Proposed clarity regarding Project Trust Accounts

Who should read this?

All principals, head contractors and subcontractors performing building and construction work in Queensland.

Proposed Project Trust Account Clarifications

On 14 February 2024, the Building Industry Fairness (Security of Payment) and Other Legislation Amendment Bill 2024 (Qld) (Bill) was introduced with the aim of clarifying the operation of the project trust account (PTA) framework under the Building Industry Fairness (Security of Payment) Act 2017 (Qld).  

What is a Project Trust Account again?

In short, a PTA is an account into which payments required under an eligible contract between a contracting party (typically a principal) and a contracted party (typically a head contractor) must be paid and distributed to subcontractors. We have published a number of articles in relation to the rollout of the PTA regime, including:

• Queensland’s new project trust regime to commence on 1 March 2021 (15 February 2021); and
• Further delays to the rollout of the Project Trust Account regime (29 March 2023).

What clarifications are proposed and why?

Recent industry feedback regarding the PTA regime indicated that greater clarification is desirable regarding certain legislative provisions and requirements. In response, the Bill proposes a number of amendments to the PTA regime, including the following:

• new definitions to provide greater certainty as to who is protected by, and paid through, a PTA. The current legislation uses the term ‘protected work’ which includes construction, alteration, repair or restoration of buildings or works. This has created some ambiguity given the definition is referable to work performed rather than the parties performing it. In order to clarify this, the Bill proposes that the protections should be referable to specific parties, such as builders and electricians;
• a regulation-making power allowing the chief executive to produce guidelines regarding compliance with record-keeping requirements. These changes aim to ensure that requirements for PTAs can be easily amended in response to changes in industry practice;
• clarifications regarding the circumstances in which an amended contract, which did not require a PTA prior to amendment, would become subject to a requirement to establish a PTA; and
• an expansion of the circumstances in which a trustee may apply for an exemption from the requirement to provide an account review report. Currently, an exemption is only available if the account held no funds during the relevant review period, however the Bill proposes to also allow for an exemption where there have been no new transactions or changes to the account during the review period.

If passed, the Bill promises to alleviate some of the confusion in the industry about compliance with certain aspects of the PTA regime.

The McCullough Robertson Construction & Infrastructure team can assist with any advice required in relation to project trust accounts and retention trust accounts.

This publication covers legal and technical issues in a general way. It is not designed to express opinions on specific cases. It is intended for information purposes only and should not be regarded as legal advice. Further advice should be obtained before taking action on any issue dealt with in this publication.