Project Bank Accounts Now a Requirement for Private Sector Projects Over $10 Million
Since March 2018, Project Trust Accounts have been a requirement in certain building, construction and services projects involving government departments and hospital and health services in Queensland. From 1 January 2022, the Project Trust Accounts regime is being rolled out to the private sector and a broader range of government entities.
What is a Project Trust Account
The Project Trust Accounts regime requires a head contractor to establish one Project Trust Account (PTA) for each ‘eligible contract’ for ‘project trust work’, along with a Trust Account for any retention monies held across all of the head contractor’s eligible contracts.
Who Will Need a Project Trust Account
From 1 January 2022, Project Trust Accounts are applicable to:
- all Queensland Government contracts (including HHSs) valued at $1 million or more; and
- private sector, local government, Queensland statutory authorities and government-owned corporations, for contracts valued at $10 million or more; and
- state authorities can continue to opt-in early and require a project trust account for contracts valued between $1 million and $10 million.
The regime applies to contracts where over 50% of the contract price is for 'project trust work'. This includes the erection or construction, renovation, alteration, extension, improvement or repair of 'buildings', and related site work. Buildings are defined broadly to include any fixed structure that is wholly or partly enclosed by walls or a roof. There are a range of exclusions for particular sectors and types of work or contract, such as pure maintenance contracts.
How Will This Impact Me
These trust accounts will need to be opened with an approved financial institution, and there are extensive requirements for head contractors who have to act as trustees and establish and manage these trust accounts. They also have to hold any retention monies in a retention trust account.
Principals who are awarding contracts over $10 million also have obligations under the Act, including to ensure that a trust account is established if they know that one ought to be, and to make payments only into that account.
Contract terms will generally require some updating to deal with the regime, particularly given the hefty penalties for non-compliance, some examples of penalties include:
- failure to open a project trust account at a financial institution in accordance with the legislative requirements (including timeframes, type of account, ensuring only 1 account etc.) – $68,925.00;
- failure to set up a retention trust at a financial institution prior to withholding the retention amount from payment – $68,925.00;
- failure to ensure the trust accounts are held at an approved financial institution – $27,570.00;
- failure to ensure the trust accounts are held under a name that includes the trustee’s name and the word “trust” – $27,570.00;
- failure to ensure the deposits to and withdrawals from the trust accounts are made only using methods which create an electronic record – $68,925.00.
- failure to provide notice to certain parties (with the required information) within 5 business days of opening, changing the name, closing or transferring the trust account – $27,570.00;
- failing to keep trust records in accordance with the requirements (including currency, language, provision of certain information, timeframes, etc) – $41,355.00 or 1 year’s imprisonment.
If you need assistance with preparing or implementing systems for this new phase of the rollout, or if you need assistance with whether or not it applies to your business or project, contact the Enterprise Legal team today: