What is not a designated service

Work that is simply not listed

The Act lists specific services in Tables 5 and 6 of section 6.¹ If your work is not one of them, it is not a designated service. Preparing tax returns, BAS and payroll, and general bookkeeping, are not listed.¹

AUSTRAC reads the Table 6 items as applying only where your work directly advances a transaction or the creation or restructure of an entity. In its words: "Merely influencing how the customer proceeds, providing general advice or ancillary services isn't sufficient."² AUSTRAC, professional designated services Its examples:

• an accounting firm advising on the tax implications of selling a company is not acting in the sale until it is instructed to act for the client in it;
• accounting or legal advice to a buyer about pulling out before settlement influences the transaction but does not directly advance it;
• a notary who only certifies documents, prepares notarial certificates or administers oaths is not providing a designated service.

Your own fees and incidental payments: s 6(5C)

Table 6, item 3 covers receiving, holding and controlling (including paying out), or managing, a client's money or other property as part of a transaction.¹ Section 6(5C) lists the circumstances in which item 3 does not apply:³

The note to s 6(5C) gives two examples of paragraph (b): fees paid to a barrister for representation in legal proceedings, and property management services.³

Paragraph (b) is the one to read carefully. AUSTRAC says it applies at the level of the whole business, across all practice areas, and does not apply where a client uses your trust account as a de facto bank account.² Its examples:

• Bookkeeper paying routine bills. A bookkeeper who pays payroll, suppliers, rent and tax on a client's fixed instructions, with no discretion to redirect funds, is less likely to be "managing" money. Even where it is, the payments are generally incidental to bookkeeping and excluded by paragraph (b), provided the practice offers no other designated service, such as a registered office address.
• Litigation practice holding settlement money. Funds held in trust under a privately negotiated settlement are likely to be incidental to litigation, which is not a designated service. If the same practice also does conveyancing, paragraph (b) is no longer available.
• Tax paid to the ATO, or insurance compensation paid through a trust account. These are payments to or from a government body or licensed insurer under paragraph (d).

Leases, property management and real estate limits

"Real estate" in the Act means freehold, leasehold interests and land use entitlements, but it expressly excludes a lease for a term of 30 years or less (options for further terms are not counted), incorporeal hereditaments such as easements, and a mortgagee's interest.⁴ s 5 So:

• Leasing is not Table 5 brokering. Arranging residential or commercial leases of 30 years or less is not brokering real estate.
• Property management. Handling rent and outgoings falls to be tested under item 3. The note to s 6(5C) names property management services as an example of the incidental-payments exclusion, and AUSTRAC's guidance says the Rules also exclude a real estate agency's management of rental income and expenses through its trust account.³²
• Selling is still captured. An agency with a rent roll that also sells property provides Table 5, item 1 for its sales work. Its customers on each sale are both the seller and the buyer.
• Licences to occupy. AUSTRAC treats a standalone licence to occupy, such as some retirement village arrangements, as not real estate, and a dwelling on leased land, such as a caravan on a lease of 30 years or less, as outside the definition.⁵
• Private and incidental sales. AUSTRAC says a business owner selling its own premises is not selling in a business of selling real estate, so Table 5, item 2 does not apply.⁵

Barristers

A service provided in the course of legal practice as a barrister, on the instructions of a solicitor given in connection with a designated service, is not a designated service.⁶ s 6(6B) The instructing solicitor is still assessed on its own services. AUSTRAC also notes separate exemptions for some providers, including legal aid commissions, community legal centres and barristers acting for Australian government bodies.²

Court and tribunal orders

Table 6, items 1 and 2 do not apply where the sale, purchase or transfer is pursuant to, or results from, a court or tribunal order.¹ Item 3 does not apply to money received or payable under such an order, and item 7 does not apply to acting in a fiduciary capacity under one.³ s 6(5C) s 6(5E)

AUSTRAC's reading: the exception covers work done after the order is made, not work to obtain it. Examples it gives are transfers from a deceased estate after a grant of probate or letters of administration, and transfers under family law consent orders. A transfer under a binding financial agreement, with no court order, is still conveyancing under item 1. AUSTRAC also says litigation will generally fall outside Table 6.²

Insolvency practitioners

Two exclusions in the Act are directly relevant: item 7 does not apply to acting as the trustee of a regulated debtor's estate within the meaning of Schedule 2 to the Bankruptcy Act 1966, and item 3 does not apply to money under a court order.³ s 6(5E) s 6(5C)

Other work can still be captured. AUSTRAC's example: changing a company limited by guarantee into one limited by shares, or splitting or merging companies, is a restructure under item 6. Reducing staff or refocusing product lines is not, because it does not change the legal structure.² AUSTRAC publishes a separate page on how designated services apply to insolvency practitioners.⁷ The answer turns on the engagement, so take advice.

Wills and individual powers of attorney

Item 7 covers acting as, or arranging, a power of attorney of a body corporate or legal arrangement.¹ AUSTRAC confirms it does not cover a power of attorney for an individual, or executors and trustees of testamentary trusts. It also says drafting a will, and the testamentary trust it creates, is not a designated service under items 2, 4, 5 or 6 to 9.²

Your own group, and the link to Australia

• Within your group. A service one member of a business group provides to another member is not a designated service, subject to conditions in the AML/CTF Rules.⁸ s 6(6A)
• Geographical link. A service is only designated if it is provided at or through a permanent establishment in Australia, or by an Australian resident (or a subsidiary of an Australian resident company) through a permanent establishment overseas.⁹ s 6(6) AUSTRAC describes a permanent establishment as a place at or through which you conduct activities or business, including through an agent.¹⁰

Not sure where you sit?

1. List every service your firm provides

   Across all practice areas, because paragraph (b) of s 6(5C) is tested across the whole business.

2. Check each one against Tables 5 and 6

   Use Is my business a reporting entity? or our free six-question check.

3. Write down your reasons

   A short file note of why each service is, or is not, listed. Look at it again when you add a service.

4. Get advice on anything close to the line

   Especially insolvency, trust-account and group arrangements.

If one of your services is listed, the tranche 2 guide sets out what follows, and our kit (A$497) and Set-up service (from A$990) help you build the program.

Independent. Not affiliated with, or endorsed by, AUSTRAC or the Australian Government.

All guides: guides. Every instrument and AUSTRAC page we cite: sources.