The first transition date from the Project Bank Account to Statutory Trust regime commenced on 1 March 2021.
The original Project Bank Account (PBA) regime was introduced in Queensland in March 2018.
From 1 March 2021 this PBA regime will be replaced by the Statutory Trust (ST) regime.
The ST regime is similar to PBAs and retains the same stated purpose of protecting the interests of subcontractors. However, there are some key differences that are important to highlight:
- number of accounts required to be opened;
- increased record keeping requirements;
- compulsory training & auditing;
- expanded definition of project trust work;
- increased penalties and executive liability offences for non-compliance; and
- phased roll out to private projects.
1. Number of Accounts Required for Each Project
Under the ST provisions head contractors will be required to open one Project Trust Account for each Project Trust Contract.
Head contractors will only be required to open a Retention Trust Account if the head contractor withholds cash retention from its subcontractors on a Project Trust Contract. Head contractors are only required to open one Retention Trust Account in which retention money from all of their Project Trust Contracts can be retained.
2. Increased Record Keeping Requirements
You must keep comprehensive records for both Project Trust Accounts and Retention Trust Accounts for at least 7 years. A failure to do so could attract a penalty of up to 300 penalty units or 1 year imprisonment. These records include:
- an individual trust ledger;
- a copy of each contract for which the trust is required;
- all payment claims and supporting statements made by or given to the trustee relating to the contract;
- all payment schedules given by or made to the trustee in relation to the contract;
- all variation documents;
- all bank statements;
- monthly bank reconciliations;
- plus a raft of other documents – a full list can be found in the regulations here https://www.legislation.qld.gov.au/view/html/inforce/current/sl-2018-0016#pt.2-div.4
All deposits and withdrawals must be recorded within 5 business days and all monthly bank reconciliations carried out within 15 business days of the end of each month.
3. Compulsory Training and Auditing for Retention Trust Accounts
A trustee or the person nominated by the trustee of a retention trust account must complete compulsory retention trust training – a failure to do so attracts a maximum penalty of 100 penalty units.
Retention Trust Accounts must also be audited every 12 months and when the Retention Trust Account is closed. The auditor must be an independent registered company auditor who has not been excluded by the QBCC. The auditor will complete their report and is required to provide a copy to both the head contractor trustee and the QBCC.
4. Expanded Definition of Project Trust Work
Statutory Trusts will apply to a broader range of work than the PBA regime.
Project Trust Work is broadly defined in the legislation and includes works related to the erection, construction, renovation, alteration, extension, improvement or repair of a building, a variety of related site work, specialist work and inspection and advisory services.
It is important to note that the definition of Project Trust Work includes some work for which contractors are not required to hold a QBCC license – such as earthmoving and electrical work and services provided by professional engineers and architects for example.
5. Increased penalties and executive liability offences for non-compliance.
There are a raft of penalties specified throughout the legislation for non-compliance with various aspects of the ST regime ranging from modest fines to large fines or imprisonment.
The QBCC also has the power to require information be delivered, issue directions in relation to trust accounts and appoint a special investigator to investigate a person’s compliance with the requirements of the ST regime.
An executive officer of a corporation that commits and offence against an executive liability provision will also be taken to have committed an offence if the officer did not take all reasonable steps to ensure the corporation did not engage in the conduct constituting the offence.
6. Phased Roll Out
The ST regime will eventually apply to all eligible contracts valued at $1million or more.
The phased transition schedule is currently set as follows:
- 1 March 2021 – applies to all eligible state government contracts valued between $1 million and $10 million.
- 1 July 2021 – adds in all eligible government and Hospital and Health Services contracts valued at $1 million or more.
- 1 January 2022 – adds in all eligible private sector, local government, statutory authorities’ and government-owned corporations’ contracts valued at $10 million or more.
- 1 July 2022 – adds in all private sector, local government, statutory authorities’ and government-owned corporations’ contracts valued at $3 million or more.
- 1 January 2023 – final phase of all eligible contracts (public and private sector) valued at $1 million or more.
An ‘eligible contract’ is a contract where:
- the principal is the type of principal included in that transition phase;
- the contract price is as specified for that transition price; and
- more than 50% of the contract price is for project trust work.
However, an ‘eligible contract’ does not include (and STs will not apply to):
- small scale residential construction work – if the only work to be carried out under the contract is residential construction work for less than 3 living units;
- contracts that are only for maintenance work;
- contracts that are only for advisory or design work carried out by an architect, RPEQ, building designer or landscape architect;
- contracts that are only for contract administration for the construction of a building designed wholly or partly by that person; and
- contracts with less than 90 days until practical completion.
The new ST regime will, over time, apply to a much broader class of head contractor and subcontractor. If this includes you, you should take steps to get familiar with the regime now and to implement administrative and banking procedures that will streamline your compliance.
If you require any further information regarding these changes, please do not hesitate to contact a member of our Construction Team.