Written by Peter Waller – Special Counsel – QLS Accredited Specialist – Commercial Litigation
Laws about Project Bank Accounts are changing to protect payments to contractors and reduce the administrative burden for head contractors, according to the QBCC.
It is time for project owners, head contractors and contractors to review the trust account requirements, project administration processes and the terms of contracts for compliance.
Read on for our guide to the new trust account model being rolled out this year and into 2022 and 2023.
What Is The New Project Trust Account Model?
The new project trust account model includes:
- One project trust account per project, but only one retention trust account per contractor, if cash retentions are held;
- Extending the range of work and monetary value that is covered by the project trust;
- Making beneficiaries secured creditors in the event of bankruptcy; and
- Greater oversight by the QBCC.
What Is Changing For Queensland Government Projects?
Some Queensland Government projects have had the required Project Bank Accounts since March 2018 (projects valued between $1 million and $10 million (including gst)). In March 2021, phase 1 of the new project trust account model started and currently applies generally to:
- State Government contracts entered into after 1 March 2021 where the contract price is between $1 million and $10 million;
- The head contractor enters into a subcontract for all or part of the work; and
- More than 50% of the contract price is for ‘project trust work’.
Phase 2 of the project trust account model will start on 1 July 2021 and be expanded to cover eligible government and Hospital and Health Services (HHS) building and construction contracts valued at $1 million or more (excluding GST).
How Will The Project Bank Account Changes Apply To Other Projects?
For most in the industry, the following phases will apply.
1 January 2022
Eligible private sector, local government, statutory authorities and government-owned corporations’ building and construction contracts (entered from commencement) and valued at $10 million or more (excluding GST).
1 July 2022
Eligible private sector, local government, statutory authorities and government-owned corporations’ building and construction contracts (entered from commencement) valued at $3 million or more (excluding GST).
1 January 2023
All eligible building and construction contracts (entered from commencement) valued at $1 million or more (excluding GST) and subcontractors working on project trust account projects that hold cash retentions, will need a retention trust account.
With these changes being rolled out, it is timely to review the trust account requirements, your project administration processes and the terms of your contracts for compliance.