Rules for using a trust account | Queensland Building and Construction Commission

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A trustee must follow strict rules when using a project trust or retention trust and to ensure it protects payments and retention amounts for all beneficiaries. 

A trustee must

  • ensure the principals (for example, the developer or project owner) pays amounts related to the contracted work into the project trust account only and not the trustee’s personal or business account (for project trust account only)
  • notify the QBCC if you nominate another person to administer the retention trust account on your behalf, see trust account notices for more information 
  • only pay all payments to contracted parties who are ‘beneficiaries’ from the required trust accounts 
  • create an electronic record of transfer for all payments (deposits and withdrawals) 
  • provide written payment notice to the relevant beneficiary within 5 business days after making a deposit or withdrawal. See notification requirements for more information
  • immediately cover any shortfall if there are insufficient funds by depositing the shortfall amount into the relevant account
  • withdraw an amount equal to the interest earned by the trust accounts every 12 months or when the trust is dissolved and closed
  • keep a separate ledger for each trust account and record all deposits and withdrawals affecting the trust in the ledger within 5 business days of the transaction occurring
  • complete a monthly bank reconciliation for each trust account within 15 business days after the end of each month. See trust accounting and recordkeeping requirements for more information
  • engage an independent auditor to complete an annual retention trust account review and provide a review report to the QBCC. See annual trust account reviews for more information
  • notify the QBCC if you nominate another person to administer the retention trust account on your behalf – see trust account notices for more information
  • keep trust records and copies or related documents for a minimum of 7 years. 

A trustee must not

  • transfer amounts or payments into or out of the trust for any purpose other than paying beneficiaries
  • withdraw an amount from a trust account to pay themselves (including interest) unless enough funds will remain after the withdrawal to pay all amounts liable to be paid to beneficiaries
  • directly pay suppliers from the trust unless they're considered subcontractors beneficiaries under the BIF Act
  • pay themselves from the retention trust until after the defects liability period ends
  • recover payment for administration or bank fees from a beneficiary or from funds held in trust
  • use amounts that have been paid, or are required to be paid, into a trust account for payment of the trustee's debts or taken in execution under a court order for the benefit of a trustee's creditors
  • invest amounts held in a trust account in any form of investment (except for interest earned on the accounts)
  • dissolve the trust while subcontractor beneficiaries remain in the trust.

Trustee guides

The following guides will help you learn more about how a trustee can meet all their obligations when using a trust account:

FAQs

  1. A head contractor is liable to pay its subcontractors irrespective of whether the principal has paid. If there is a shortfall in a project trust account (even if this results from late payments from the principal), the head contractor must top-up the trust account with an amount equal to the shortfall. It is an offence not to cover these shortfalls.

    The head contractor may decide to take action against the principal in relation to non-payment, however that does not remove their liability to pay subcontractors.

    Once the principal pays the outstanding amount into the trust account, the head contractor may want to reimburse itself the top up amount from the trust account – this is allowable so long as no other beneficiaries are entitled to the amount.
     

  2. The head contractor must correct this by depositing the amount into the project trust account as soon as they can.

  3. Do all project funds go into the trust account (not just amounts payable to subcontractors)? How can a head contractor use funds in the trust account to pay for overheads?

    All project payments must be deposited by the principal into the project trust account. If the head contractor needs to pay overheads, employees or suppliers from the project funds, they would first need to withdraw an amount they are entitled to pay themselves from the trust account. Once withdrawn, they can pay overheads, employees and suppliers from their general account. The head contractor must ensure they never pay these non-beneficiary expenses directly from the project trust account.

  4. How does the head contractor determine when and how much they can withdraw from a project trust account to pay themselves, their staff, and their overheads? 

    Detailed trust records must be kept for each trust account. This includes a ledger that shows the amount each beneficiary is entitled to at any given time. Only when the funds in the account are surplus to the entitlements of other beneficiaries, can a trustee pay themselves from the trust account.

    For example, if the balance of the account was currently $1500, and there was a subcontractor due to be paid $1000 the next day, the trustee should only pay themselves the other $500 to leave sufficient available balance to pay the subcontractor the next day.
     

  5. The QBCC, through its approved audit programs, inspects trust account records to determine if the trust account has been operated in compliance with the legislation.

  6. It is a matter for the trustee to determine what they do with amounts they are not yet liable to pay to subcontractor beneficiaries. The trustee needs to be careful to ensure the amounts will be in the account when they fall due, either by keeping the funds in the account or topping up the account before the due date for subcontractor payment.

  7. Should a principal pay a head contractor’s retention amount into their PTA or general business account? What if the PTA has been closed? 

