Law firm bookkeeping covers two sets of records: the office (general) account that runs the business, and the trust account that holds client money under strict rules. In Queensland, trust accounts are governed by the Legal Profession Act 2007 and the Legal Profession Regulation 2017, which require monthly trust reconciliations and an annual external examination of trust records.
This guide explains how it all fits together, the key Queensland deadlines, the mistakes that most often show up in trust account investigations, and how an experienced bookkeeper can take the monthly load off your practice.
Key takeaways
- Trust money belongs to clients and must be kept separate from the firm’s own money.
- In Queensland, monthly trust reconciliation statements must be prepared within 15 working days after the end of each month.
- The trust year runs 1 April to 31 March. For 2026, the external examiner’s report (QLS Forms 4 and 5) was due with the Queensland Law Society by 30 May.
- Most trust account breaches are record-keeping and process errors, which good monthly bookkeeping prevents.
What makes law firm bookkeeping different?
Most businesses have one set of books. A law practice that holds client money effectively runs two, with very different rules:
| Office (general) account | Trust account | |
|---|---|---|
| Whose money | The firm’s | Clients’ (held on their behalf) |
| Purpose | Fees, wages, rent, GST, profit | Settlement funds, retainers in advance, disbursements held for clients |
| Main rules | Tax law, GST, payroll and super obligations | Legal Profession Act 2007 and Legal Profession Regulation 2017 (Qld) |
| Reporting | BAS/IAS, payroll, management reports | Monthly trust reconciliations, client trust statements, annual external examination |
| Risk if wrong | Penalties and interest | Regulatory investigation and practising certificate consequences |
What is trust accounting for lawyers?
Trust accounting is the recording and reconciling of money a law practice holds for clients. Every receipt and payment must be recorded against the right client matter, the trust bank account must never go into deficit for any client, and money can only move to the office account once it is properly owed, for example after a bill has been issued in line with the rules.
Queensland’s rules also cover controlled money (client money held in a separate account under the practice’s control, often an interest-bearing account for one client), money subject to a power, and money subject to a written direction. Each has its own record-keeping requirements.
Queensland trust account obligations at a glance
| Obligation | When | Source |
|---|---|---|
| Notify the Queensland Law Society after opening a general trust account | Within 14 days | Legal Profession Regulation 2017, s 46(1) |
| Appoint an external examiner | Within 14 days of first receiving trust money | Legal Profession Act 2007, s 267 |
| Prepare monthly trust reconciliation statements (and keep the trust cashbook and ledger listings) | Within 15 working days after each month end | Legal Profession Regulation 2017, ss 29 and 44 |
| Give QLS Form 4 (Parts A and B) to your external examiner | As soon as possible after 31 March | QLS guidance |
| Lodge Forms 4 and 5 (external examiner’s report) with QLS | By 30 May (2026 deadline) | QLS guidance |
| Lodge Form 4 Part A only, if no trust money was held | By 30 April (2026 deadline) | QLS guidance |
The Queensland Law Society treats a principal’s failure to have the external examiner’s report submitted as a suitability matter when assessing whether they remain fit to hold a practising certificate. Always check current deadlines on the QLS external examination page.
Practising outside Queensland? Every state and territory has similar rules. In New South Wales and Victoria, for example, the external examiner’s report is generally due by 31 May each year. Check with your local law society.
What is a trust account reconciliation?
Often called a three-way reconciliation, it confirms that three figures agree at the end of each month:
- The trust bank account balance, adjusted for unpresented items and deposits not yet credited
- The trust cashbook balance (all receipts less all payments recorded)
- The total of all client trust ledger balances, which must never show a debit (overdrawn) balance for any client
Any difference needs to be investigated and corrected, and adjustment items carried forward must be reviewed and cleared. External examiners specifically check that every monthly reconciliation was prepared and that adjustment items were dealt with.
