The report, which proposed amendments to the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act), outlined the industry’s suggestions on the practicalities of the proposed changes to the use of PBAs
Background
Project Bank Accounts are a key component of the Queensland Government’s security of payment reforms, which were trialled from 2018 for Government building contracts between $1 million and $10 million.
Currently, the legislation requires that head contractors establish the following 3 trust accounts for each qualifying project to secure monies for the benefit of subcontractors:
- general project account
- retention account
- disputed monies
Changes to Retention Monies Trust Account
- Head contractors will now be able to maintain a single retention monies trust account for all subcontractor retentions which is in contrast to the current regime where separate retention monies trust accounts are required for each project.
- The obligation to operate a single retention trust account will now extend to all building and construction contractors (including all levels of subcontractors) and private sector principals. This obligation is decoupled from the requirement to establish a PBA.
- Mandatory external reviews will be required initially within the first 6 months of a retention trust account being opened and continue annually thereafter. While the Government has indicated a desire to minimise the administrative burden of the regime by aligning any such reviews with existing financial audit requirements, businesses below the audit threshold ($50m turnover FY20) will still face an additional administrative burden.
- Prior to opening a trust account, contractors wishing to hold cash retentions will be required to complete training and assessment by an approved training provider to ensure that they fully understand their role a trustee, accounting, record keeping and other obligations (similar to real estate and auctioneers).
- The roll-out of retention monies trust accounts will be phased, as with PBA’s.
Changes to Disputed Monies Trust Accounts
- The requirement to open and maintain a disputed monies trust account for each project will be abolished. This is not surprising as under the current drafting, this account was of limited assistance to subcontractors with disputed claims.
Other changes
- The Government proposes improving security of payment for all contractors (including head contractors) by introducing “payment withholding requests”.
- Subcontractors will be able to issue payment withholding requests to principals on or after making an adjudication application, to protect disputed amounts and reduce the risk of nonpayment following adjudication.
These changes are intended to also apply to projects that do not require a PBA and will provide an ability to “issue a charging order or impose a lien over property”. With Queensland being the first jurisdiction to introduce such measures, the changes will provide expanded protection for head contractors from failure by developers/ principals.
