Project Trust Accounts: A Builder’s Guide to Queensland’s New Rules

John Merlo
5 days ago
9 min read

The construction industry is fraught with financial risks, and for too long, subcontractors have borne the brunt of payment delays and disputes. If you're a builder or contractor in Queensland, you've likely heard about the significant changes to how project funds are managed. The introduction of the Project Trust Account (PTA) system represents a fundamental shift, and understanding your obligations is not just a matter of compliance—it's crucial for the survival and success of your business. Are you prepared for these changes? Do you know when a Project Trust Account is required and what you need to do to manage one correctly?

This article will provide a comprehensive overview of the Project Trust Account framework in Queensland. We will explore what a PTA is, the legislative requirements under the Building Industry Fairness (Security of Payment) Act 2017, and the practical steps you need to take to ensure you are compliant. Managing these new requirements can be complex, but with the right knowledge, you can protect your business, your clients, and your subcontractors.

What is a Project Trust Account and When is it Required?

A Project Trust Account is a specific type of bank account that must be opened for certain construction projects in Queensland. Its primary purpose is to safeguard progress payments, ensuring that money flows down the contractual chain as intended. Think of it as a secure holding account for project funds. The head contractor, who is appointed as the trustee, manages the account. Payments from the principal (the developer or project owner) are paid into the PTA, and from there, the head contractor pays the subcontractors and themselves. This system is designed to prevent the misuse of funds and protect subcontractors from non-payment, especially in cases of insolvency.

The introduction of PTAs is a key component of the Queensland Government's efforts to improve financial security within the building and construction industry. The governing legislation is the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act), which has been progressively updated to expand the PTA regime.

The Phased Rollout of Project Trust Accounts

The requirements for establishing a Project Trust Account have been introduced in phases, with different effective dates depending on the project value and the nature of the principal. This staged approach was intended to give the industry time to adapt to the new requirements.

The key phases of the rollout have included:

From 1 March 2021: The trust account framework commenced.
From 1 January 2022: PTAs became mandatory for Queensland State Government and Hospital and Health Service contracts with a contract price of $1 million or more (excluding GST), and for contracts with state authorities, local governments, and private entities valued at $10 million or more (excluding GST).

The plan was to continue expanding the regime to cover projects with lower contract values. However, it is essential to be aware of recent developments that have impacted this timeline.

An Important Update: The Pause on Further Rollout

In a significant development, the Queensland Government announced a pause on the further rollout of Project Trust Accounts, effective from 31 January 2025. This decision means that the planned expansion of the PTA regime to include all construction contracts valued at $3 million or more by 1 March 2025, and all contracts over $1 million by 1 October 2025, has been indefinitely delayed.

The government cited several reasons for this pause, including the current vulnerability of the construction industry, ongoing risks of insolvency, and the need for a comprehensive review of the industry by the incoming Queensland Productivity Commission. This pause provides some breathing room for the industry, but it does not eliminate the existing requirements. If your project falls under the current thresholds, you must still comply with the PTA framework. For expert legal advice on how these changes affect your specific projects, it is wise to consult with an expert construction lawyer.

Determining if Your Project Requires a Trust Account

To determine if you need to establish a Project Trust Account, you must consider the following factors:

The Contracting Party: Is the contract with a government entity, a hospital and health service, or a private entity?
The Contract Value: Does the contract price meet or exceed the relevant threshold for the contracting party?
The Type of Work: Is more than 50% of the contract price for "project trust work"? This generally includes most building and construction work as defined under the BIF Act.

The Queensland Building and Construction Commission (QBCC) provides a helpful online tool to assist in determining whether a PTA is required for a specific project. Given the complexity and the potential for changes, using this tool and seeking professional advice is highly recommended. If you are facing a dispute over payment or contractual obligations, understanding your position is the first step. Merlo Law can assist in resolving a dispute.

Project Trust Accounts vs. Retention Trust Accounts

It is also important to distinguish between a Project Trust Account (PTA) and a Retention Trust Account (RTA). While both are designed to improve financial security, they serve different purposes.

Project Trust Account (PTA): As discussed, a separate PTA is required for each eligible project to handle all progress payments.
Retention Trust Account (RTA): This is a single trust account that a head contractor can use across multiple projects to hold cash retention amounts. If you withhold cash retentions from subcontractors, you will likely need to establish an RTA in addition to any required PTAs.

Understanding the nuances of both types of trust accounts is vital for compliance. If you are unsure about your obligations when reviewing your building contract, our team can provide clarity.

Managing Your PTA: Compliance, Reporting and Best Practices

Once you've established that a Project Trust Account is required for your project, the real work begins. Acting as a trustee comes with significant legal responsibilities and administrative burdens. Failure to comply with the strict requirements of the BIF Act can lead to severe penalties, including substantial fines and even the suspension or cancellation of your building license. The Queensland Building and Construction Commission has been granted significant oversight powers to enforce these rules.

Key Obligations of a Trustee

As the head contractor and trustee, you have a fiduciary duty to manage the trust account for the benefit of the subcontractors (the beneficiaries).

