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Travel Agents Trust Account Audits

 

 

 

 

 

 

 

 

 

 

 

 

Annual Audit Requirements

 

All licensed travel agents in Australia are required to have both their financial statements and trust account audited and submit a report to the Travel Compensation Fund (TCF). TCF monitors the financial security of all licensed travel agents and any persons, companies, etc., wishing to carry on business as a licensed travel agent in the six states and the Australian Capital Territory are required to be participants in the TCF. To become a participant in the TCF, applicants must be able to demonstrate they have sufficient financial resources to carry on the business of a travel agent.

 

 

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What do you have to submit and to whom?

 

All participants are required to renew their participation annually, providing audited financial statements and a certified Annual Financial Review return to confirm that they continue to have sufficient financial resources. TCF issues distinctive participant renewal certificates for display at travel agents' offices.

 

 

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When do you have to lodge audited financial statements?

 

You are required to lodge Annual Financial Review (AFR) within three months of your financial year end, unless another time is specified by the Trustees. For example, if your financial year end is 30 June, then you are required to lodge your audited financial statements by 30 September.

 

The Trustees of TCF have the power to require audited financial statements to be lodged earlier and more frequently.

 

 

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Do you always have to complete the audit?

 

Yes. All Licensed Travel Agents in Australia are required to join the TCF and participate in the annual audit (except in Northern Territory, which has its own fidelity insurance scheme).

 

 

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Who can complete the audit?

 

A Registered Company Auditor listed with the Australian Securities and Investments Commission must audit the financial statements in accordance with applicable Australian Auditing Standards.

 

Michael Quinn is a registered company auditor (registered by ASIC) and this allows Quinns to assist corporations in ensuring their financial reports meet ASIC's regulations as well as undertake the audit, making the reporting process a simple step.

 

 

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What records does the auditor need?

 

Essentially, the auditor will need access to all financial records and documents relating to money held in a trust account. It is best if you have this information already prepared, and then meet with the auditor before the auditor starts any work. More specifically, the auditor will require:

 

A full set of financial reports including:

 

  • The profit and loss account (Statement of Financial Performance);
  • Balance sheet (Statement of Financial Position);
  • Accompanying notes and directors declaration,

 

If you keep a trust account, the auditor will need:

 

  • All trust account statements for the reporting period
  • Trust account deposit books
  • Trust account receipt books
  • Trust account cheque butts or details of electronic funds transfers
  • Cash book (details of daily receipt and payment transactions) - manual and computer systems
  • Monthly trust reconciliations records
  • Trust account journals and client ledgers
  • Monthly trust account trial balances and records of any overdrafts.

 

 

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What is involved in the Audit?

 

In order to meet TCF financial requirement, your financial statements should disclose that you have:

 

  • Sufficient amount of Net Capital and Reserves to meet the minimum amount of Capital and Reserves
  • Net Tangible Assets should be at least 1.5% of the turnover
  • Working Capital should be at least equal to one month's overhead expenses.

 

In order to determine if your agency meets the financial requirements, TCF have developed four tests that your financial statements must pass under the following sections:

 

1. Trust Account

2. Working Capital

3. Net Tangible Assets

4. Net Capital & Reserves.

 

You will need to score a minimum total of 10 points from Tests 1, 2 and 3 and in order to pass test 4 you are required to have a sufficient amount of Net Capital and Reserves to meet the minimum amount of Capital and Reserves.

 

 

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Do you have to keep a trust account?

 

No - under normal circumstances it is not mandatory for an agency to maintain a Trust account. However, you are encouraged to do so and, in certain circumstances, the Trustees of TCF have the power to require you to do so. If you maintain your Trust account in accordance with the 9 rules listed below, 4 points will be awarded in the TCF financial calculation for the abovementioned tests.

 

The 4 points will only be awarded when the 'AFR' is lodged and auditor certification confirms operation in accordance with all of the following rules:

 

1. A pre-numbered receipt must be issued for all payments received in advance of travel arrangements, and monies banked within 2 working days of receipt into a separate bank account in the name of the participant - titled 'Client Travel Account' or 'Client Trust Account'.

2. Interest bearing or term deposit accounts may be opened with any recognised financial institution.

3. Any such account mentioned above must be used exclusively for client funds.

4. All monies deposited to the client account must remain in the client bank account until:

a) they are paid to principals on behalf of the client from whom they were received; or

b) they are refunded to the client.

5. Any such bank account must not be subject to a right of set off or any encumbrance, including any floating charge.

6. Commission earned is not to be withdrawn until the balance has been paid to principals on behalf of clients. Cancellation charges may be deducted from refunds.

7. A disbursement from the client travel or trust account on behalf of a customer who has not lodged funds (e.g. sale on credit) is not permitted. Such a disbursement should be made from the 'general' or 'working' account of the participant.

8. Use of client funds to finance loans or advances to related parties or others is a breach of the conditions for maintaining a client account.

9. The client bank account and the liability for client funds held should be clearly identified on the balance sheet, or in the notes to the accounts, and in the 'AFR'.

 

Should there be Minor breaches of the above items, the Auditor should attach an explanation detailing the areas of variance and this will be considered in the assessment of points for this test.

 

 

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What to do if you do not meet the financial requirements

 

A Registered Company Auditor listed with the Australian Securities and Investments Commission must audit the financial statements in accordance with applicable Australian Auditing Standards.

 

Michael Quinn is a registered company auditor (registered by ASIC) and this allows Quinns to assist corporations in ensuring their financial reports meet ASIC's regulations as well as undertake the audit, making the reporting process a simple step.

 

 

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Lodging the auditor's report

 

Audit reports for corporations must be in the form required under the Corporations Law and Statements of Auditing Practice or Standards. Reports for non-corporate entities must comply with Statement of Auditing Practice or Standards issued by the Institute of Chartered Accountants in Australia and the Australian Society of CPAs.

 

You need to lodge the following documents by the due date:

 

  • Printed copy of AFR signed by participant and auditor; and
  • Full set of financial statements with independent audit report; and
  • Submission of the Electronic AFR (e-AFR), via the TCF website.

 

 

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Can the lodgment date be extended?

 

Yes, you can request an extension and pay a fee depending on the length of extension you are requesting.

 

For example, if your financial year end is 30 June and you request for extension in July or August, an amount of $110 is payable. If you request the extension in September, the amount payable is $330. Your extended due date for lodgement will now be 31 October.

 

 

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Penalties and offences

 

If you carry on business without a licence you may incur penalties of up to $50,000 or 12 months imprisonment, or both.

 

 

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Our dedicated team can assist you with all your auditing needs. Complete and submit the Express Enquiry form on the top right hand side of this page and we will contact you to discuss your enquiry or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166  to arrange an appointment.