Special deposit calculations are regulated by s285 Legal Profession Act 2007 and r.70 of the Legal Profession Regulation 2007.
Rule 70:
1. A law practice must keep at least the minimum amount on deposit in a prescribed account.
2. The minimum amount applying to a law practice at any time during a calendar year is the amount that is two-thirds of the law practice’s lowest combined balance at any time during the previous calendar year.
3. The minimum amount worked out under subsection (2) is to be rounded down to the nearest $100.
4. The amount a law practice must keep on deposit in a prescribed account to comply with this section must be deposited into a prescribed account from a trust account kept by the law practice.
5. However, subsection (1) does not apply to a law practice during a calendar year if the law practice’s combined balance at any time during the previous calendar year was less than $3000.
- 2/3rds of the lowest combined balance of trust funds in a calendar year must be remitted to the Department of Justice & Attorney General’s prescribed account by 21st January the following year.
- The most important thing is getting the calculation correct.
- The calculated amount is then rounded down to the lower even hundred of dollars. e.g.
Lowest combined balance in previous calendar year | $9,408.00 |
Two-thirds of lowest combined balance | $6,272.00 |
Required deposit amount | $6,200.00 |
Methods of calculation of special deposits differ between the Australian states, so it is important to know what applies to your firm. For example, the NSW calculation is based on the audit year from 1 April to 31 March, the threshold for the calculation of the lowest balance is $10, 000 however if the lowest balance is over $10 000, 80% of that lowest balance should be lodged.
Recording special deposits can be problematic as sometimes it results in an overdrawn trust ledger account - which is NOT ALLOWED, under legislation.
If the amount is to be lodged into the Special Deposit Account, also known as the Department of Justice & Attorney General Prescribed Account, then a cheque must be written.