Real estate agency bookkeeping is fundamentally different from any other industry because a substantial portion of the money flowing through the agency's bank accounts does not belong to the agency. Rental collections, sale deposits, bond money, and vendor-paid advertising costs all sit in trust, governed by state-based property legislation that carries criminal liability for mishandling. A bookkeeper who does not understand the distinction between trust money and agency money, or who codes trust receipts as income, is not just making an accounting error — they may be creating evidence of trust account misappropriation.
Trust Account vs Business Account: The Core Distinction
Every licensed real estate agent in Australia is required by their state's property legislation to maintain a dedicated trust account, held with an authorised deposit-taking institution. In New South Wales, this is governed by the Property and Stock Agents Act 2002. In Victoria, by the Estate Agents Act 1980. In Queensland, by the Property Occupations Act 2014. The specific rules vary, but the core principle is uniform: money held on behalf of clients or customers must be kept in the trust account and cannot be commingled with the agency's operating funds.
Trust account receipts and payments never appear in the agency's profit and loss statement. They flow through the trust account and are settled to the appropriate party — the landlord, the vendor, the purchaser — net of any amounts owed to the agency (commission, management fees, maintenance recharges). Only when those agency amounts are formally drawn from trust and deposited into the agency's business account do they become income on the P&L.
The bookkeeper's practical scope is therefore two separate reconciliation processes: the trust account reconciliation (governed by legislation, often audited annually by a statutory auditor) and the business account reconciliation (standard accruals or cash bookkeeping for the agency itself).
How Commission Income Is Recognised and GST Applied
Sales commission income arises when the agency earns its fee on settlement of a property transaction. Under AASB 15, the performance obligation is satisfied at settlement — not at exchange of contracts, not at listing. If your client's commission agreement specifies that commission is payable on the earlier of settlement or 90 days after exchange, that contractual term governs the recognition date.
GST applies to the gross commission charged. If an agent charges a 2.2% commission on a $900,000 sale, the commission is $19,800 plus $1,980 GST, totalling $21,780. The full GST-inclusive amount is drawn from trust on settlement and deposited into the agency's business account, and the GST is remitted on the next BAS.
The journal entry on recognition:
- Debit Trust Account Payable — Vendor $21,780
- Credit Commission Income $19,800
- Credit GST Collected $1,980
Then on transfer from trust to business:
- Debit Business Bank $21,780
- Credit Trust Account Payable — Vendor $21,780
Property Management Fees vs Sales Commission
Property management is a recurring fee, typically charged as a percentage of rent collected (often 7–10% in most Australian markets, plus GST). The bookkeeping cadence is monthly: rent is collected into trust, the management fee is calculated, drawn from trust, and transferred to the business account. The balance is remitted to the landlord.
Management fee income is recognised monthly as services are rendered. The GST treatment is the same as sales commission — management fees are taxable supplies and GST applies at 10%.
The distinction matters for chart of accounts setup. Sales commission and property management fees should be separate revenue accounts, because the agency's gross margin on each stream differs significantly (sales commission involves higher variable costs — marketing, agent commissions — while property management is more recurring and margin-stable).
Trust Account Reconciliation: What the Bookkeeper Does
The trust account reconciliation is not a bank reconciliation in the conventional sense. It is a three-way reconciliation: the trust bank statement balance must agree with the trust cash book balance (the running ledger of all trust receipts and payments) and the total of all individual trust ledger balances (one ledger per client or transaction). The reconciliation must balance to zero — not to a profit figure. If the trust account shows a surplus, that is not income; it is unexplained money that should not be there.
Legislative requirements for trust account reconciliation vary by state. In NSW, agents must reconcile the trust account at least monthly. In Queensland, reconciliation must be completed monthly within 21 days of month-end. The reconciliation documentation is subject to annual audit by an approved auditor under the relevant legislation. Shortfalls in the trust account — even temporary ones caused by timing errors — must be reported to the relevant state authority.
The bookkeeper's role is to maintain the trust cash book accurately, ensure every receipt and disbursement is coded to the correct client ledger, and produce the three-way reconciliation on time. Errors found in the trust account must be corrected through approved adjusting entries, never by simply deleting transactions from the cash book.
GST on Advertising Recharges to Vendors
Real estate agents routinely recharge vendor-paid advertising costs — photography, print advertising, digital portal listings — to property vendors. The GST treatment of these recharges is a common source of confusion.
When the agency pays the advertising supplier directly, the agency claims the GST input tax credit (assuming the supplier's invoice is addressed to the agency and includes a valid ABN and GST registration). When the agency recharges the vendor for those advertising costs, the recharge is itself a taxable supply: the agency charges GST on the recharge amount and remits it on the BAS.
The net effect is that the agency is on the hook for GST on the recharge but has already claimed the input tax credit on the original purchase — so the GST is a wash unless the agency marks up the advertising costs. If the agency pays $2,200 (GST-inclusive) for photography and recharges the vendor $2,200 plus GST ($2,420), the agency has a GST liability of $220 on the recharge and a GST credit of $200 on the purchase — a net GST payable of $20 on the mark-up. If there is no mark-up and the recharge equals the cost, the net GST position is zero, but both sides of the transaction still need to appear in the BAS.
Vendor-paid advertising costs held in the trust account prior to disbursement to the advertising supplier are trust money and must not be coded as agency income. Only the mark-up — if any — and the agency's own commission are the agency's money.