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Proctor : December 2015
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26 PROCTOR | December 2015 Trust account investigations consistently show that a number of law practices fail to maintain the Department of Justice and Attorney-General (DJAG) prescribed deposit account in accordance with the legislative requirements of Part 3.3 Division 2 of the Legal Profession Regulation 2007. The three most common irregularities reported by Queensland Law Society trust account investigators are: • failure to correctly calculate the required deposit to be made to the prescribed account • failure to make the required deposit/ adjustment to the prescribed account by 21 January • failure to redeposit trust funds to the prescribed account after funds have been withdrawn from the prescribed account. Don’t forget the prescribed account deposit! Due by 21 January 2016 Each January, law practices must ascertain whether or not they are required to deposit trust moneys to the prescribed account. The deposit to the Department of Justice and Attorney-General Prescribed Deposit Account is to be made on or before 21 January. Initial deposit Law practices must determine the lowest amount of general trust money held on any one day in the previous calendar year. Nil balances before the first credit entry to the general trust account are to be ignored for the purpose of determining the lowest balance. When calculating the initial deposit, the law practice simply ascertains the lowest approved ADI statement balance and calculates two-thirds of that balance. NB: If a trust account statement records a nil balance after the initial credit entry, that nil balance is an effective balance for the purpose of determining the lowest balance. Exemptions Law practices are exempt from making a deposit to the prescribed account if the lowest amount of trust money held in the previous calendar year was less than $3000. NB: Moneys held in investment accounts, controlled money accounts and power money accounts are not general trust money and thus are not included in the calculation. Calculating the deposit Law practices must determine the lowest combined balance in the previous calendar year (1 January 2015 to 31 December 2015) by: 1. determining the lowest balance of the general trust account by reviewing the ADI statements for each calendar month 2. recording the prescribed account amount on the same day as the above balance 3. calculating the combined balance using the figure from (1) and (2) above (see figure one, below) 4. Calculating two-thirds of the lowest amount and rounding that figure down to the lowest even hundred dollars. Lowest combined balance in previous calendar year $9200 Two-thirds of lowest combined balance $6164 Required deposit amount (rounded down) $6100 In the example above, the law practice already holds a deposit amount of $5000, so an additional deposit of $1100 is required to be made to the prescribed account. Calculation tool The Society’s trust account investigations team has developed a prescribed account deposit calculation tool to assist law practices to calculate the required deposit. This calculation tool is available for complimentary download at qls.com.au > For the profession > Trust accounting resources > Prescribed account deposit calculation tool. Date Balance as per financial institution statement Prescribed account deposit Combined balance 01/01/15 $160,000 $40,000 $200,000 12/01/15 $193,000 $125,000 $318,000 15/02/15 $55,000 $125,000 $180,000 22/03/15 $241,000 $125,000 $366,000 05/04/15 $1000 $125,000 $126,000 09/05/15 $31,500 $35,000 $66,500 17/06/15 $42,250 $35,000 $80,250 05/07/15 $4200 $5000 $9200 25/08/15 $126,254 $5000 $131,254 05/09/15 $185,265 $5000 $190,265 15/10/15 $16,000 $5000 $21,000 22/11/15 $102,000 $5000 $107,000 28/12/15 $43,892 $5000 $48,892 Figure one back to contents
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