Complying with your trust account obligations as a credit licensee
This information sheet (INFO 136) is for holders of an Australian credit licence (credit licensees).
It explains how to meet your trust account obligations when you hold money received on behalf of another person in the course of providing a credit service: see section 97 of the National Consumer Credit Protection Act 2009 (National Credit Act), including:
- how to determine if the trust account obligations apply to you
- your obligations relating to the handling of trust account money
- completing and lodging your trust account statement and trust account audit report
- your obligations relating to the appointment of an auditor of your trust account, and their cessation, replacement and resignation
- the lodgement process and lodgement fees.
Under the National Credit Act, you must maintain a trust account if:
- you hold a credit licence that authorises you to provide a credit service
- in the course of providing that service, you or one of your 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.
If you receive trust money, you must:
- keep a trust account with an Australian authorised deposit-taking institution (ADI) (the ADI must be an Australian ADI as defined in section 9 of the Corporations Act 2001 (Corporations Act)) (section 98(2))
- designate the account’s title as your trust account (section 98(3))
- pay into the trust account any money received by you or your representatives on behalf of another person in your capacity as a credit licensee (section 99(1)), and
- only withdraw money from the trust account to pay a person who is lawfully entitled to that money (sections 99(2)–(3)).
Trust money is not to be used for the payment of any other debt or for any purpose other than the purpose for which it was collected. Criminal and civil penalties apply if trust money is withdrawn otherwise than in accordance with the National Credit Act.
Trust money held under an AFS licence
If you also hold an AFS licence and maintain a trust account to hold funds in the course of providing a financial service, you cannot use the same account to keep trust funds you receive as part of your credit service business, even if the same client is involved.
For each financial year that you operate a trust account, you must lodge:
- 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 multi-step process. First, you will need to complete and sign Part 1 of Form CL70, including trust account details for the financial year, and give this to your appointed auditor.
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: see the lodgement process below.
These forms must be lodged with us within three months after the end of the financial year to which they relate – that is:
- by 30 September if you are not a body corporate, or
- within three months after your financial year end if you are a body corporate (section 101).
A fee applies to lodging these forms: see Table 1.
Extensions of time
We may grant an extension to the usual time limits if you and your auditor make a request for an extension before your due date for lodging Forms CL70 and CL71. Our approval of such a request may be subject to conditions.
To request an extension of time, you and your auditor will need to submit a jointly signed letter that provides a reasonable explanation for why Forms CL70 and CL71 cannot be lodged within the required time. The letter should also specify the end date of the extension period you are seeking. The letter can be submitted in the same manner that you lodge forms: see the lodgement process below.
You must appoint an auditor within three months of the obligation to maintain a trust account applying to you. You must notify us within 14 days of appointing an auditor by lodging Form CL16 Australian Credit Licence – Notification of appointment of a trust account auditor. Fees apply to lodging Form CL16 after the due date and by mail or in person: see the lodgement process and Table 1 below.
Your auditor must be a person who meets the eligibility requirements set out in the National Consumer Credit Protection Regulations 2010 (National Credit Regulations). To meet these requirements, they must:
- be eligible to be appointed as an auditor under the Corporations Act (regulation 18)
- not owe money to, or be owed money by, you or a related body corporate (regulation 18)
- not be an employee, director or partner of you or of any other person carrying on a business that engages in credit activities (regulation 19), and
- not be carrying on a business that engages in credit activities (regulation 19).
There is no provision to appoint a firm of auditors. Your auditor can either be an individual registered company auditor, including a partner of a firm, or an authorised audit company.
For guidance on the way in which we will apply the provisions of the National Credit Regulations relating to the resignation and replacement of a credit licensee trust account auditor, see Regulatory Guide 26 Resignation, removal and replacement of auditors (RG 26), particularly RG 26.83–RG 26.87.
Your auditor’s appointment is continuous until:
- you are no longer required to keep a trust account
- they cease to engage in the business of being an auditor (e.g. they retire or the authorised audit company is wound up)
- they are unable to perform their duties as your auditor – for example, due to the auditor:
- falling ill
- being no longer eligible to be an auditor under the Corporations Act, or
- commencing their own credit business
- we approve the auditor’s resignation (an auditor can apply to resign by lodging Form CL18 Australian Credit Licence – Application for approval to resign as a trust account auditor)
- we approve your request to replace the person as an auditor (you can apply to replace an auditor by lodging Form CL17 Australian Credit Licence – Application for approval to replace a trust account auditor), or
- the auditor dies.
