Project Trust Accounts: Are you ready for January 2022?

We refer to our two previous updates on the proposed Project Trust Accounts implemented by the QLD Government.

As set out in our previous updates, from 1 March 2021, on eligible state government projects the Project Trust Account (PTA’s) model included the following changes and roll out:

1. Fewer accounts required – one PTA per project, but only one Retention Trust Account (RTA) per contractor (formerly one per project) if cash retentions are held.
2. The disputed funds account has been removed and replaced by added protections for subcontractors.
3. More subcontractors protected – by extending the range of work and monetary value that is covered by the project trust.
4. Statutory charge over retention amounts – will make beneficiaries secured creditors in the event of bankruptcy.
5. Viewing access for principals has been removed.
6. The next PTA phase roll out and criteria for eligibility is as follows:

• • phase 2B commencing 1 January 2022: private-sector construction projects that are valued at $10 million or more will require a PTA if more than 50% of the contract price is for ‘project trust work’ and at least one subcontractor is engaged;
  • phase 3 commencing 1 July 2022: private-sector construction projects that are valued at $3 million or more will require a PTA if more than 50% of the contract price is for ‘project trust work’ and at least one subcontractor is engaged; and
  • phase 4 commencing 1 January 2023: all building and construction projects that are valued at $1 million or more will require a PTA if more than 50% of the contract price is for ‘project trust work’ and at least one subcontractor is engaged, completing the rollout.

Obligations of the Head Contractor in the private sector

1. The Head Contractor must open one PTA per eligible project with an approved financial institution by the QBCC. The PTA must be opened within 20 business days after the Head Contractor enters into the first subcontract. Each subcontractor must be given written notice about the use of a PTA.
2. Within 5 business days of opening a PTA, the Head Contractor must give the Principal and the QBCC (in the approved way) notice that the PTA is established. Information about the PTA will be published on the QBCC’s website.
3. The Head Contractor must open an (Retention Trust Account) when they are party to a PTA and withholding cash retentions from first-tier Subcontractors under a subcontract. The Head Contractor will have the same obligations as the Principal regarding the RTA.
4. The Head Contractor may only withdraw from the PTA for payment to subcontractors, depositing an amount into the (RTA) paying themselves for the work, rectifying a payment error, or payment for an adjudication decision or decision of a court. The Subcontractor beneficiary must be given 5 business days notice after making the withdrawal.
5. If there are insufficient funds in the PTA, the Head Contractor must use its own funds to top up the PTA and then pay the Subcontractor. Failing to do so is an offence and will require notification to the QBCC.
6. The Head Contractor is responsible for all trust records and a trust account ledger which are to be retained for 7 years.

Obligations of the Principal

1. The Principal is required to deposit any amounts due and payable that are related to the contract for which the PTA is required, into the PTA. In particular, the contract sum is deposited into the PTA, however, the Principal is entitled to do so through progress payments for completed works, rather than the sum in full.
2. The Principal must open an RTA if an eligible contract for a PTA exists and the Principal is withholding cash retentions from the progress payment of the Head Contractor. Additionally:

• • only one RTA is necessary for the Principal which they are entitled to hold cash retention amounts across multiple projects;
  • the Principal must open the RTA with an approved financial institution and notify the QBCC within 5 business days of opening;
  • the Head Contractor must be notified before the retention amount is withheld from a progress payment;
  • any retention amount must be deposited immediately via transfer to the RTA from the PTA; and
  • should the RTA have insufficient funds to make payments that are due, the Principal is required to top up the RTA with its own funds.

*As a disclaimer, the content does not constitute legal advice and should not be relied upon as such. Appropriate legal advice should be obtained in actual situations. Feel free to contact us should you require any assistance in resolving a legal dispute.

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