The need for project trust accounts has risen since 1st January, 2022, as a few private sectors and government contracts in Queensland have been valued at $10 million or more!
- Since 1st January, 2022, the project trust fund account regime was rolled out to the private sector and a distinct range of government entities.
- Since 1st January, 2022, this regime has applied to contracts worth 10 million or more. The threshold is said to drop to $3 million from 1st July, 2022, and to further drop to $1 million from 1st January, 2023.
- All parties should keep in mind the financial and administrative burden of complying with the regime and the penalties for non-compliance, staying well prepared before the commencement date.
Service and construction contracts involving departments in hospital and health services in Queensland have been using project bank accounts on certain buildings since March 2018. The Building Industry Fairness ( Security of Payment ) Act 2017 was amended by the Queensland Government to simplify the regime in 2020. 1st January, 2022 marked the next phase of that new regime where project trust accounts were required for the first time.
What Are Project Trust Accounts?
Project trust accounts, also known as project bank accounts, make sure that any money paid by a principal is held on trust for the benefit of the contractor and sub-contractors by the head contractor. If a builder becomes insolvent, a project trust account can provide extra protection for the sub-contractors.
Workings Of The Regime And What Clauses Do They Apply To?
The new regime brought into action helps create a statutory trust while also obliging management of a bank account for that trust by the head contractors once they establish it. This is the essence of what a project trust account is. For better understanding, you may think of it as a bank account which meets a few minimum requirements!
If 50% of the contract price is allotted for ‘project trust work’, then this regime will apply to that contract. This includes renovation, erection, construction, extension, alteration, any related site work, and repair or improvement of buildings. Any uniform structure that is covered by a roof of a fall can be referred to as a building. Yes, of course this regime also includes exclusions. These exclusions are applicable to specific sectors and types of contract or work, like pure maintenance contracts.
Does This Regime Apply To My Contract?
The Queensland Building and Construction Commission (QBCC) has made things easier by developing a tool that helps parties find out if they are in need of a project trust account. This tool can be very helpful but if you are confused about your standings, legal advice should be sought after.
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Even principles that are handing out contracts worth a whopping $10 million have certain obligations under this Act. This is to make sure that a project trust account is established and payments are made only to that account. Principals, builders, and subcontractors have penalties in place for non-compliance with the project trust account regime. All parties should make sure that they are well prepared in advance.
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