Common trust account mistakes (and how to avoid them)
Queensland Law Society trust account investigations regularly turn up the same kinds of problems. QLS Proctor’s list of the most common trust account errors is a useful read. Typical issues include:
- Monthly reconciliations prepared late, incomplete or not at all
- Reconciliation adjustments left uncleared from month to month
- Missing written records for EFT payments, including PEXA settlements
- Receipts not issued or numbered in sequence, or deposits not recorded properly
- Client ledgers going into debit, or money transferred to office before it is properly owed
- Controlled money and transit money not recorded in line with the Regulation
Nearly all of these are process problems. A disciplined monthly routine, done by someone who knows the rules, prevents most of them.
Office account bookkeeping for law firms
The office side matters just as much for a healthy practice:
- Billing and work in progress: making sure time is billed and collected promptly
- Disbursements: recovering costs paid on clients’ behalf
- GST, BAS and IAS: GST on legal fees and accurate, on-time lodgements (see What Is a BAS Statement?)
- Payroll and super: including Payday Super from 1 July 2026
- Cash flow and partner drawings: knowing what the practice can safely distribute
- Software: keeping your practice management software and Xero, MYOB or QuickBooks in sync
How an outsourced bookkeeper supports a law firm
An experienced bookkeeper can handle the monthly trust and office work so lawyers can focus on clients:
- Monthly trust account reconciliations prepared on time, with adjustments followed up
- Trust and general bank accounts reconciled every month
- Records organised and ready for your external examiner after 31 March
- Payroll, BAS and IAS prepared and lodged by a Registered BAS Agent
- Clear monthly reporting on fees billed, collected and cash available
What a bookkeeper does not do: the law practice and its principals remain responsible for compliance with the Legal Profession Act and Regulation. Your external examiner must be independent, so your bookkeeper cannot also act as your external examiner. A good bookkeeper makes the examination smoother; they do not replace it.
We have supported one law firm for more than ten years with weekly payroll, monthly trust and general account reconciliations and BAS and IAS, all for a fixed fee. Read the law firm payroll case study. We also reconcile trust accounts for the building industry and real estate; see bookkeeping for construction companies.
A simple monthly trust accounting checklist
- Record every trust receipt and payment against the correct client matter
- Keep written authority and records for every EFT and PEXA payment
- Check no client ledger is in debit
- Reconcile the trust bank account, cashbook and client ledger total
- Investigate and clear any adjustment items
- Print or save the reconciliation, cashbook and ledger listing within 15 working days of month end
- Have a principal review and sign off
Frequently asked questions
Do law firms need a separate trust account?
Yes. A law practice that receives trust money must hold it in a general trust account with an approved bank (ADI), separate from the firm’s own office account. In Queensland the practice must notify the Queensland Law Society within 14 days of establishing a general trust account.
How often must a Queensland law practice reconcile its trust account?
Monthly. Under the Legal Profession Regulation 2017, trust reconciliation statements and supporting records must be prepared within 15 working days after the end of each month.
When is the external examiner’s report due in Queensland?
The trust year runs from 1 April to 31 March. For 2026, the Queensland Law Society required Forms 4 and 5 to be lodged by 30 May. Practices that held no trust money lodged Form 4 Part A by 30 April. Always check current dates with the QLS.
Can a bookkeeper do trust accounting for a law firm?
Yes. An experienced bookkeeper can maintain trust records and prepare monthly trust reconciliations. The law practice and its principals remain responsible for compliance, and the external examiner must be independent of the bookkeeper.
What is controlled money?
Controlled money is client money a law practice holds in a separate account under its control, rather than in the general trust account, often an interest-bearing account for a single client. It has its own record-keeping requirements under the Regulation.
Do you work with law firms outside Queensland?
Yes. Dedicated Bookkeeping works remotely with businesses Australia-wide. Trust rules are similar across states, but deadlines and forms differ, so we work to your local law society’s requirements.
Get your trust accounting off your desk
If monthly trust reconciliations, BAS and payroll are taking time away from clients, book a free discovery call. We reply within 24 hours. See our bookkeeping services, the industries we work with, or what a great bookkeeper actually does.
This article is general information, not legal advice. Trust accounting obligations depend on your circumstances and jurisdiction; check current requirements with the Queensland Law Society or your local law society.