Construction contracts are infamous for being complex. The contractor chain involves numerous parties like electricians, bricklayers, plumbers, engineers, and carpenters. Add this to several unpredictable circumstances in this field of work; construction projects are not easy to manage.
The complex nature of construction contracts often results in conflicts. One cause of such disputes is the withholding or delay of payment to subcontractors. There are several possible reasons for this, including the non-delivery of a job within a specified timeframe, and the contractor is not liquid.
While there are cases when the contractor is legally justified in withholding payments to subcontractors, it can lead to numerous problems for all stakeholders. Moreover, the industry is rife with unfair payment practices. Since subcontractors are usually at the end of the contractual supply chain, they are vulnerable to payment delays or non-payment.
This raises the need for a regulation to promote parties’ interests. Queensland recognizes this concern and addresses it through the QLD Project Trust Account framework.
The QLD Project Trust Account framework is the Queensland government’s action to minimise disputes and the adverse effects of improper money management in construction projects. It aims to increase the security of subcontractor payments in the construction industry.
Under the framework, head contractors are required to hold funds received from project principals in a separate bank account (on trust) for the benefit of the project’s subcontractors. Trust accounts ensure that parties at the top of the supply chain pay subcontractors on time and in full.
Parties to the Project Trust Account
- The party requesting the work for a head contract (contracting party in a head contract)
- Pays progress payments into the trust account
- The party engaged to do the work for a head contract (contracted party in a head contract)
- The contracting party for a first-tier subcontract
- Both a trustee and beneficiary of the project trust
- A party engaged by a head contractor (in a first-tier subcontract) to contribute work.
- A beneficiary of the project trust
- Sub-subcontractors: party engaged in a lower-tier subcontract — generally not a beneficiary of the trust account and are paid directly by the subcontractor
- Other parties: suppliers and consultants offering unrelated services — not beneficiaries of the project trust
There are two types of trust accounts under the QLD Project Trust Account framework.
This is an account where project payments are received and paid. Every eligible construction contract in Queensland must have a separate PTA.
This is an account where ‘eligible’ retentions are withheld until they are due to be paid. One RTA may be used across multiple projects.
One of the effects of implementing the QLD Project Trust Account framework is the increase in administrative work necessary to ensure compliance.
The majority of the responsibilities under the framework lie with the trustee.
For example, the contracted party for a head contract must file a record of all transactions for the account to the Queensland Building and Construction Commission (QBCC). Failing to properly address such responsibilities can lead to penalties and potential future conflicts. Fortunately, emerging technologies and construction software can help companies achieve compliance.
While the framework has added another layer of complexity to construction contracts, parties can leverage technology to improve compliance. Contract compliance software like Bizprac has the functionality to meet QBCC requirements.
Improved Record-Keeping: The QLD Trust Account Framework mandates keeping thorough records for all account transactions. Bizprac can help builders comply with this requirement. It can instead retain precise records of payments, receipts, and other financial transactions by preserving documents in a digital format.
Streamline Payment Procedures: Digital payment systems can enhance the speed and accuracy of payment procedures. This, in turn, can guarantee that payments are made on time and that the amounts being paid are accurate.
Enhanced Communication: Employing a digital platform for exchanging information, documents, and other materials enables a single source of truth for everyone. This makes communicating about payments, payment schedules, and other crucial information easier for all parties involved.
Increased Security: Digitalisation can increase the security of financial transactions. This makes it possible to avoid fraud and other financial crimes, which is crucial given how frequently huge quantities of money are at risk.
Transparency can be improved by automating procedures, including the utilisation of trust account assets in the construction process. Construction enterprises can prove that they adhere to the state’s trust account structure by giving clients and other stakeholders access to digital documents if needed. Technology is also helpful during the independent audits that the framework mandates.
The Queensland building and construction sector can gain greatly from digitisation, especially in light of the state’s trust account framework. Bizprac, one of Australia’s few regulatory-complaint software that enables compliance with the new QLD trust framework, can help builder companies avoid non-compliance.
Bizprac allows the company to establish a distinct and unique account ledger for each project trust account and retention trust account, which is required under the framework. Each beneficiary can access specific information from the trust account ledger, including a comprehensive record of transactions and the amounts maintained in the account for each beneficiary.
● Record of Deposits and Withdrawals
Bizprac can keep a record of deposits and withdrawals for each project trust account and retention trust account. It can act as a document management software that keeps these records as a computer file and stores them securely.
Be free from worrying about your project trust account compliance in Queensland with Bizprac. Request a free trial here or contact us at 1800 009 970.
You can also read more about the Queensland Project Trust Account framework from this infographic: The Expanding Project Trust Account Framework.