Water market intermediaries: Are you ready for the new trust account requirements?

From 1 July 2025, eligible water market intermediaries became subject to significant new trust accounting obligations under the Water Act 2007 and associated regulations.

These changes introduce a statutory trust accounting framework designed to improve transparency, strengthen accountability and better protect client funds held by brokers and other intermediaries involved in water market transactions. 

For many businesses operating in the water trading sector, the 2025-26 financial year will be the first reporting period under these new requirements. This means businesses should act now to confirm whether the requirements apply to them, and ensure their trust account arrangements, record-keeping systems, internal processes and audit arrangements are  ready ahead of upcoming reporting and audit obligations.

Who is affected?

The new requirements apply to eligible water market intermediaries that receive money on behalf of another person in the course of providing  water market intermediary services. In practice, this means that where an intermediary holds client funds connected to water trading activities, those funds will generally need to be placed and managed through a compliant trust account, unless a specific exemption applies. 

These reforms are designed to strengthen confidence in Australia's water markets by improving transparency and ensuring client funds are appropriately separated, protected and accounted for.

Key trust account compliance obligations for water market transactions

The new framework introduces several compliance requirements, including:

• Establishing and maintaining a compliant trust account with an Australian authorised deposit-taking institution.
• Ensuring client funds are held separately from business operating funds.
• Maintaining client ledgers for each client whose money is held in trust.
• Appointing an eligible trust account auditor.
• Preparing annual trust account statements and obtaining an independent auditor's report.
• Retaining appropriate trust accounting records.

Intermediaries are also required to notify the ACCC when they commence maintaining a trust account with the notification generally required to be lodged within three months.

Auditor appointment requirements

A critical requirement under the new framework is the appointment of an eligible auditor within three months of first becoming required to maintain a trust account. There are specific criteria for your auditor to be considered eligible, which includes being one of the following: 

• a member of CPA Australia, and hold a current Public Practice Certificate issued by that body
• a member of Chartered Accountants Australia and New Zealand, and hold a current Certificate of Public Practice issued by that body
• a member of the Institute of Public Accountants, and hold a current Professional Practice Certificate issued by that body
• a registered company auditor, within the meaning of the Corporations Act 2001
• an authorised audit company, within the meaning of the Corporations Act 2001

The auditor must also meet independence requirements. This means they cannot be a related party of the intermediary or have certain contractual relationships that may compromise their independence.

Importantly, the auditor's role extends beyond confirming bank balances. Audit procedures are expected to be conducted in accordance with Australian Auditing Standards and include an assessment of whether trust account records, statements, controls and processes comply with the relevant legislative requirements. 

Given the three-month appointment timeframe and the importance of auditor independence, intermediaries should confirm their auditor arrangements early to avoid delays or compliance issues.

Annual reporting deadlines

At the end of each financial year, intermediaries required to maintain a trust account must prepare annual trust account statements and obtain a trust account auditor's report within three months of year end. For entities with a 30 June balance date, this generally means these obligations must be completed by 30 September each year.

As the 2025-26 financial year is the first reporting period under the new framework for many intermediaries, businesses should consider whether their current systems and records, are audit-ready. This includes assessing whether they can produce complete and accurate client ledgers, transaction records, reconciliations and supporting documentation require for the annual  trust account audit.

Early preparation will help reduce the risk of delays, incomplete records or compliance issues as the first reporting deadline approaches.

What should businesses do now?

If your organisation receives and holds client funds in connection with water market transactions, it is important to:

• Confirm whether the trust accounting requirements apply to your activities.
• Review trust account arrangements and account naming conventions.
• Ensure client ledger records are being maintained appropriately.
• Assess internal processes for handling trust money and calculating any interest earned.
• Engage an eligible auditor early to avoid compliance deadlines being missed.

The introduction of these requirements represents one of the most significant regulatory changes for water market intermediaries in recent years. Early planning can help minimise compliance risks and ensure your organisation is well prepared for its first trust account audit.

If you would like assistance understanding your obligations or preparing for your first trust account audit under the new framework, contact your local RSM auditor.