QBCC Act - Statutory Trusts and Retention Trusts

From 1 March 2021 the next round of changes to the payment processes for some contracts in the construction industry commenced. It involves the replacement of the current project bank account (PBA) framework in place since 1 March 2018.

The Statutory Trust Regime (ST Regime) has some significant differences from PBA’s.

This includes a provision where individual executive officers of a company can be held personally liable for offences committed by the company in respect of trust accounts.

From 1 March 2021 the ST Regime applies to:

• All State Government projects from $1 million to $10 million excluding GST
• All State Authority projects from $1 million or more excluding GST if the Authority opts in

From 1 July 2021 it will apply to:

• All State Government projects $1 million or more excluding GST
• All hospital and health services projects $1 million or more excluding GST
• All State Authority projects $1 million or more excluding GST if they opt in

Further changes are slated for January and July 2022 and January 2023.

If a project is an ST Regime project then Head Contractors must establish a project trust account for every contract to which the regime applies and a retention trust account for all retention amounts withheld on project trust contracts.

The retention trust account is only required if cash retentions are withheld from subcontractors. This is a substantial change from PBA’s that required three separate bank accounts per project.

The ST Regime requires comprehensive trust account records for both the project trust account and the retention trust account. These include:

• Head Contract and all subcontracts
• Variations
• Payment claims and payment schedules
• Supporting statements given with Head Contract payment claims
• Notices, bank statements, reconciliations and records for all trust account transactions including changes to the balances, deposits and withdrawals
• Records of trust account training and auditor account review reports.

Trust account deposits and withdrawals must be recorded within 5 business days after the deposit or withdrawal, and all monthly bank reconciliations must be carried out within 15 business days after the end of each month.

This will be a significant administrative burden on all contractors required to open these accounts. The retention trust account must be audited by an independent registered company auditor every 12 months (and on closure of the retention trust account). There are a number of other onerous administrative requirements with which auditors and contractors must comply.

Mandatory trust account training may be required by the QBCC.

For further information please contact John Carey.