How to Protect Your Organisation From Changes to Project Bank Account Laws
As a builder or construction manager working in Queensland, it’s important for you to understand how Project Bank Accounts (PBA) work and when they are needed, especially as the laws are being amended. Failure to follow the rules regarding PBAs can result in criminal penalties, so let’s get some clarity on the issues from a building contract solicitor in Brisbane.
Why are PBAs needed?
PBAs were created to protect progress payments and ensure that sub-contractors were paid on time.
How do they work?
The parties involved in a PBA include the Principal (the entity that commissions the building work), the head contractor (the entity with responsibility for completing the work) and the sub-contractor (commissioned by the head contractor to assist in completing the work). Rather than project monies being paid directly to the head contractor’s bank account, a PBA creates a more arms-length financial structure that includes the following elements:
The 3 bank accounts are managed as a trust in which the head contractor is the trustee and beneficiary and the sub-contractors are beneficiaries.
PBAs are currently required when all of the following requirements are met:
PBAs are not currently required for any of the following contracts:
How will this affect you?
The QBCC has release the following information about PBAs:
“Subject to a review of Phase One, PBAs will be required on all building projects with a contract value of more than $1 million (including GST), in 2019.
PBAs will not apply to engineering and infrastructure projects including bridges, roads and ports, unless ‘building work’ makes up 50% or more of the contract value.”
So while this gives builders some guidance as to what the amendments will be, it does not provide a definitive outline of when PBAs will be required after the proposed amendments.
One potential impact of the proposed amendments is that they will impose obligations on builders to create PBAs in non-government commercial projects, as well as residential projects relating to 3 or more living units.
However, until the proposed amendments come into effect and are interpreted by the Courts, the exact ramifications of these amendments will remain unknown.