Queensland has now implemented the revised regulation regarding the management of construction project finances. The Security of Payments Act of 2017 was created to protect payments and retention. It has been modified to provide a simplified approach to account requirements.
The Project Trust Account framework is designed to increase the security of subcontractors’ payments in the construction and building industry. This framework applies to all eligible contracts for entities that fall under the jurisdiction of the state, hospital, or health service, as well as the private sector, which requires head contractors to keep the money paid to the project principal in a separate trust fund for subcontractors.
A trust account is an arrangement in which funds are held by a third party, such as a bank, for the benefit of another party. There are two types of trust accounts: project trust and retention. The retention trust account holds cash eligible for withholding until it becomes payable. The money is placed in a separate account to protect the employer against inefficient or defective work by contractors.
Meanwhile, a project trust account is a type of financial account that holds money in trust until payment for a project becomes due. To ensure that all parties are paid for their work, the head contractor must maintain the project trust account.
The project trust account framework can be used for projects that mainly involve project trust work and where at least one subcontractor has been engaged to perform any or all related tasks. The regulation defines project trust work as building construction, extension, renovation, or improvement.
Head contractors must comply with administrative requirements, as anyone violating the framework could face penalties. This is why construction companies need to be able to handle the extra load. With the help of document management software, they must adapt to keep track of all project-related files and requirements.
Construction companies can also opt for commercial estimating software that enables users to make accurate estimates or quotes. Having an accurate estimate allows contractors to determine the feasibility and profitability of a possible construction project.
To learn more about the project trust account framework in Queensland, check this infographic from Bizprac.