows a firm to record individual components of the PEXA payment in the multi-column of the payments cash book, with the total PEXA payment still being recorded in the payment amount column of the payments cash book. The total amount would then reconcile with the EFT payment showing on the trust account bank statement.
ACT law firms completing e-conveyancing matters will be aware that they are required to register with PEXA, the Property Exchange Australia company that provides and operates the PEXA Electronic Lodgement Network.
All ACT law firms with an ACT trust account should have their ACT trust account registered with PEXA to complete any e-conveyancing matters.
ACT firms who do not have their own trust account will need to register to use the PEXA Source Account.
The PEXA Source Account is maintained by PEXA with an authorised deposit-taking institution within the meaning of the Banking Act 1959 (Cwlth), and the account is used by PEXA to receive and hold funds that are paid into that account for use in a settlement of a conveyancing transaction using the PEXA Electronic Lodgement Network.
If a law firm does not have their own trust account and funds provided by the purchaser are deposited into the PEXA Source Account, these funds are recognised as Power Money, as the law firm is being given the authority by the purchaser to disburse the funds pursuant to the purchaser’s instructions. For the vendor’s solicitor, funds received into the PEXA Source Account will be disbursed under the authority of the vendor’s solicitor pursuant to the vendor’s instructions. In both situations, the funds are then recognised as Power Money and therefore trust money, which will need an External Examination Report prepared each trust year, regardless of the fact that the law firm may not have their own trust account.
Effective from 16 November 2020, the ACT Council invoked Section 81 of the Regulations to allow an exemption from the need to lodge an external examiner’s report if the only Power Money received in a trust year was in relation to PEXA (or through any future electronic conveyancing platform).
The law firm must maintain a Register of powers and estates pursuant to section 61 of the Regulations.
In summary, along with section 67 of the Regulations, a law practice’s trust records are not required to be externally examined if the only trust money received or held by the law practice during a trust year is either or both of the following:
- Transit money
- Money received into or held in a PEXA Source Account (or any future electronic conveyancing system which may be available).
A law firm without a trust account that uses the PEXA Source Account, must include wording in their annual statutory declaration provided to the Society after the end of the trust year, that the only Power Money dealt with is that which is used in the PEXA platform (or any future electronic conveyancing platform).
Further information regarding Power Money can be found on the Society’s website.