Trust account question.

Does one legally have to hold moneys in a trust account. Scenario: A business managing short term lettings for clients takes the fees from the guests, subtracts a management fee and other expenses and twice monthly forwards the balance to the client. Does the fee have to sit in a trust account until payed out?
Thanks in advance for replies.

 

This is should be in the legal section - nothing to do with tax.

Yes it it is held on trust because the money is not the agent's its the landlord's money, held on trust. A trustee should hold trust money separately from their personal money.

Legislation also requires it.
NSW law
PROPERTY, STOCK AND BUSINESS AGENTS ACT 2002 - SECT 86 Trust money to be paid into trust account

 

On what basis is the business operating - in the capacity of travel agent or as property manager or live-in owner/property manager?

Definitely in the case of property manager but I recall that travel agents no longer require a trust account - linky

Operators of accommodation only do not require a trust account either.

 

I would think a business managing short term rentals for clients would need to be a real estate agent?

 

I know of at least a few short term letting agents and airbnb type managers that are not licensed real estate agents and hence I guess not bound by the same legislation. They really should be since the funds collected are on behalf of the owner..

 

That's a concern.
I looked at the NSW act
They would be required to be licensed if they are inducing people to lease (etc).
PROPERTY, STOCK AND BUSINESS AGENTS ACT 2002 - SECT 3 Definitions

I guess a short term rental doesn't amount to a lease. But lease is not defined in the act so it takes its ordinary meaning - which should include short term rentals.

They should be registered i think.

 

Agree. They should be accountable to Fair Trading so disasters like And Chill don't happen, might take a few more collapses before there's an overhaul.

 

Just asking that question says enough to concern me.
This new age concept of "disruption" seems to infer that anyone can undertake certain businesses without registration, training, qualifications and licenses and all the flies are attracted initially in the race to the bottom. Cant wait to see Amazon Surgery take off. There are already unlicensed dental service advertised on TV.

 

Probably best to report these unlicensed operators to NSW Fair Trading