Changes to Queensland security of payment commence from 1 October 2020: What you need to know

30 September 2020

Recently we reported on amendments to the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) and related legislation which are set to have profound changes for the Queensland construction industry (article available here). The Queensland Government has now confirmed when those changes will take effect.

What you need to know for 1 October 2020

The following changes to security of payment in Queensland will take effect on 1 October 2020, for both existing and new contracts:

1. Supporting Statement: Head Contractors must ensure their payment claims are accompanied with a ‘supporting statement’, remembering that in Queensland an invoice may be a payment claim. The Government is yet to release the suggested form for the supporting statement, however it must state either:

  •  that all subcontractors have been paid in full as at the date of the payment claim;
  •  if all subcontractors have not been paid in full, the following details must be provided:
    • the subcontractor’s name;
    • the amount still unpaid;
    • the details of the unpaid payment claim for the subcontractor;
    • the date the subcontractor carried out the construction work or supplied the related goods and services;
    • the reasons the amount was not paid in full; and
    • a statement that all other subcontractors have been paid in full.

Non-compliance is an offence (maximum penalty of 100 penalty units, currently $13,345), however the failure to provide the supporting statement will not invalidate the payment claim.

2. Non-payment is an offence: it will be an offence:

  • to fail to pay the scheduled amount stated in a payment schedule by the due date for payment, unless the amount must be withheld due to a Payment Withholding Request (maximum penalty 100 penalty units, currently $13,345);
  • for the respondent to not pay the amount of an adjudication determination within 5 business days of the decision being released, unless the adjudicator has determined a later date (maximum penalty 100 penalty units, currently $26,690);
  • if the respondent does not notify the Adjudication Registrar (ie the QBCC) that the claimant has been paid the adjudicated amount, within 5 business days of making the payment (maximum penalty 20 penalty units, currently $2,669). The notification must include evidence of the payment.

3.  Payment Withholding Requests: a claimant will be able to serve a Payment Withholding Request on a party higher in the contractual chain (including financier in some instances) for an unpaid adjudication amount. Upon receiving the payment withholding request, the higher party is required to retain, from amounts otherwise payable to the respondent, the lesser of the adjudicated amount or the amount payable from the higher party to the respondent. The claimant must provide the respondent with a copy of the request. It is important to be aware that:

  • if a higher party fails to withhold the amount, the higher party becomes jointly and severally liable with the respondent to pay the claimant the adjudicated amount;
  • the claimant can demand details of the higher party from the respondent. Failure to comply is an offence;
  • an entity receiving the Payment Withholding Request who is not the ‘higher party’ must notify the claimant of that within 5 business days. A failure to do so is an offence.

4. Charge over property: Head Contractors will be able to apply to the Land Titles Office to register a charge over land where the work was performed if the respondent fails to pay an adjudicated amount and the respondent (or a related entity) is a registered owner of that land.

5. Failure to release security: the offence at section 67NB of the QBCC Act1 will be expanded so that it is an offence not to release retention moneys or other forms of security (eg bank guarantees) at the expiry of the defects liability period, subject to the carve outs provided by Part 4A of the QBCC Act.

Project Trust Accounts and Retention Trust Accounts: Commencement dates confirmed

The Queensland Government has confirmed the phased implementation of Project Trust Accounts to new building contracts, from 1 March 2021, as follows:

11 March 2021Project and retention trust accounts require for all new State Government eligible building contracts with a value between $1 million and $10 million, plus any building contracts with a State authority valued over $1 million where the State authority has decided a project trust is to be established.
2A1 July 2021Project and retention trusts will expand to include both State Government and health and hospital service eligible building contracts of $1 million or more.
2B1 January 2022Project and retention trusts will expand to private sector, local government, statutory authorities and Government owned corporations eligible building contracts worth $10 million or more.
31 July 2022Project and retention trusts will expand to any eligible building contracts valued at $3 million or more.
41 January 2023Project and retention trusts will expand to all eligible building contracts valued at $1 million or more.

Importantly, the scheme extends to the private sector from 1 January 2022, with the applicable start date being a function of the value of the building work.

Head Contractor QBCC licence exclusion

While Parliament has passed amendments to remove the ‘Head Contractor’ exclusion2 from the requirement to hold a QBCC licence, the Government is yet to announce when that change will come into force. The removal of this exclusion could have significant consequences for parties entering agreements as development managers, and similar agreements where an unlicensed party promising to perform building works proposes to engage one or more licenced contractors to perform that work.

This article was written by Colin Harris, Partner.

Queensland Building and Construction Commission Act 1991 (Qld).
Section 8, Schedule 1A of the QBCC Act.

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