The Queensland Government has fixed commencement dates for certain provisions of the Building Industry Fairness (Security of Payment) and Other Legislation Amendment Act 2020 (Qld), which received assent on 23 July 2020.
The commencing provisions extend the project trust account regime and introduce further security of payment protections with a view to creating a safer, fairer and more sustainable building and construction industry.
Further rollout of the project trust account regime
Project trust accounts are currently required for State Government eligible building contracts valued between $1M and $10M (and State authority eligible building contracts of the same value on an opt in basis). From 1 March 2021 the new framework will apply to those contracts. State authorities will also be able to opt in for eligible building contracts valued at $1M+.
The new framework is streamlined; for example, it requires only one project trust account for each eligible contract, a single retention trust account for cash retentions across eligible projects and no 'disputed funds trust account'.
The new framework will be further rolled out as follows:
- 1 July 2021: State Government and Hospital and Health Services eligible building contracts valued at $1M+;
- 1 January 2022: private sector, local government, statutory authorities' and government owned corporations' eligible building contracts valued at $10M+;
- 1 July 2022: private sector, local government, statutory authorities' and government owned corporations' eligible building contracts valued at $3M+; and
- 1 January 2023: all eligible building contracts valued at $1M+.
Western Australia has followed Queensland's lead in its bid to improve security of payment in the building and construction industry using a statutory trust account regime, with its recent introduction of a proposed deemed trust scheme to protect retention money under the Building and Construction Industry (Security of Payment) Bill 2020 (WA).
Security of payment amendments commencing 1 October 2020
From 1 October 2020, a head contractor must provide a supporting statement with each payment claim confirming that all of its subcontractors have been paid (or stating the reasons for any amount withheld). While a failure to provide a supporting statement will not invalidate a payment claim, it may result in a penalty of up to 100 penalty units.
A number of payment enforcement mechanisms also commence on 1 October 2020, including:
- payment withholding request provisions;
- charge over property provisions; and
- additional penalties for failure to pay a scheduled amount.
For more details regarding the substance of the above changes, see our previous alerts from March and July 2020.
The announcement also fixes further commencement dates for other building and related amendments, including those regarding certification and licensing – see the explanatory notes for further details. A further amendment to remove a QBCC licence exemption will commence on a date to be fixed by proclamation.
Looking forward
Parties should ensure these arrangements are reflected in project plans, tender and contract documents where applicable. For example, while many building contracts already require a supporting statement with each payment claim confirming that subcontractors have been paid, parties to head contracts may choose to align those requirements with newly introduced legislative requirements in order to assist contract administrators to comply.
Should you wish to discuss how these new arrangements will affect your business and how to plan for and mitigate associated risks, please contact us.
