9.1 Client Money: Segregation, Permitted Payments, and Controls

9.1 Client Money: Segregation, Permitted Payments, and Controls

The current client-money regime is principally in sections 50 and 51 of the Code of Conduct, together with invoicing and entitlement rules including section 313 of the Migration Act. It should not be confused with a State legal-practice trust-account regime or with requirements from an earlier Code.

What is client money?

Client money broadly covers amounts paid by or for a client to an agent or the agent’s business in advance for fees or disbursements under a service agreement. Money for work already completed and properly invoiced may be treated differently from an advance. The accounting classification should follow the work, agreement, invoice, and payment purpose rather than the label used in banking software.

Under section 51, an agent generally must not receive fees or disbursement amounts connected with immigration assistance before a covering service agreement is in force. The section 43 initial-consultation exception preserves specific invoice, money, refund, and sufficiency safeguards.

Mandatory segregation under section 50

Client money received by the agent or a member of the business must be paid into an account with a qualifying financial institution. Other money must not be paid into that account. The Code specifically prevents account interest from being credited into it. The purpose is real banking segregation, not merely a client sub-ledger inside the general operating account.

Section 50 permits payments out only for identified purposes:

• paying the agent or business where the amount is lawfully due, including satisfaction of section 313’s statement-of-services rule;
• paying amounts required by the Department or a review authority;
• paying disbursements in accordance with the service agreement;
• refunding client money to the client; or
• transferring a refund to another RMA or their business at the client’s instruction.

Bank fees and account-maintenance costs cannot be paid from the client-money account. For each purpose, the amount paid out must not exceed the amount paid in for that purpose. That rule prevents using Client B’s balance to cover Client A’s visa charge even when the overall bank account has enough money.

Law versus prudent controls

The current Code does not prescribe the exact words “Clients’ Account” in the account title, nor does it mandate a monthly three-way reconciliation in the manner of some legal-profession trust regimes. Presenting those controls as express Code requirements is inaccurate. Nonetheless, a practice needs records capable of demonstrating compliance to OMARA on request. Individual client ledgers, bank reconciliations, approval controls, and separation of duties are prudent ways to prove the source, purpose, balance, and authority for every movement.

A good reconciliation compares the bank balance with the total client-ledger liability, investigates differences immediately, and documents corrections. This is risk management supporting section 50, not an invented statutory timetable.

Scenario

An RMA receives AUD 7,800: AUD 3,000 for future professional work and AUD 4,800 for a Department charge. The full amount is client money and should enter the segregated account. Later, the agent may pay the Department amount for the agreed matter. A professional-fee transfer requires the contractual and invoicing basis and entitlement under section 313. The agent cannot use part of the balance to pay rent, bank charges, or another client’s shortfall.

If OMARA asks the agent to demonstrate compliance, section 50 requires a response supported by the bank record, agreement, invoice, receipts, disbursement evidence, and client ledger. An accounting label without the actual segregated funds is not enough.

Transaction-level proof

For each receipt, record payer, client, matter, purpose, amount, date, agreement, and invoice status. Allocate mixed payments between future fees and each disbursement rather than posting one undifferentiated balance. For every payment out, link the client instruction or agreement term, itemised invoice or statement of services where required, recipient, purpose, amount held for that purpose, bank confirmation, and approving person. A daily or frequent exception report should flag negative client ledgers, unmatched deposits, stale balances, bank fees, interest, duplicate payments, and withdrawals without support. Independent reconciliation is a prudent control even though the Code does not prescribe a monthly three-way formula. Restrict bank permissions, require dual approval above a risk threshold, and test access when staff leave. If an error occurs, stop further movement, quantify affected clients, restore any shortfall, preserve records, obtain advice, and consider regulatory or insurer notification. The central question is always whether the practice can demonstrate compliance with every limb of section 50.