QBCC’s Project Trust Account framework, commenced under the Building Industry Fairness (Security of Payment) Act. It was designed to protect payments in Queensland’s building and construction industry and strengthen the security of payments to subcontractors.

Recent changes to the Act introduced a new framework that expand out to more sectors and more contracts in a phased approach, with the next stage due on 1st April, 2023 and will be fully implemented as of 1 October 2023.

Subcontractors are especially vulnerable to payment delay or non-payment as they are at the end of the contractual supply chain. Trust accounts are aimed at ensuring money paid by those at the top of the chain, is secured for the benefit of subcontractors, ensuring they are paid on time and in full.

There are two types of trust accounts, project trust accounts (PTA) and retention trust accounts (RTA). These trust accounts are used to hold progress payments and retention amounts on behalf of the parties entitled to them.

In this article, we explain both:

Project Trust Accounts

A Project Trust Account (also known as ‘PTA’) is an account through which project payments are received and paid. A PTA is needed for all eligible construction contracts in Queensland. A separate PTA is required for each eligible contract.

Typically, a PTA is:

•            paid into by the project owner or developer

•            managed by the head contractor

•            the account from which all subcontractors are paid

•            the account from which the head contractor pays themselves.

Where a trust account is required by law, there are specific processes and trust obligations that must be met by the parties including the contracting party, contracted party, subcontractors, auditors and financial institutions.

Retention Trust Accounts

A Retention Trust Account (‘RTA’) is an account where ‘eligible’ cash retention amounts are withheld until they are due to be paid.

A retention amount is an amount that is withheld from a payment to a contracted party. It’s purpose is to give financial protection to the contracting party in relation to the need to correct defects or otherwise secure the performance of work under the contract. Retention amounts are typically released following practical completion and/or after the end of a defects liability period in accordance with the contract.

While a PTA is needed for each eligible contract or project a business undertakes, only one RTA is needed, as the same account can be used across multiple projects.

Regulation and Compliance

The QBCC is responsible for regulating the new trust framework and making sure the industry complies. It has a number of powers, responsibilities and oversight functions, and can now:

•            undertake audits

•            require independent audits of accounts

•            receive notifications about trust accounts

•            freeze trust accounts

•            appoint a special investigator.

Phased implementation

The new project and retention trust account framework is being phased in gradually to all eligible building and construction contracts valued at $1 million or more. This will make sure that the industry has time to adapt and get ready for the changes.

• The first phase began on 1 March 2021 and applies to eligible Queensland Government contracts valued between $1 million and $10 million. These kinds of contracts used project bank accounts.

• From 1 July 2021, the framework expanded to eligible Queensland Government and Hospital and Health Services contracts valued at $1 million or more.

• On 1 January 2022, the framework expanded further to include eligible private sector, local government, statutory authority, and government-owned corporations’ contracts with a value of $10 million or more.

• Due to ongoing challenges within the industry, including COVID-19 and recent natural disaster events, the Queensland Government extended the start dates for the remaining two project trust account phases:

• Eligible private sector and local government, statutory authorities’ and government-owned corporations’ contracts valued at $3 million or more – scheduled to start 1 July 2022 – now starts 1 April 2023.

• All eligible contracts valued at $1 million or more (full implementation) – scheduled to start 1 January 2023 – now starts 1 October 2023.

• Retention trust accounts were scheduled to expand on 1 January 2023 for eligible contracts throughout the whole contractual chain on a project trust project. This expansion will now occur on 1 October 2023.

These extensions will allow more time for smaller industry stakeholders to prepare, and for the government to continue to support the industry with the transition.

In the interim, industry can continue to use the other existing security of payment protections available including adjudication, payment withholding requests, charges over property, subcontractors’ charges and monies owed complaints.

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