Introduction
Xero and MYOB are widely used accounting platforms in Australia.
But there is an important distinction between general business accounting and statutory trust accounting.
The question is not whether a general accounting platform can record a bank transaction.
The question is whether it provides the specific controls, records, workflows and audit trail required for statutory trust-account management.
For tax practitioners, the distinction is particularly important when receiving money or property on behalf of clients.
What does the TPB require?
The Tax Practitioners Board states that registered tax practitioners must account to clients for money or other property held on trust.
This can include:
- ATO tax refunds received on behalf of clients
- Money received for a specific client purpose
- Other money or property held for clients
The TPB also states that trust money should be kept separate from the practitioner’s own money.
Why general accounting is different
A general accounting system is primarily designed to manage the business’s financial accounts.
A statutory trust system needs to manage another layer:
money belonging to clients.
That means the system needs to help answer:
- Who does this money belong to?
- Why was it received?
- Which client does it relate to?
- What has been paid?
- What remains?
- When was it reconciled?
- Who authorised the transaction?
- What records support it?
Audit trail matters
Trust-account records need to demonstrate what happened.
A system with a clear transaction history can make it easier to understand:
- Original transaction
- Corrections
- Payments
- Receipts
- Reconciliations
- Supporting records
This is particularly useful when preparing for an audit or reviewing historical transactions.
Reconciliation is more than matching a bank balance
The goal is not simply to make the bank balance equal the accounting balance.
The practice also needs to understand the balances attributable to individual clients.
The TPB guidance emphasises accurate and up-to-date records when accounting for money held on trust.
What about spreadsheets?
Spreadsheets can work for simple tasks, but they can become difficult as transaction volumes increase.
Common problems include:
- Manual calculations
- Duplicate data
- Formula errors
- Version control
- Missing documentation
- Difficult audit preparation
A specialist system can reduce these operational issues by creating a structured workflow.
So what should you use?
The answer depends on your firm’s requirements.
A general accounting platform may continue to be useful for the firm’s ordinary financial accounting.
A dedicated statutory trust-account system can be used for the trust-account component, where the relevant statutory requirements call for specific trust processes and records.
How TrustEasy fits in
TrustEasy provides statutory trust-account functionality for Australian accounting firms and tax practitioners.
The platform supports trust-account management, Fee From Refund workflows, bank feeds, reconciliation, audit trail, reports and related trust-account processes.
TrustEasy can therefore sit alongside a firm’s general accounting system rather than attempting to replace every accounting function.
Conclusion
The right question isn’t:
“Can Xero or MYOB record this transaction?”
It is:
“Does our overall system provide the trust-account controls, records and processes required for our statutory obligations?”
For firms managing client money, that distinction can make a significant difference.
This article is general information only and should not be taken as a statement that Xero or MYOB is incapable of any particular configuration. Firms should assess their own systems against the applicable requirements.
