When you need a trust account
There are different criteria that determine when project trusts and retention trusts are required to be used for payments and retention amounts.
To learn more about when trust accounts are required, you can register for online webinars and retention trust training sessions at the QBCC’s events page.
Criteria for a trust account
A contracted party (head contractor) is required to have a project trust account for their contract if all of the following apply:
- the contracting party is as specified for the relevant phase AND
- the contract price is as specified for the relevant phase AND
- more than 50% of the contract price is for project trust work AND
- there is at least one subcontractor engaged for all or part of the contracted work.
Even if all four of the above criteria are met, some contracts are exempt from requiring a project trust account:
- contracts relating to small-scale residential construction work
- contracts solely for maintenance work
- contracts between the state government and a state authority
- contracts solely for professional design, advisory or contract administration work
- short term contracts for work that is to be completed in less than 90 days
- subcontracts (unless the subcontractor and head contractor are related entities).
If the head contractor for an eligible contract engages a subcontractor who is a related entity (e.g. family member, corporate relationship, etc.), and the subcontractor further subcontracts all or part of the work, the subcontractor must also have a project trust account.
Other scenarios requiring trusts
There are also some situations where a project trust may be required after a contract amendment or variation or if there are multiple contracts between the same parties for the same or adjacent sites.
Not sure? Use our tool
Not sure if you need a project trust account? The QBCC has developed a project trust account tool to help you quickly and easily determine if your contract is eligible and requires a project trust account.
Project trust work includes particular work relating to a building or swimming pool. A building is a fixed structure that has a roof or is wholly or partly enclosed by walls.
Below is a list of construction work that may require a trust account if all the other relevant qualifying criteria are met.
- Erection or construction of a building.
- Renovations, extensions or repairs of a building.
- Lighting and electrical work.
- Water supply, sewerage or drainage.
- Heating, ventilation and air-conditioning work.
- Installing prefabricated components.
- Wet pour rubber.
- Site work related to construction work (e.g. the construction of retaining walls).
- Soil testing and site classification.
- Earthmoving and excavation.
- Scaffolding erection, management and removal.
- Preparing plans or specifications for project trust work.
- Work performed by an architect.
- Work performed by a registered professional engineer.
- Work performed by a surveyor.
- Mechanical services work.
- Fire protection work.
- Inspection and treatment of termite infestation or management systems.
- Contract administration (when they have also designed the building).
When associated with the building:
- carrying out a building inspection
- building certification work
- energy efficiency assessments
- fire safety advice.
- Swimming pool construction, installation, alterations and repairs (whether associated with a building or not).
A contracting party is required to have a retention trust account if all of the following apply:
- a project trust is required for the head contract (that is, the head contractor has or must have a project trust account)
- the contracting party (that is, the person withholding the retention amount) is as specified for the relevant phase
- the contracting party withholds retention amounts in the form of cash from the contracted party/parties.
If the above criteria are met, the retentions withheld by the contracting party are ‘eligible’ cash retentions and MUST be held in a retention trust account.
However, even if all the above criteria are met, a Commonwealth, Queensland government, state authority or local government contracting party is exempt from the requirement to have a retention trust account.
A contract that is solely for professional design, advisory or contract administration work is exempt from the requirement for a project trust account. Preliminary business cases may fall under this exemption however, this should be considered on a case-by-case basis.
No. There is no limit on the number of trust accounts a trustee can have, however a trust account should only be set up where required and there must only be one project trust account per eligible contract.
The trust account framework under the BIF Act only applies to contracts for work carried out within Queensland. Activities outside of Queensland will need to comply with the relevant legislation for the state or territory in which the works are being undertaken.
If I entered a contract before the new framework started (pre - 1 March 2021) and it only now qualifies for a PBA because of an amendment, do I have to set up a PBA or can I use the new trust accounts?
If you haven’t already set up a PBA for the contract, you have the choice of either setting up a PBA and operating under the old PBA rules or setting up trust account/s and operating under the new framework.
If there is a contract amendment (a change in contract price or a variation) part way through a project, the amended contract must be reassessed against the project trust criteria that applied when the contract was entered into. This may result in a project trust account being required part-way through a project.
A project trust may be required due to a contract price increase, but only if
- the amended contract price is at least 30% more than the original contract price when it was first entered; and
- all other project trust criteria are met and no exemptions apply.
How do trust accounts apply to residential developers of house & land packages? Who is responsible for trust accounts if some contracts are with the developer and others are with the buyer?
Private sector building contracts entered into from 1 January 2022 need to be assessed against the project trust criteria. This includes residential building contracts for 3 or more living units.
