Queensland: Project Trust Accounts take another step forward, but questions remain

14 August 2020

Queensland is on track for broad implementation of project trust accounts with the latest amendments to the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (BIF Act) having now passed Parliament and received royal assent on 23 July 2020.  However, questions remain regarding the timetable for implementing the scheme and clarifying exactly who will be caught.

Key developments

Currently Queensland has a scheme of project bank accounts, limited to State Government building projects valued between $1 million and $10 million.  That is set to be replaced by a scheme of statutory project trusts which will be gradually rolled out to a broader range of government and privately funded projects.

The passage of the amendments has been delayed by COVID-19. The pandemic has resulted in the government providing the following indicative commencement dates for the commencement of the amendments, flagging the ability for those dates to change as the pandemic unfolds:

Intended CommencementPhase
Until next phaseCurrent regime for project bank accounts on some State funded projects continues.
1 March 2021Project and retention trust accounts required for all new State Government building contracts valued between $1 million and $10 million, with State authorities having the option of adopting the requirements. These projects are currently subject to the project bank accounts regime.
1 July 2021Expansion to eligible State Government and Health and Hospital Services building contracts of $1 million or more.
1 January 2022Extended to the private sector, local government, statutory authorities and government owned corporations for eligible building contracts valued at $10 million or more.
1 July 2022Extended to all eligible building contracts valued at $3 million or more.
1 January 2023Final implementation with the regime applying to all eligible building contracts valued at $1 million or more.

Project Bank Accounts v Project Trusts

The current project bank account regime is cumbersome and requires the head contractor to establish three project specific bank accounts for each project.  The incoming trust account regime will require the contractor to establish:

  • One project trust account per eligible project; and
  • A single retention trust account for retention monies across all of that contractor’s eligible projects.

The amendments also remove the principal’s involvement and oversight in the administration of the project account, which had provided the principal with visibility of subcontractor pricing and claims.  The Queensland Building and Construction Commission is instead provided with extensive powers to oversee and audit the trust accounts.  Substantial penalties, including personal liability, apply for contraventions.

The amendments also require the trustee or their nominated person responsible for administering the trust accounts to undergo training prescribed by the QBCC.

What projects are caught?

One criticism of the project bank account legislation was that the lack of certainty in respect of which projects were excluded from the regime, in particular whether projects which were predominantly for engineering or civil work but which arguably were associated with a ‘building’ (which is defined broadly) were caught.

The amended legislation provides an avenue for this to be clarified through future regulation prescribing types of work that are not subject to the regime.  The amendments also remove small scale residential work, being the construction or renovation of three or less ‘living units’ (ie dwelling or unit) from the scheme.

Other amendments to security of payment

Separate to the trust account regime, the amendments also modify Queensland’s security of payment regime in respect of:

  • Head contractors are required to provide supporting statements with each payment claim, declaring that subcontractors have been paid;
  • Enforcement of adjudications is enhanced with claimants with unpaid adjudication determinations able to issue a payment withholding request on a higher party in the contractual chain (including a financier in some instances) and a head contractor being able to register a charge over the principal’s site;
  • Imposing penalties for failing to pay the amount provided in a payment schedule by the due date for payment; and
  • Requiring respondents to notify the Adjudication Registrar that an adjudicated amount has been paid, with evidence.

Key takeaways

  • Once in operation, the project and retention trust requirements will increase head contractors’ administrative workload and affect their cashflow.  While the new scheme does not apply to contracts already tendered or entered prior to commencement of each phase, the timetable for implementation of the scheme should be considered in project planning, budgeting and pricing;
  • Contractors may wish to review whether they will accept cash retentions as a form of security, and the additional administration that comes with that;
  • Alternative procurement strategies may need to be considered for projects where the imposition of trust accounts would be impractical;
  • All industry participants should be aware of the broader changes to security of payment and consider adapting contracts to speak with those changes; and
  • Head contracts and subcontracts will need to be reviewed and adapted to operate with the new regime.

It remains to be seen what impact the State election in October 2020 will have on the scheme. While the legislation passed unopposed, the opposition has signalled that if elected it will convene a broad inquiry into the building industry which may impact upon the trust account regime.

Further updates will be provided as the timetable for the implementation of the scheme is confirmed.

This article was written by Colin Harris, Partner, Alyssa Collie, Solicitor and Mikayla Coonan, Solicitor.

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