If a person ceases to be your auditor and you are still required to maintain a trust account, you must appoint another eligible person as your auditor within 28 days. You must also notify us of the appointment within 14 days of the appointment of the new auditor by lodging Form CL16.
Detailed guidance on how we will apply the provisions of the National Credit Regulations relating to the replacement and resignation of auditors of an Australian credit licensee’s trust account is in Regulatory Guide 26 Resignation, removal and replacement of auditors (RG 26), particularly RG 26.83–RG 26.87. A brief summary is provided here.
A credit licensee trust account auditor who wishes to resign, or a credit licensee that wishes to replace an auditor from office, must apply to ASIC for our consent.
In general, we will consent to the resignation or replacement of a credit licensee trust account auditor to take effect at any time of the year if:
- our criteria for consent are satisfied (see RG 26.17)
- all relevant supporting information is provided with the application (see RG 26.87).
However, we will generally not consent to the resignation or replacement of an auditor at any time of the year if:
- concerns are raised by the outgoing auditor about a disagreement with the licensee, including management or directors of a company that is a credit licensee (see RG 26.22–RG 26.27), and/or
- other evidence indicates that we should not provide our consent, including the outgoing auditor being made aware that their resignation or replacement may be connected with ‘opinion shopping’ (see RG 26.18–RG 26.21).
We will decide whether to consent to a resignation or replacement on the merits of each application.
If the auditor intends to resign, they must advise the credit licensee of their intention in writing. We will notify both the auditor and the licensee in writing when our decision has been made.
If the credit licensee intends to end the auditor’s appointment, the licensee must advise the auditor of their intention in writing. We will notify the licensee of our decision in writing. The licensee should give written notice of our decision to the auditor. Such notice should not be given until after the licensee has received notification of our decision.
An application may be lodged, using either Form CL17 or Form CL18 as applicable, at any time of the year subject to the requirements in RG 26. The auditor continues to hold office until consent has been granted. For this reason, auditor arrangements should not be changed before our consent is received.
We do not have the power to allow a resignation to take effect before the date on which we give consent, nor can we backdate our consent. You should lodge your application within a reasonable time so we can give due consideration to the information provided and arrive at a decision.
Generally, a reasonable time is at least three weeks before the intended date of change.
Applications that do not sufficiently address the matters referred to in RG 26, or that are incomplete or deficient, will not be assessed by us until all relevant information is provided. In this case, we will return the application to you with an ‘Intent to refuse’ letter, seeking correction of the deficiencies and asking for further information to support the application.
Lodge your forms by emailing completed and scanned copies to firstname.lastname@example.org.
If you are unable to lodge the forms by email, you can mail them to us at:
Australian Securities and Investments Commission
PO Box 4000
Gippsland Mail Centre VIC 3841
Or you can lodge in person at your nearest ASIC office.
However, an additional fee of $25 applies if you lodge the forms by mail or in person (this fee does not apply to a request for an extension of time to lodge Form CL70 and Form CL71).
The National Consumer Credit Protection (Fees) Regulations 2010 sets fees for certain chargeable matters and the manner in which they are lodged: see Table 1 below.
Late lodgement fees may also apply in addition to the lodgement fee. However, if an application for an extension is granted for the lodgement of a trust account statement and audit report, and you lodge the documents within the extension period, the late lodgement fees do not apply.
Additional fee for late lodgement - Within one calendar month of due date
Additional fee for late lodgement - One calendar month or more after due date
Lodgement of a trust account statement and audit report under section 100: Forms CL70 and CL71
Lodgement of notice of appointment of auditor: Form CL16
* If you are lodging your forms by mail or in person, add an additional $25 to the lodgement fee.
Where can I get more information?
Go to www.asic.gov.au/credit for the latest information on credit and to download copies of regulatory guides.
Download RG 26 Resignation, removal and replacement of auditors.
Subscribe to ASIC updates on credit at www.asic.gov.au/credit-update.
Contact ASIC on 1300 300 630.
Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances must be taken into account when determining how the law applies to you.
This is Information Sheet 136 (INFO 136), reissued in July 2016. Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.