Trust account framework
Security of payment in the building and construction industry is a priority for the Queensland Government. A review of Project Bank Accounts (PBA) by the independent Building Industry Fairness Reforms Implementation and Evaluation Panel recommended a simplified model.
The new trust account framework commenced on 1 March 2021 replacing the PBA framework.
The model was simplified by reducing the number of trust account from three trust accounts (general trust account, retention trust account and disputed funds trust account) to:
- One project trust account to be established for each eligible contract
- One retention trust account per contractor to hold all cash retentions for contracts under a project trust account project.
Other changes include:
- The disputed funds account no longer exists, but subcontractors will be better protected because the project trust account will cover a larger range of work.
- There is a statutory charge over retention amounts held in trust. This charge makes the subcontractor a secured creditor in the event of bankruptcy or insolvency.
- Principals no longer have viewing access of the trust accounts.
Once full implementation is reached, all subcontractors down the chain in a trust account project will have the benefit of a retention trust.
The Queensland Building and Construction Commission (QBCC) now has a greater role in making sure the industry complies with the trust account framework 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 market-wide supply and labour shortages and cost pressures, 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 April 2023 – now starts 1 March 2025.
- All eligible contracts valued at $1 million or more (full implementation) – scheduled to start 1 October 2023 – now starts 1 October 2025.
Retention trust accounts were scheduled to expand on 1 October 2023 for eligible contracts throughout the whole contractual chain on a project trust project. This expansion will now occur on 1 October 2025.
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.