Key Takeaway
- The Queensland Government has paused the further roll-out of the project trust account regime due to several risk factors identified, likely to impede its success.
- The soon-to-be re-established Queensland Productivity Commission will be tasked with a comprehensive review of the building and construction industry, which will hopefully provide guidance on how to seamlessly phase in the regime to further tiers of the industry.
On 31 January 2025, the Queensland legislature made a Proclamation under the Building Industry Fairness (Security of Payment) Act 2017 (Qld) (SL No. 3 of 2025) (‘the Proclamation) which has repealed a prior proclamation made under the same Act dated 16 March 2023 (SL No. 16 of 2023) (‘the Prior Proclamation’), in relation to the phased implementation of the project trust account regime in Queensland.
Initially, Phase 3 was expected to commence on 1 March 2025. This would have extended the project trust regime to impact eligible private sector, local government, statutory authority and government-owned corporations’ contracts valued at $3 million or more, as opposed to the current threshold of $10 million. Further, Phase 4 was expected to commence on 1 October 2025, which would have extended application of the regime to all eligible contracts valued at $1 million or more from that date. Regarding retention trust accounts, Phase 4 was also set to simultaneously expand the ambit of the retention trust account system, capturing retention amounts withheld under eligible contracts throughout the contractual chain. Thus, 1 October 2025 would have marked the completion of all aspects of the implementation of the project trust accounts regime, but for the Proclamation. The Proclamation repeals the Prior Proclamation, leaving the commencement dates of Phases 3 and 4 in suspension, to be determined at a later date.
The Department of Housing and Public Works, responsible for monitoring the framework’s efficacy and implementation, has cited many risk factors which could impede the successful implementation of Phases 3 and 4. These include:
- tough financial conditions within the industry, with further challenges including acute profit margins, rising costs, labour shortages, availability of materials, restricted cash flow and compliance costs;
- continuing risk of insolvency in the construction sector;
- availability of software to support trustees in complying with their strict obligations under the regime; and
- the need to improve visibility and understanding of the regime and its requirements, due to Phases 3 and 4 being more likely to impact smaller contractors.
Due to the volatility in the industry, the government has made sure the soon-to-be re-established Queensland Productivity Commission (‘QPC’) is first tasked with a regulatory review of the sector, as a matter of priority. The extension regarding the commencement of Phases 3 and 4 has generally been supported by key stakeholders within the industry, seemingly indicating the pressures faced currently. Notably however, there are subcontractors and software providers indicating apprehension toward the extension. The extension does delay the point at which smaller subcontractors will come to benefit from the regime. In the midst of the extension and QPC review, existing options regarding adjudication and other protection mechanisms regarding security of payment will continue to be available to tiers of the industry still excluded from the project trust accounts regime. We anticipate the commencement dates of Phase 3 and 4 will not be proclaimed until after the conclusion of the QPC review.
If you wish to understand how this change affects you, please contact our Commercialisation, Supply and Projects experts.
