Earnest Money and Escrow: Trust Account Compliance in the ACT

Last updated: April 2026

For candidates preparing for the Australian Capital Territory (ACT) real estate licensing assessments, understanding the strict regulations surrounding client funds is absolutely critical. While international textbooks and online resources frequently use the terms "earnest money" and "escrow," ACT real estate professionals must translate these concepts into their local legal equivalents: deposits and trust accounts. Mishandling these funds is one of the fastest ways to lose your license, face severe financial penalties, or even face criminal charges.

This article breaks down the legal framework, practical handling, and exam-critical knowledge regarding client funds. For a broader overview of all exam topics, be sure to review our Complete ACT Real Estate Agent Licence Exam Exam Guide.

Translating Terminology: The ACT Context

To succeed in your ACT Real Estate Agent Licence Exam, you must be fluent in the terminology used by local regulatory bodies, specifically Access Canberra and the ACT Civil and Administrative Tribunal (ACAT).

Earnest Money = The Deposit: In the United States, "earnest money" shows a buyer's good faith. In the ACT, this is simply called a "deposit" (or sometimes a "holding deposit" prior to exchange). Upon the exchange of contracts, a standard 10% deposit is typically required, though this can be negotiated down to 5% or a fixed amount by mutual agreement.
Escrow = Trust Account: "Escrow" refers to a neutral third party holding funds. In the ACT, client funds are held in a highly regulated Trust Account operated by the real estate agency or a solicitor.

Regulatory Framework: The Agents Act 2003

The handling of trust money in the ACT is heavily governed by the Agents Act 2003 and the Agents Regulation 2003. As a licensed agent, you are acting as a fiduciary. This means you hold a position of trust and must manage client funds with the utmost integrity.

Defining Trust Money

Under the Agents Act 2003, trust money is any money received by an agent in their capacity as an agent, on behalf of someone else. This includes:

Residential and commercial sales deposits.
Holding deposits.
Rental bonds (before being lodged with the ACT Revenue Office).
Rent payments collected on behalf of landlords.
Strata levies collected by an owners corporation manager.

Strict Banking Timelines

A frequent exam question revolves around the timeline for depositing trust funds. In the ACT, any trust money received by an agent must be deposited into the agency's approved trust account by the end of the next business day following receipt. Delays in banking are a strict liability offense.

Prohibition on Commingling

Agents must never mix trust money with the agency's general operational funds. This illegal practice, known as commingling, is a severe breach of the Agents Act 2003. Trust accounts must be held at an approved authorized deposit-taking institution (ADI) in the ACT, and the account name must clearly include the words "Trust Account."

Common Trust Account Audit Breaches (ACT)

The Cooling-Off Period and Deposits

Under the Civil Law (Sale of Residential Property) Act 2003, buyers of residential property in the ACT are entitled to a statutory cooling-off period of five (5) clear business days. This period begins on the first business day after the contract is exchanged.

Deposit Forfeiture Formula

If a buyer exercises their right to cool off and backs out of the contract during this 5-day window, they forfeit 0.25% of the purchase price to the seller. The remainder of the deposit must be refunded to the buyer.

Practical Example:
Sarah agrees to purchase a townhouse in Braddon for $800,000. She pays a 5% deposit of $40,000 into the agent's trust account upon exchange. Three days later, Sarah decides to pull out of the sale under the cooling-off provisions.

Calculation: $800,000 × 0.0025 (0.25%) = $2,000.

The agent, under instruction from the solicitors, will disburse $2,000 from the trust account to the seller, and refund the remaining $38,000 to Sarah.

Practical Scenario: Managing a Residential Sales Deposit

Understanding the life cycle of a deposit is crucial for both your exam and your daily practice. Let's trace a typical transaction:

Receipt of Funds: The buyer transfers a $50,000 deposit via EFT. The agent must immediately issue a legally compliant trust account receipt.
Banking: Because it was an EFT, the funds land directly in the trust account. If it were a physical cheque, the agent must bank it by the next business day.
Holding the Funds: The money sits securely in the trust account. It cannot be used to pay for the agency's marketing, the seller's legal fees, or the agent's commission at this stage. (For more on the fiduciary duties involved, see our guide on Agency Relationships Explained).
Settlement: Upon successful settlement, the buyer's and seller's solicitors will authorize the agent via an "Order on the Agent." The agent can then disburse the funds, typically deducting their commission and marketing expenses as agreed in the agency agreement, and forwarding the balance to the seller.

Connecting Trust Concepts to Broader Real Estate Knowledge

While mastering trust accounts is vital, a well-rounded ACT agent must understand how the property itself is regulated and identified. While holding deposits, you must ensure the property being transacted complies with local laws. Familiarize yourself with ACT Zoning and Land Use Regulations to ensure you aren't misrepresenting a property's potential to a buyer.

Additionally, while international exams heavily feature the Government Rectangular Survey system, remember that the ACT utilizes the Torrens Title system, identifying properties by Block and Section numbers within specific Divisions (suburbs).

Frequently Asked Questions (ACT Specific)

1. What is the standard deposit amount required in the ACT?

The standard deposit is typically 10% of the purchase price. However, buyers and sellers can mutually agree to a lower amount, commonly 5%, or even a fixed sum. This must be documented in the contract of sale.

2. How long does an ACT real estate agent have to deposit trust money?

Under the Agents Act 2003, all trust money received must be deposited into the agency's approved trust account by the end of the next business day following receipt.

3. What happens to the deposit if a buyer pulls out during the cooling-off period?

In the ACT, if a buyer terminates a residential contract during the statutory 5-day cooling-off period, they forfeit 0.25% of the total purchase price to the seller. The balance of the deposit held in the trust account is refunded to the buyer.

4. Can an agent use trust funds to pay for the vendor's marketing expenses prior to settlement?

No. Trust funds cannot be touched or disbursed without express written authorization from both parties (usually via their solicitors at settlement). Using a buyer's deposit to pay agency expenses before settlement is misappropriation of trust funds.

5. Who audits and regulates real estate trust accounts in the ACT?

Trust accounts in the ACT are regulated by Access Canberra. Agents are required by law to have their trust accounts audited annually by a qualified auditor, and the audit report must be submitted to the Commissioner for Fair Trading.