Since the Building Industry Fairness (Security of Payment) Act 2017 (“BIF Act”) was enacted in late 2017 the regime of project bank accounts (“PBAs”) in Chapter 2 has been very much a case of ‘watch this space’. Chapter 2 commenced operation on 21 March 2018 but only imposed the PBA regime upon State government projects and then only for contracts valued at between $1M and $10M. Nevertheless, the regime was quite onerous with the head contractor being required to establish three trust accounts for every project. A general account, an account for disputed amounts and an account for retentions.
The PBA regime then underwent an extensive review process which resulted in some 20 recommendations being made for the amendment of the PBA regime. All of those recommendations were accepted and consequential amendments were made to the BIF Act by the Building Industry Fairness (Security of Payment) and Other Legislation Amendment Act 2020 replacing the entirety of Chapter 2 in the BIF Act. These changes finally commenced on 1 July 2021.
With the implementation of the new regime, the procedures have been significantly simplified and the amount of administrative work required by head contractors has been greatly reduced. Under the new Chapter 2, Head contractors are still required to establish trust accounts for relevant projects however, the requirement for three PBAs for each project has been replaced with a new regime of statutory trusts. Chapter 2 now requires the head contractor to establish trust accounts defined as ‘project trust accounts’ (“PTAs”) and ‘retention trust accounts’ (“RTAs”). However, each head contractor is only required to establish and operate one RTA into which they must deposit and hold retentions withheld on all applicable projects. They must also establish a separate PTA for every applicable project into which all payments from the principal are deposited and from which payments to subcontractors are made.
Further, the $10M cap on the value of the contracts has been removed which makes the new Chapter 2 apply to considerably more contracts than previously.
Other significant changes are:
- The projects to which the regime applies has been increased from just State Government projects between $1M and $10M in value to include State Government projects and contracts for the construction of hospital and health service buildings valued at $1M and above; and
- increased regulation which is administered by the Queensland Building and Construction Commission (QBCC) ensuring framework compliance. Powers held by the QBCC in this regard include the power to:
- maintain a register of PTAs and RTAs;
- appoint special investigators into PTA and RTA activities;
- require disclosure of information such as contracts, bank statements, ledgers and accounts;
- apply to the Supreme Court for directions to deal with funds held in PTAs and RTAs.
There are more changes coming which will increase the scope of the regime to a wider class of projects. The commencement dates for the further changes are:
- on 1 January 2022 the regime will extend to include private sector and local government projects valued at $10M and above;
- on 1 July 2022 the regime will extend to include private sector and local government projects valued at $3M and above; and
- on 1 January 2023 the regime will extend to include private sector and local government projects valued at $1M and above
Although much more simplified that the previous version, there is still a great deal of complexity in the implementation of the necessary procedures for builders to comply with the regime. We urge you to take the time to understand the procedures and seek advice to assist you in ensuring you are complying. It is also a timely reminder to ensure your contracts are all appropriately drafted to ensure they are up to date with the latest in the building and construction legislative framework that applies in Queensland.
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The material distributed is general information only. The information supplied is not and is not intended to be, legal or other professional advice, nor should it be relied upon as such. You should seek legal or professional advice in relation to your specific situation.