Types of trust accounts


There are two types of trust accounts – each protects different contractual payment amounts:

  • project trust accounts 
  • retention trust accounts.

What are trust accounts?

Project and retention trusts are statutory trusts formed under legislation. 

A trust describes the relationship which arises when a person (the trustee) holds property (in this case, progress payments and retention amounts) on behalf of and for the benefit of the party/parties that will become entitled to the amounts (the beneficiaries).

This arrangement operates through the use of a trust account - accounts separate to the trustee’s personal or business accounts, keeping the project funds and retention amounts separate from funds of other projects and the contractor’s other cash flow.

Unlike other types of trusts, trust deeds and other documentation are not required to establish the trust or to establish the beneficial interest in trust amounts. This is because the trust over amounts held is established by the BIF Act (created by statute), making them statutory trusts.

Project trust accounts

A project trust is an account through which project funds are received and paid – more specifically: 

  • the project owner or developer (contracting party) makes payments to the contracted party (head contractor) for work completed in accordance with the contract
  • the head contractor pays all subcontractors from this account 
  • the head contractor pays themselves from this account.

For more detailed information on operating a project trust account, refer to the Trustee guide – Project trusts (PDF).

Retention trust accounts

A retention trust account is an account where ‘eligible’ cash retention amounts withheld from contractors are held until due to be paid.  

Each trustee only requires ONE retention trust account and this one account may hold cash retention amounts across multiple projects. However, if they prefer, a trustee may have multiple retention trust accounts.

For more detailed information on operating a retention trust account, refer to the Trustee guide – Retention trusts (PDF).