Queensland’s construction industry is navigating significant changes with the introduction of the trust account framework under the Building Industry Fairness (Security of Payment) Act 2017. Understanding the requirements and recent amendments to this framework is essential for ensuring compliance and protecting the financial health of projects.

The Basics: What Are Trust Accounts?

The trust account framework in Queensland comprises two types of accounts: Project Trust Accounts (PTAs) and Retention Trust Accounts (RTAs). These accounts are designed to safeguard progress payments and retention amounts, ensuring that funds are securely held on behalf of the entitled parties.

• Project Trust Account (PTA): A PTA is required for all eligible construction contracts in Queensland. It acts as the primary account through which project payments are received and disbursed. Each eligible contract or project requires its own PTA, ensuring that payments are handled transparently and securely.
• Retention Trust Account (RTA): An RTA is used to hold ‘eligible’ cash retention amounts until they are due for payment. Unlike PTAs, a single RTA can be utilized across multiple projects, streamlining the management of retained funds. This flexibility is particularly beneficial for contractors managing multiple contracts simultaneously, reducing the administrative burden.

Key Implementation Milestones

The trust account framework is being implemented in phases from 1 March 2021 to 1 October 2025, allowing the industry time to adapt. These phases progressively expand the scope to include more contracts and contractors.

1 March 2025:

• PTAs will be required for projects with contract prices of $1 million or more (excluding GST), involving the Queensland State Government, Hospital and Health Services, and certain state authorities.
• PTAs will be required for projects with contract prices of $3 million or more (excluding GST), involving state authorities, local governments and private (entities and individuals).
• RTAs will be necessary where a PTA is required for the head contract, with specific exemptions for Commonwealth, state, and local government entities

1 October 2025:

• Full implementation of PTAs for all contracts priced at $1 million or more (excluding GST), across public and private sectors, including local governments and private entities.
• RTAs will be required for any contracting party where a PTA is in place for the head contract, covering a broad range of project types.

Determining the Need for a Project Trust Account

To determine whether a PTA is required, you must assess whether more than 50% of the contract’s value is dedicated to project trust work. This includes a wide range of activities, from construction and renovations to specialized services like mechanical systems, electrical work, fire protection, and more. The scope of what constitutes “project trust work” is broad, ensuring that a significant portion of construction activities are covered under this framework.

For a more detailed assessment, you can use the Simple Trust Account Tool provided by the Queensland Government. This tool helps contractors and principals determine if their contracts require a trust account, streamlining the compliance process.

Obligations Under the Act

Adhering to the obligations outlined in the Building Industry Fairness (Security of Payment) Act 2017 is crucial to avoid penalties. Here are three key responsibilities:

1. Payments into the Project Trust Account: Payments made to a head contractor for a trust project must be deposited into the PTA, ensuring that funds are managed in accordance with the Act. Exceptions to this requirement include payments due before the trust was established, payments made into court, amounts withheld due to a payment withholding request, direct payments in connection with a subcontractor’s charge, or if there is a reasonable excuse for not depositing the funds into the PTA.
2. Establishing a Retention Trust Account: When withholding cash retentions from payments to a head contractor, you are required to establish an RTA in compliance with Part 3 of the Act. This ensures that retention funds are securely held until they are due to be released. Exemptions apply if retentions are held in forms other than cash or if the contracting party is a government entity. Once the RTA is established, it must be reported to the Queensland Building and Construction Commission (QBCC) within five business days, maintaining transparency and regulatory oversight.
3. Reporting Non-Compliance: If you know or should reasonably know that a PTA is required but has not been opened by the head contractor, you are legally obligated to notify the QBCC. This requirement ensures that trust obligations are properly maintained throughout the contractual chain, protecting the financial interests of all parties involved.

Recent Amendments to the Framework

The Building Industry Fairness (Security of Payment) and Other Legislation Amendment Act 2024 introduced several changes aimed at simplifying the trust account framework, reducing costs, and enhancing protections for subcontractors. These amendments are crucial for staying compliant and ensuring that your trust account management practices are up to date.

1. Simplified Definition of Subcontractor Beneficiaries: The definition of ‘subcontractor beneficiary’ has been streamlined. Now, any contractor who is required to hold a license or registration to perform the work is considered a beneficiary. Additionally, specific types of work, such as earthmoving, prefabricated building installation, and site restoration, have been included as protected subcontract work, ensuring comprehensive coverage under the trust account framework.
2. Clarification on Retention Amounts Including GST: The amendments clarify that retention amounts held in trust must include any applicable GST. This ensures that the full retention amount is protected, reducing the risk of non-payment at the end of defect liability periods. While this requirement will not be enforced immediately, it is advisable to align your practices with this clarification to avoid future complications.
3. Removal of Mandatory Retention Trust Training: Trustees are no longer required to complete mandatory retention trust training. This change reduces regulatory burden and allows trustees to choose from a range of training and resources provided by industry bodies and the QBCC, supporting awareness and compliance in a more flexible manner.
4. Relaxed Accounting and Auditing Requirements: Trustees are no longer obligated to engage auditors for account review reports, simplifying compliance and reducing costs. This change supports the transition to new record-keeping and software requirements, making it easier for businesses to adapt to the evolving regulatory environment.
5. Streamlined Record Keeping and Software Solutions: The record-keeping requirements have been simplified to align with standard accounting practices. This simplification facilitates the development of compliant software tools, which are expected to be available from September 2024. The Department is working closely with digital software providers to ensure that these tools meet the new requirements. A list of approved products will be published, giving trustees confidence that their software solutions will enable compliance.

Preparing for the Future

These amendments are part of a broader effort to make compliance more manageable while ensuring that trust accounts effectively protect financial interests. By staying informed and adapting to these changes, you can ensure compliance and safeguard your projects from potential legal and financial risks.

With the transitional period extending, there is ample time to adjust your business processes and systems to meet the new requirements.

If you need further assistance or have specific questions about how these regulations impact your projects, don’t hesitate to reach out to our team for guidance. We’re here to help you navigate the complexities of Queensland’s trust account framework and ensure your projects remain compliant.

The content of this publication is intended to provide a summary and commentary only. It is not intended to be comprehensive nor does it constitute legal advice, and has been prepared based on applicable legislation and case authority at the date of publication. You should seek legal advice on specific circumstances before taking any action.