    If the head contractor still has a project trust account when their retention amounts are due to be released, then the principal will need to release the retention amounts into the head contractor’s project trust account.

    In some situations, retentions will be due for release by the principal after the project trust account has been closed. In these situations, the retention amounts are to be released to the head contractor’s nominated account. This is why it is important for the head contractor to notify the principal when closing the project trust account for the project.
     

  8. It is a matter for the trustee to determine what they do with amounts they are not yet liable to pay to subcontractor beneficiaries. The trustee needs to be careful to ensure the amounts will be in the account when they fall due, either by keeping the funds in the account or topping up the account before the due date for subcontractor payment.

  1. If a subcontractor submits an invoice for both protected work and supply of materials, will the payment need to be split so only the protected work component is paid from the project trust account?

    No, splitting invoices is not necessary. If the subcontractor is performing any protected work or related services under their subcontract, they are regarded as a beneficiary and the whole invoice can be paid from the project trust account.
     

  2. What if the reduction in the amount payable to the subcontractor is not in dispute?  Does the full claimed amount need to be kept in the project trust account? 

    It is a matter for the trustee to determine what they do with amounts they are not yet liable to pay to subcontractor beneficiaries.

    The trustee needs to be careful to ensure the amounts will be in the account when they fall due, either by keeping the funds in the account or topping up the account before the due date for subcontractor payment. 
     

  3. How do proportional payments to subcontractors work (when there are insufficient funds in a trust account)?

    The trustee must top up the project trust account to cover any shortfall. It is an offence to fail to do so and it is also an offence to fail to pay amounts liable to be paid by the due date for payment. 

    Where there are two or more subcontractors due to be paid at the same time, there is an insufficient amount in the trust account to pay them all in full, and the trustee is unable to top up the account, the trustee must make proportional (i.e., pro rata) payments to each subcontractor. An example of this may be when a company is in administration or insolvency. 
     

  1. Eligible cash retention amounts need to be deposited into the retention trust account as soon as they are withheld. They can only be released from the retention trust account if they are due to be paid.

  2. Should a principal pay a head contractor’s retention amount into their PTA or general business account? What if the PTA has been closed? 

    If the head contractor still has a project trust account when their retention amounts are due to be released, then the principal will need to release the retention amounts into the head contractor’s project trust account.

    In some situations, retentions will be due for release by the principal after the project trust account has been closed. In these situations, the retention amounts are to be released to the head contractor’s nominated account. This is why it is important for the head contractor to notify the principal when closing the project trust account for the project.
     

  3. If there is an adjustment to retentions, can the trustee transfer from any account following reconciliation? Or should all payments or credits of retention be done as a separate payment directly out of the retention trust account?

    The retention amount must be released to the beneficiary from the retention trust account, trust records updated and a notification of the payment provided to the beneficiary. 
     

  4. Yes – If the payment claim includes GST, then the retention amount withheld will also include GST. The total retention amount withheld needs to be held in the retention trust account. 

  5. Should a principal pay retention amounts to the head contractor at the same time each claim is submitted? Or must the principal hold the retention amount until the project is completed? 

    Retentions are withheld and paid in accordance with the contract to which they relate. Additionally, if the principal is a private entity, they may also require a retention trust account for withholding cash retentions.
     

  1. The amount included in a validly given payment schedule is the amount liable to be paid to the claimant. If the claimant is successful in a payment dispute, the respondent will be liable to pay the disputed amount - if the contract is a project trust contract, that amount will need to be paid from the project trust account.

  2. What is the amount held in trust for a beneficiary? Is it the same as their beneficial interest? Is it the amount claimed or the scheduled amount? 

    An amount is held in trust for a subcontractor beneficiary when the amount is liable to be paid to the subcontractor. This is also known as their beneficial interest. It arises: 

    • when the amount is due under the terms of the subcontract
    • when the amount is certified/assessed as being payable
    • when an amount is included in a payment schedule
    • when an adjudicated amount is due
    • when the amount must be paid because of a binding dispute resolution process or court/tribunal order.

    So, it can be a little broader than just the claimed or scheduled amount, but in most cases where there is no dispute, it will be the claimed (or scheduled) amount.
     

  3. The head contractor, as a beneficiary, may withdraw amounts from the trust account to pay themselves when they are liable to be paid, so long as there are sufficient funds in the account to pay any other beneficiaries. If all beneficiaries (including the trustee) have been paid their entitlements to date, this may result in a nil balance until the next payment from the principal.


Last reviewed: 10 Sep 2021 Last published: 10 Sep 2021
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