Twice a year, five simple words send a ripple of anxiety through South Australian law firms: “Combined Trust Account Calculation Due.”
For legal practitioners and support staff alike, 31 May and 30 November mark more than just dates on a calendar, they signal the start of a high-stakes financial task with tight timelines and serious consequences for errors or oversights.
What Is the Combined Trust Account (CTA)?
The CTA is a composite account held by each approved Authorised Deposit-taking Institution (ADI). Law practices may be required to deposit trust funds into this account twice a year.
Why does this matter?
Funds in the CTA earn a higher rate of interest than funds in the law practice general trust account. CTA interest does not go to the law firm. Instead, it is paid into a statutory interest account administered by the Law Society of South Australia. From there, it is distributed:
- 3/8 to the Fidelity Fund, which compensates individuals who suffer financial loss due to a practitioner’s fiduciary or professional default.
- 5/8 to the Legal Services Commission, which provides essential legal services to the South Australian community.
It is important to note only funds in the law practice general trust account are included in the CTA calculation. Investment accounts, controlled money accounts, and power money accounts (outside of the general trust account) are excluded. And yes, the trust funds held in the CTA remain accessible to meet client obligations at any time.
Why the Calculation Matters
Getting the CTA calculation right, and on time, is critical. Law practices must complete a CTA calculation for the periods 1 December to 31 May and 1 June to 30 November in each year to determine if a deposit is required, and if so, then by 14 June* and 14 December*, respectively either:
- Deposit the required funds into the CTA, or
- Lodge a Notice of Withholding with the Law Society of South Australia
Mistakes are common, and understandable. After all, combining legal work, financial calculations, and strict deadlines is a recipe for stress. This compliance obligation is frequently overlooked or deferred by legal practitioners due to immediate time pressures, which can result in significant professional, ethical, and financial consequences.
The Cost of Getting It Wrong
Failure by a law practice to make a timely CTA deposit, or lodge a required Notice of Withholding, may result in a substantial interest liability.
While the Legal Practitioners Act 1981 provides a mechanism for applying to reduce or waive interest, such relief is discretionary and not assured. Deposit failures or delays also disrupt critical funding streams and may have broader regulatory implications. Repeated or cumulative contraventions in this area may adversely affect future applications for interest relief and could lead to referral to the Legal Profession Conduct Commissioner.
One Size Does Not Fit All
Preparing the CTA calculation involves navigating a range of nuanced compliance considerations, including recent structural changes to the business, the establishment or closure of trust bank accounts, the timing of CTA deposits and withdrawals, account opening and transaction dates, and decisions regarding withholding versus depositing. The process requires careful coordination across multiple regulatory touchpoints, compounded of course by stringent deadlines.
How Nimblebiz Solutions Can Help
At Nimblebiz Solutions, we take the stress out of CTA compliance. Our team:
- Calculates your required deposit with precision, factoring in the unique nuances of your trust account setup, ready for your verification.
- Assists you understand the withholding process, based on your specific circumstances.
- Records compliant CTA deposit and withdrawal trust transactions.
- Provides guidance to ensure ongoing compliance.
When deadlines loom and the pressure mounts, we are here to ensure your practice stays compliant and confident.
Disclaimer: The content of this blog is for general informational purposes only and does not constitute legal advice.
*Refer to the Acts Interpretations Act 1901 when the required deposit or Notice of Withholding lodgement date is a Saturday, Sunday, or a holiday.