When you put down a deposit on an Australian property, that money doesn’t go straight to the seller. It sits with a neutral third party until every condition in your contract is met. This arrangement — called escrow — is the backbone of property transactions across the country. And from 1 July 2026, it’s about to change. New anti-money laundering rules will require buyers to prove exactly where their money comes from before a deal can go through.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Escrow isn’t just a technical detail. It’s what stops a buyer from losing their deposit if the seller can’t deliver clear title, and it guarantees the seller that payment is real before they hand over the keys. The system works well — but only if you understand how it operates and what the new rules mean for you. Here’s what you actually need to know.
The term you’ll hear most often is escrow. It’s the arrangement where a third party — usually a conveyancer, lawyer, or licensed digital platform — holds money or documents until both sides meet their obligations. In property, that almost always means your deposit.
What I tend to notice is that many first-time buyers assume escrow is automatic. It’s not. The terms of release — what triggers the money to move — must be written clearly into the contract or a separate escrow agreement. Without that, a dispute can freeze your funds indefinitely.
What the Full Cost Picture Looks Like
The purchase price is only part of what you’ll pay. The real figure includes stamp duty, conveyancer fees, title searches, and settlement costs — and escrow fees on top if you use a dedicated platform. Here’s how those costs stack up for a typical $600,000 residential purchase in New South Wales.
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| Cost Item | Typical Amount | Paid When |
|---|---|---|
| Deposit (held in escrow) | $60,000 (10%) | At exchange of contracts |
| Stamp duty (NSW) | ~$21,412 | Within 30 days of settlement |
| Conveyancer fees | $800 – $2,500 | At engagement and settlement |
| Title registration & settlement fees | $500 – $1,000 | On settlement day |
| Escrow/platform fees (if applicable) | $100 – $300 | At settlement |
The deposit is the biggest chunk, and it’s the one most people worry about. But here’s the thing: that $60,000 isn’t gone — it’s sitting in a trust account or with a licensed escrow agent. You only lose it if you breach the contract. The seller can’t spend it until settlement day.
Stamp duty is the second-largest cost and varies by state. In Queensland, the new Property Law Act 2023 brought mandatory seller disclosure from August 2025, which can affect what you’re liable for. Conveyancer fees are a smaller line item but cover critical work — contract review, title searches, and liaison with your lender’s legal team.
Common Mistakes Buyers Make With Escrow
Not Knowing What Triggers Release of Your Deposit
The most expensive mistake is assuming the deposit releases automatically on settlement day. It doesn’t. The escrow agent needs clear instructions — usually a signed settlement notice or confirmation from both parties’ conveyancers. If the contract doesn’t specify what counts as “conditions met,” the agent may refuse to release funds until a court or arbitrator decides. That can take months. In practice, your conveyancer will confirm that all conditions — building inspection, finance approval, title check — are satisfied before authorising release. Make sure your contract lists those conditions explicitly.
Thinking Escrow Covers Everything
Escrow protects your deposit, but it doesn’t guarantee the property is sound. A building inspection might uncover termite damage or structural issues that cost tens of thousands to fix. A property law specialist can help you understand what falls outside escrow protection. Your conveyancer should order planning certificates and drainage diagrams to check council compliance. Escrow holds the money; your due diligence holds the property to account.
Ignoring the New Identity and Source-of-Funds Rules
From 1 July 2026, agents and conveyancers must verify your identity and document where your money comes from before they can act for you. That means providing photo ID, proof of address, and — for cash buyers or higher-risk transactions — bank statements showing the accumulation of your savings. If you’re buying through a trust or company, you’ll need to disclose the ultimate owners. Gather these documents early. If you delay, your settlement could be pushed back while the agent complies with their legal obligations under the AML/CTF Tranche 2 reforms.
How Escrow Works in Practice — From Offer to Keys
Exchange of Contracts and Deposit Payment
Once you’ve agreed on a price and your conveyancer has reviewed the contract, you exchange signed copies with the seller. At this point you pay the deposit — usually 10% — into the escrow account held by your conveyancer or a licensed agent. The sale becomes legally binding. The seller cannot accept another offer, and you cannot withdraw without losing your deposit unless a specific condition allows it.
The Conditions Period — Inspections, Finance, and Searches
This is where the real work happens. Your conveyancer orders a title search to confirm the seller owns the property and to check for easements, caveats, or mortgages. A building inspector and pest inspector examine the property. Your lender completes a valuation and issues formal mortgage approval. Each of these steps is a condition that must be satisfied before the escrow agent can release your deposit to the seller. If an inspection reveals major defects, your conveyancer can negotiate a price reduction or allow you to withdraw with your deposit returned.
Settlement Day — Funds and Title Transfer Simultaneously
Most Australian settlements now run through the PEXA digital platform. Your conveyancer confirms that all conditions are met, your lender provides the remaining funds, and the escrow agent releases your deposit. The land titles office registers the transfer of ownership. The whole process takes a few hours. Once registration is confirmed, you get the keys. If anything goes wrong — a dispute over repairs or a last-minute title issue — the escrow agent holds the funds until both parties agree or a legal decision is made.
What the 2026 AML Reforms Change for Escrow
The new rules don’t replace escrow, but they add a layer of identity verification before escrow can even begin. Agents must verify who you are and where your funds come from before accepting your deposit. Cash payments over $10,000 must be reported to AUSTRAC within 10 business days. Splitting a large cash payment into smaller amounts to avoid reporting is a criminal offence. For most buyers, this means using bank transfers instead of cash and having your documentation ready before you make an offer. If you’re buying through a self-managed super fund or a family trust, you’ll need to provide the trust deed and identify all controlling beneficiaries. Start gathering those documents now — before you start looking at properties.
Can I lose my deposit if the seller changes their mind? ▾
What happens if my finance falls through after exchange? ▾
Does escrow cover off-the-plan purchases? ▾
Who pays the escrow fees? ▾
Can I use a digital escrow platform instead of a conveyancer? ▾
What if the escrow agent goes bankrupt? ▾
What the 2026 Reforms Mean for Your Next Purchase
The AML/CTF Tranche 2 reforms aren’t just a paperwork change. They shift the timing of what you need to prepare. Instead of gathering documents after your offer is accepted, you’ll need photo ID, proof of address, and source-of-funds evidence ready before you engage an agent or conveyancer. For buyers using a trust, company, or self-managed super fund, the requirements are more detailed — you’ll need to disclose the individuals who ultimately control the entity. The business law implications of these changes are worth reviewing early if you’re buying through a structure rather than as an individual.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Understanding House and Land Contract Risks When Buying in Australia.
Sources and Further Reading
Top Tips for Your Land Purchase Checklist in Australia — A practical checklist covering due diligence steps before you commit to a land purchase.
Decode the Aussie Property Ladder: Your First Step Up — A guide for first-home buyers navigating the early stages of property ownership in Australia.
Cockatoo (2026). Escrow Agreements Australia: Protection for Buyers and Sellers. 🔗
Jameson Law (2026). Conveyancing for Buyers: A Simple Guide to Locking In Your Purchase. 🔗
MQ Realty (2026). Buying or Selling Property in Australia? Here Is What the New Financial Rules Mean for You. 🔗
Sprintlaw (2026). What Is an Escrow Account? 🔗
