APES 310 Client Monies: What Your Practice Must Do

APES 310 requires members in public practice to safeguard client money, transact on the client’s authority and keep auditable records. A practice trust account also needs regular reconciliation and an annual independent compliance audit.

APES 310 in Brief: Money That Belongs to Your Client

APES 310 Client Monies is the Accounting Professional & Ethical Standards Board’s (APESB) standard for members who receive, hold or control clients’ money. It binds members of professional bodies that adopt it, including CPA Australia, CA ANZ and the Institute of Public Accountants.

Keep money received for clients in a separate trust account, unless you operate their own bank account under authority. Match every movement to its client and instructions. CPA Australia’s APES 310 guidance explains the standard’s scope.

You can choose to avoid handling client money. Have refunds paid directly to clients and leave payment approval with them. Preparing a payment for the client to approve, without authority to transact, is outside APES 310’s scope.

What Counts as Client Monies

Client monies belong to a client and come under your or your staff’s authority to transact. They include money to which your practice has no present entitlement.

A tax refund received for a client is client money. So is money provided to pay the client’s ATO debt or held for a pending transaction. A payment settling your billed fee belongs to your practice. An unpaid invoice does not give you automatic authority to take money from a refund.

Signing authority over the client’s own bank account also brings the standard into play, even when you can approve payments only alongside the client. CA ANZ’s client monies guidance explains this arrangement.

Running the Trust Account

Open the practice trust account with a financial institution regulated by the Australian Prudential Regulation Authority (APRA), such as a bank, building society or credit union. Use your name or the practice’s name and include Trust Account in the title.

If reasonable efforts cannot secure that title, APES 310 permits client account or a similar term. The account terms must protect client funds from combination or set-off against your other accounts and credit interest to the trust account. Where those terms cannot be agreed, the standard requires a financial institution where you have no other accounts or credit facilities.

Retain the terms. Tell the client in writing where their funds will be held by the initial deposit. APESB’s trust account information sheet helps you discuss the account with a bank.

Keep office funds out, subject to the standard’s narrow exceptions for incorrectly charged bank fees and required minimum balances. Your practice bears account charges. Credit earned interest to clients on a reasonable basis. You cannot take benefits from client money without prior written authority.

Never pay one client’s expense using another client’s balance. Require written payment instructions in your practice procedure and obtain written approval before deducting your fees or expenses. APES 310 recommends written instructions generally and allows documented oral instructions. Written approval for your own deductions is mandatory.

A family trust’s operating bank account holds that trust’s assets. A practice trust account holds money for your clients. Identify the owner, your role and transaction authority before selecting the bank’s account category. Acting solely as trustee outside a client relationship has a separate legal basis. The family trust setup guide covers that entity’s establishment.

A Software Demonstration to Request

Choose trust accounting software by whether you can trace each client’s balance. Ask for separate client ledgers, payment authorities attached to transactions, restricted approval rights, visible correction history and an examiner-readable export.

Use this fictional demonstration with invented amounts:

1. Record a $2,000 receipt for the individual client and a $3,000 receipt for the company client. The pooled bank balance is $5,000.
2. Attach the individual client’s authority for a $600 payment to the ATO. Record the approval and payment against that client alone.
3. Reconcile the bank statement balance of $4,400 to the individual’s $1,400 and company’s $3,000 balances. Explain any outstanding bank items separately.
4. Export the receipts, payment, client balances and authority record. Correct a deliberately entered description and confirm the original entry and correction remain visible.

Reject a package that balances the bank while hiding which client owns the money. Reject one that silently overwrites corrections. These are acceptance questions, not an APESB software certification.

Records, Reconciliations and the Yearly Check

Keep a client ledger with receipts, payments and a running balance. Retain the payer, purpose, transaction date, amount and payment method, plus the instructions and approvals supporting payments. Preserve the bank statements and correction records so an examiner can reconstruct each balance.

Reconcile the trust account at least every 25 business days. Take action to correct differences within five business days of identifying them. Make the responsible member review and record sign-off as your practice procedure. The standard assigns responsibility to the member without prescribing a separate sign-off form. Client-money documentation must remain accessible for at least seven years.

For client-owned accounts, reconciliation duties depend on who has that responsibility. Section 6 of the current APES 310 standard addresses that distinction.

Appoint an independent member in public practice as auditor of client monies. Arrange an annual reasonable assurance engagement within three months of the applicable year-end. This checks compliance with APES 310, not the client’s financial statements. Your practice pays for it.

Where you maintain no trust account and can only co-authorise client-account transactions with the client, a limited assurance engagement is permitted. CPA Australia’s explanation of the revised requirements explains why client bank accounts also enter the audit scope.

For CPA Australia members, the auditor sends a modified report to the professional conduct team within 15 business days of completing the engagement. An unmodified report is retained for inspection. Other members follow their body’s reporting arrangements. Give the auditor access to records with the required client authorisation.

Fee From Refund and the Standard

Receiving a client’s refund into your trust account to deduct fees brings the practice within APES 310. Put the client’s written authority in place before the first refund arrives. Deduct only authorised fees and account for the remaining funds. The fee from refund guide covers setup and the client arrangement.

Settling Client Money Arrangements at Onboarding

Before money arrives, establish whether you will receive or control any funds for the client. Record the client’s identity, the source of funds and the purpose. Collect the written authority and onward bank details with the account holder’s name.

Match the account holder to the client using bank-issued evidence and confirm any mismatch before paying. For an entity, identify its account holder correctly, including a trustee where relevant. Verify later changes by calling a number already held on file. The refund-redirection prevention guide covers changed instructions in detail.

State in the engagement letter whether you hold client money, the agreed fee deductions and when funds will be released. Retain authority for the auditor and professional body to access the necessary records.

Tax Genie collects bank details in a guided client form and checks BSBs as the client types. Staff can lock bank details against unreviewed changes. Collect your client-money authority alongside those details and keep it available to whoever approves payments.

When Client Money Goes Wrong

A shortfall, an unexplained balance or a payment to changed bank details needs immediate investigation. Compare the bank statement with each client ledger and preserve the payment authority. A pooled account can balance while an individual client’s ledger has a deficiency.

For a deficiency, notify your professional body and the auditor within five business days of becoming aware of it. Include the corrective action taken. Stop further unauthorised payments and arrange recovery of missing funds. An ordinary unreconciled item needs investigation before you classify it as a deficiency.

Review balances left after the job ends and obtain payment instructions. Hold money only for the purpose for which it arrived. Apply unclaimed-money law when funds cannot be returned.

The TPB’s trust-money guidance explains the separate Code duty to account to clients for money held on their behalf. Mishandling money can also breach the duty to act with integrity. The TPB Code guide explains these obligations.

Before accepting the first refund, name the person who approves payments and the person who reconciles the account. Have the authority, bank terms and auditor appointment ready.