Multiple contracts between the same parties on the same or adjacent sites are assessed against the criteria as a single contract. The contract price threshold applies to the full contract value (or in the case of multiple connected contracts - the combined value), not to each individual home/unit. However, if the contracting parties are different for each build/unit then they are considered as individual contracts, with each of them to be assessed against the criteria independently.
If the developer is the highest party in the building contract chain, the builder (head contractor) is responsible for assessing whether they need a project trust. If the property is sold by the developer before the build commences and the buyer is considered the highest party in the building contract chain, the party contracted by the buyer is responsible for assessing whether they need a project trust.
The entire contract must be assessed against the eligibility criteria. Similarly, if a project is broken up into multiple contracts between the same parties on the same site or adjacent sites, those multiple contracts are considered as one larger contract and assessed as a whole against the eligibility criteria.
For any contract being assessed, the value of project trust work must be calculated. If the value of project trust work is less than or equal to 50% of the total contract price, the contract will not require a project trust account.
Work that is not project trust work includes:
- the construction, maintenance or repair of a busway, road or railway (or a tunnel for a busway, road or railway)
- authorised activities for a resource authority (e.g. activities authorised under a mining lease) and
- work that is not related to a building or swimming pool.
Can project trust accounts be set up for contracts under $1M? What if a contractor has some projects under $1M and some over $1M?
No. Project trust accounts are not to be used for head contracts that don’t meet the contract price criteria (and all other criteria) for the relevant phase.
Contractors who only occasionally work on eligible contracts will have to use trust accounts for those contracts that are eligible. They will not have to (or be able to) use trust accounts for the contracts that don’t meet the contract price criteria.
Is profit for the head contractor included when working out contract price and whether project trust work represents more than 50% of the contract price?
The entire value of the contract (excluding GST) is assessed against the contract price eligibility criteria. If there is a portion of the head contract price that doesn't specifically relate to a type of project trust work (e.g., overheads), it is not included in the calculation of the value of project trust work but is included in the overall contract price.
Where a head contract is a standing offer arrangement, should all projects awarded under that standing offer use the same project trust account? Or does each separate order have its own project trust?
Generally, each separate purchase order is considered its own separate contract that will need to be assessed against the eligibility criteria. Project trust accounts cannot be used for multiple projects or reused for subsequent projects.
No. Retention trust accounts are only required where the related head contract requires a project trust account and where cash retentions are being withheld from a contracted party by a relevant contracting party (which will expand throughout the contract chain in phases).
Yes. A contracting party can have multiple retention trust accounts although the legislation only requires one retention trust account per contracting party. This account or accounts are to hold cash retention amounts across eligible projects.
If a person is director for two companies and each of those companies withholds eligible cash retentions, does each company need a retention trust account, or can the person just have one for both their companies?
Each contracting party (in this case, each company) must have its own retention trust account. The account name for each retention trust account must include the name of that contracting party (trustee) and the word trust.
To work out if this exemption applies:
- start counting from the day the contract would become eligible if this exemption didn’t exist (the ‘trigger date’ - this is usually the date the first subcontract is entered into or the date the contract becomes eligible due to an amendment); and
- count the number of days until practical completion is expected to occur (using the practical completion date specified in the contract or, if not specified in the contract, a reasonable estimate).
If that period is less than 90 days, the contract will not require a project trust.
If, sometime later, there is a later contract amendment that is likely to affect the practical completion date, the head contractor will need to reassess whether the exemption still applies. If that amendment causes the expected practical completion date to change from less than 90 days to 90 days or more past the trigger date (and all other project trust criteria are met), a project trust will be required from the date of the amendment. Progress payments already made are unaffected. However, cash retention amounts already withheld will need to be transferred into a retention trust account.
For this exemption, maintenance work includes testing; taking samples (and restoring the sample site); work required on an ongoing basis to prevent deterioration, restore to correct operating specifications or replace a component at the end of its working life; but does not include certain building improvements/refurbishment/replacements.
If maintenance work is the only type of project trust work to be carried out under a contract, a project trust is not required for the contract.
Subcontractors are generally not required to open a project trust account for paying their sub-subcontractors. However, if a subcontractor and their head contractor are 'related entities' and the head contract is eligible for a project trust, the subcontract will also require a project trust.
Project trust work does not include an 'authorised activity for a resource authority'. What this means is authorised activities permitted under a resource authority (e.g. a mining lease) are not included when calculating the value of project trust work.
If you are uncertain whether your contracted work (or which elements of the work) is for an authorised activity permitted under a resource authority, we recommend you seek independent advice.
State authorities include bodies established (by Queensland law or authority) for a public/state purpose (e.g. local government and university councils), government owned corporations, and hospital and health services. Contracts between the State and a state authority are exempt from project trust requirements. However, a state authority engaged by a private entity may require a project trust (if the contract meets the eligibility criteria).