One common question is:

Why do I need a separate trust ledger when I’m already recording this information in my business ledger?

Below, we clarify why these additional administration and record-keeping requirements are necessary and what it’s actually designed to do.

Please note that it’s also a mandatory requirement to keep compliant trust records, including a separate trust ledger. Some software is still catching up, but this is what we’re working towards.

WHAT IS A TRUST LEDGER? 

A trust ledger is a specific record that tracks all entitlements to trust funds – ie. who is entitled to what from a trust account.

The trust ledger consists of separate sub-ledgers for each beneficiary, the trustee and the bank account itself.

HOW IS IT DIFFERENT FROM A GENERAL BUSINESS LEDGER?
Unlike a regular business ledger, which records all financial transactions for a company, a trust ledger only tracks changes to entitlements for a specific trust account.

Yes, a separate ledger is required for each trust account.

WHY IS A TRUST LEDGER REQUIRED?

Keeping a trust ledger is important because it creates a clear, accurate record of trust money, protecting the rights of subcontractors and others who should be paid from that trust.

A trust ledger (and the trust account) is there to protect subcontractor entitlements in the instance of an insolvency.

The funds are safeguarded in a separate account and the trust ledger tracks entitlements for those funds, and those funds alone.

The trust ledger helps the trustee to know who is entitled to what from the trust account, at any point in time.

WHEN DO I NEED TO UPDATE THE TRUST LEDGER AND WITH WHAT INFORMATION?

The trust ledger must be updated within 3 business days of a “transaction”, that is an event or change that impacts a beneficiary’s entitlement.

Transactions include: receiving a payment claim, issuing a payment schedule or RCTI, being paid by the client, paying beneficiaries or transferring retentions into the retention trust account and topping up or withdrawing funds from the account.

WANT TO KNOW MORE?

Download the detailed Trust Account Ledger factsheet – link below. 

Or contact us to see an example ledger or to find out what software can assist with trust account compliance.