New initiative will secure payments for subcontractors from 1 March 2018
On 1 March 2018, Project Bank Accounts became a part of the Queensland building and construction industry under the new Building Industry Fairness (Security of Payment) Act 2017.
What are Project Bank Accounts?
In simple terms, they are trust accounts held for the specific purpose of paying progress claims submitted by subcontractors on a project.
For each applicable project, the Head Contractor must establish three Project Bank Accounts:
- A General Trust Account – for amounts paid under the head contract
- A Retention Account – for amounts held as retention amounts
- Disputed Funds Account – for amounts subject of a payment dispute
Will you be affected by the new laws?
Because Project Bank Accounts are being rolled out gradually, they have a limited application at this stage. Currently a Project Bank Account will be required for projects in Queensland where :
- The Queensland State Government is the principal contractor; and
- More than 50% of the contract price is for building work; and
- The contract price is from $1 million to $10 million.
These new laws apply to all State Government contract tendered from 1 March 2018, with some exceptions including:
- The construction work relates to 2 or less residential dwellings ; or
- The building contract is for maintenance work.
Heavy penalties apply for non-compliance
Establishing and using Project Bank Accounts correctly is compulsory. If you do not comply with these strict requirements, heavy penalties can be applied of up to 500 penalty units (currently $63,075) or up to 2 years imprisonment.
While these are maximum penalties (subject to a court determining the exact penalty) it is worth knowing and appreciating these penalties can be applied.
Minister for Housing and Public Works Mick de Brenni has confirmed the decision to prosecute will be based on public interest. Nonetheless, the simplest way to avoid penalties will be to comply with the new legislation.
The next phase for Project Bank Accounts
In September 2018 the State Government will conduct a review of Project Bank Accounts. The intention will be to then expand the initiative to private sector contracts between $1 million to $10 million from 1 March 2019.
Contact MDL for advice on what you need to do
If you’re a head contractor and you’re unsure about whether you need to establish a Project Bank Account on a project, contact McCarthy Durie Lawyers on 3370 5100 or fill out the contact form here to get in touch.