Your key obligations include:

Account Setup: You must open a dedicated PTA with an approved financial institution before work starts. You must also provide notice to the QBCC and the principal about the account details.
Depositing Payments: All payments received from the principal for the project must be deposited into the PTA. You cannot use these funds for any other purpose, such as paying for materials or subcontractors on a different project.
Making Payments: Payments to subcontractors must be made from the PTA in accordance with the contract and the BIF Act. You are also entitled to pay yourself from the account for work you have completed.
Record Keeping: You must maintain detailed and accurate records of all transactions related to the PTA. This includes all payment claims, invoices, receipts, and bank statements. These records must be kept for a minimum of seven years.
Monthly Reconciliations: The trust account must be reconciled at the end of each month. This process involves ensuring that your records match the bank's records and that all transactions are accounted for.
Reporting: Previously, trustees were required to provide an Account Review Report to the QBCC annually, prepared by an independent auditor. However, this requirement was removed from 1 July 2024 due to amendments to the Building Industry Fairness (Security of Payment) and Other Legislation Amendment Act 2024. You must also provide monthly bank statements to the principal and upon request from a subcontractor beneficiary.

These administrative tasks can be demanding, especially for smaller businesses. It is crucial to have robust accounting and administrative systems in place to manage these obligations effectively. For issues related to payment, such as security of payment, having clear records is your best defense.

Common Pitfalls and How to Avoid Them

Mixing Funds: Never deposit money from another project into the PTA or use PTA funds to pay for another project's expenses. This is a serious breach of trust.
Poor Record-Keeping: Inaccurate or incomplete records make reconciliations impossible and will be flagged during an audit. Implement a clear, consistent process from day one.
Late Payments: Failing to pay subcontractors (or yourself) from the PTA within the legislated timeframes can lead to disputes and penalties.
Ignoring Bank Fees: Bank fees must be paid from your own business funds, not from the trust account. You must deposit money into the PTA to cover these specific costs.
Failing to Notify: You must notify the QBCC of any changes, such as closing the account or if you are no longer the trustee, within the specified timeframes.

The Role of Your Accountant and Lawyer

Successfully managing a PTA is a team effort.

Your Accountant: Your accountant is essential for setting up the financial systems and conducting monthly reconciliations. They ensure the numbers are accurate and compliant with accounting standards. Note that the previous requirement for annual Account Review Reports was removed from 1 July 2024.
Your Lawyer: A construction contract lawyer is equally critical. They can advise on the legal implications of being a trustee, ensure your contracts align with the PTA requirements, and provide representation if disputes arise. Our team of experts is here to help you understand your legal duties.

Conclusion

The Project Trust Account framework is a complex but necessary reform aimed at creating a more secure and equitable payment environment in the Queensland construction industry. While the recent pause in the rollout provides a temporary reprieve from further expansion, the existing obligations for eligible projects remain firmly in place. For head contractors, understanding and complying with these rules is not optional—it is a fundamental requirement of doing business.

Here are the key takeaways:

Purpose: Project Trust Accounts are designed to protect payments for subcontractors by holding project funds in a secure, dedicated account.
Legislation: The rules are governed by the Building Industry Fairness (Security of Payment) Act 2017.
Applicability: A PTA is required for eligible government and private sector projects based on specific contract value thresholds.
Rollout Paused: The planned expansion of the PTA regime has been paused indefinitely from January 2025, but current rules still apply.
Compliance is Key: As a trustee, you have strict legal obligations for managing the PTA, including setup, record-keeping, and reporting. Non-compliance can lead to severe penalties from the QBCC.

The Project Trust Account system can be challenging. The stakes are high, and a single misstep can lead to significant financial and legal consequences. Empower yourself with knowledge and ensure your business is built on a foundation of compliance and best practice.

Don't risk license suspension or penalties due to PTA non-compliance. Get proactive legal advice on Queensland's trust account framework - contact Merlo Law for a consultation today.

Frequently Asked Questions

Q: What is the main purpose of a Project Trust Account (PTA)?

A: A PTA's main purpose is to protect payments for subcontractors. It ensures funds from the project owner are held in a secure account and are available to pay subcontractors, reducing the risk of non-payment, especially if the head contractor faces financial difficulty or insolvency.

Q: Do I need a separate Project Trust Account for every project?

A: Yes. If a project meets the eligibility criteria under the BIF Act, you must establish a new, separate Project Trust Account specifically for that project. This differs from a Retention Trust Account, where one account can hold retention money from multiple projects.

Q: What happens if I don't comply with the Project Trust Account rules?

A: Non-compliance is a serious offence. The QBCC can impose significant penalties, including large fines for individuals and companies. In serious cases, it can lead to the suspension or cancellation of your contractor's license, preventing you from running your business.

Q: Has the rollout of Project Trust Accounts been stopped?

A: The further rollout has been paused. The planned expansion of the PTA regime to lower-value contracts has been delayed. However, the requirements for projects that already fall under the existing value thresholds (e.g., private projects over $10 million) are still in effect and must be followed.

Q: Where can I find official information about Project Trust Accounts?

A: The most reliable source is the Queensland Building and Construction Commission (QBCC) website. They provide detailed guides, tools, and updates. You can also refer to the Building Industry Fairness (Security of Payment) Act 2017 for the specific legislation.

Q: What's the difference between a Project Trust Account and a Retention Trust Account?

A: A Project Trust Account (PTA) manages all progress payments for one specific project. A Retention Trust Account (RTA) is used to hold cash retention amounts withheld from subcontractors, and one RTA can be used for multiple projects. You may need both depending on your contracts.

Q: Should I get legal advice about Project Trust Accounts?

A: Yes, seeking professional advice is highly recommended. A specialist construction lawyer can help you understand your specific obligations as a trustee, review your contracts for compliance, and ensure your business processes are set up correctly to avoid severe penalties. Get in touch with our team for tailored advice.

This guide is for informational purposes only and does not constitute legal advice. For advice tailored to your specific circumstances, please contact Merlo Law.