Organisations impacted by the requirement to operate PTAs on each project they undertake need to prepare for the additional regulatory compliance required, as well as the cashflow implications of restricted access to progress claim receipts and subcontractor retention monies after the relevant commencement date.
As noted in previous alerts, the revised PTA roll-out implemented the majority of recommendations made by the Building Industry Fairness Reforms Implementation and Evaluation Panel, including removing the requirement for a disputed funds trust account and introducing the option to maintain a single Retention Trust Account to manage retention monies across all projects. The obligation to administer Retention Trust Accounts (not PTAs) was however extended to include Principals from 1 January 2022 and Subcontractors from 1 January 2023.
What are the obligations for Project Trust Accounts?
Project Trust Accounts must be opened within 20 business days of entering the eligible contract (including variations) and must only be opened with an approved financial institution.
Where a PTA is opened, there are strict requirements to notify the Queensland Building and Construction Commission (QBCC) and Principals (within five business days) and subcontractors (within 10 business days). Head contractors must also provide subcontractor beneficiaries with written advice of payments within five business days of making payments.
What are the obligations for Retention Trust Accounts?
From 1 January 2022, trustees or a person/s nominated by a trustee to administer a Retention Trust Account (RTA) are required to complete retention trust training.
If you withheld a retention amount or nominate an administrator on or after 1 February 2022, you must complete the training within 20 business days of withholding an eligible retention amount or from the date of nomination.
The QBCC is delivering weekly training sessions on retention trust training to meet this requirement.
Like PTAs, there are strict requirements to notify the QBCC and subcontractors within five business days of opening the account. Ideally, subcontractors should receive this notification before retention amounts are withheld.
There are also requirements to notify subcontractors’ specific details of all deposits and withdrawals from an RTA within five business days. Information required under the notice includes details of the amount and date of the transaction, and the total retention amount withheld for the beneficiary after the transaction.
Requirement for annual audit of RTA
The RTA review must be carried out by a registered company auditor who is independent of the Head Contractor or Trustee. RTA reviews must be carried out at the following times:
- Annually, the review must start within 20 business days after the end of each annual period; and
- When the account is closed, within 20 business days of closure.
The period of the review that the auditor must cover is as follows:
- For an annual review:
- the first review of the account should account for 12 months from the day the account was opened; or
- a later review of the account should account for 12 months from the day after the last review period ended.
- When the account is closed, the review should start on the day the account was opened (if no previous review period), or the day after the last review period ended; and ending on the day the account was closed.
An RTA review must also be carried out if directed by the QBCC at any time.
A registered company auditor must complete their review of the RTA within 40 business days after starting the review and provide an account review report to the QBCC in the approved way within 20 business days after completing the review. The auditor must also give the trustee a copy of the account review report.
Failure to meet the QBCC reporting requirements can result in the suspension of a building license and fines of more than $2,600 for individuals and more than $13,000 for companies, or prosecutions for those that do not submit their reports by the due date. There is a long list of examples over recent years where the QBCC has used its power and suspended builders’ licence until it can show compliance.
How can we help?
Grant Thornton is a full-service firm of specialist advisors and auditors that regularly helps clients effectively manage their QBCC regulatory obligations. We welcome the opportunity to assist you by lightening the load of regulatory compliance, allowing more time to focus on what matters most – business performance. Reach out to your local advisor today for more information on what has been discussed.