Statutory Trusts and Retention Trusts – new framework

12 February 2021

The next round of changes for the industry commence on 1 March 2021 and involve the replacement of the current Project Bank Account framework that has been in place since 1 March 2018.

The Statutory Trust framework (ST Framework) has some similarities with the Project Bank Account framework (PBA Framework) but some significant differences as well, along with additional serious penalties, including Executive Liability Offences where individual executive officers of a company will be held personally liable for certain offences committed by the company in relation to the trust accounts.

The timing of the ST Framework is as follows (NB: State Authority includes local governments, state owned corporations, state agencies etc.):

1 March 2021

  • All state government projects $1M to $10M excl. GST
  • All state authority projects $1M or more excl. GST if they opt in

1 July 2021

  • All state government projects $1M or more excl. GST
  • All Hospital and Health Services (HHS) projects $1M or more excl GST
  • All state authority projects $1M or more excl. GST if they opt in

1 January 2022

  • All state government and HHS projects $1M or more excl GST
  • All state authority projects $1M to $10M excl. GST if they opt in but mandatory for projects $10M or more excl. GST
  • All private sector projects $10M or more excl. GST

1 July 2022

  • As above except mandatory for private sector and all state authority projects $3M or more excl. GST

1 January 2023

  • All projects (public and private sector) $1M or more excl GST
  • Also mandatory for Retention Trust Accounts for lower tier subcontractor retentions under a Project Trust Contract head contract.

The ST Framework consists of a single Project Trust Account for every Project Trust Contract and a single Retention Trust Account for all retention amounts withheld on Project Trust Contracts i.e. one Retention Trust Account per head contractor for all eligible contracts. This Retention Trust Account is only required to be opened if the head contractor withholds cash retention from its subcontracts on a Project Trust Contract. If it doesn’t, there is no requirement to open a Retention Trust Account. This arrangement is a substantial change from the PBA Framework that required the head contractor to open three bank accounts – Project Trust Account, Disputed Funds Trust Account and Retention Trust Account, regardless of whether there were any funds in the accounts or whether retention even applied to the subcontracts.

The most significant change under the ST Framework is the requirement to have comprehensive trust account records for both the Project Trust Account and the Retention Trust Account. These records include:

  • Head contract and all subcontracts;
  • Variations to the head contract and all subcontracts;
  • Payment claims and payment schedules;
  • Supporting statements given with head contract payment claims;
  • Notices given for the Project Trust Account and Retention Trust Account;
  • Bank statements;
  • Monthly bank reconciliations;
  • Records of deposits and withdrawals;
  • Trust account ledger trial balance statements;
  • Records of all changes to trust account ledger, ledger trial balance statements, deposits and withdrawals;
  • Records of trust account training; and
  • Auditor account review reports.

All trust account deposits and withdrawals must be recorded within five business days after the deposit or withdrawal and all monthly bank reconciliations must be carried our within 15 business days after the end of each month.

It is mandatory for trust account training to be carried out prior to opening a Retention Trust Account, however, this will not commence until later in 2021 prior to commencement of the ST Framework in the private sector. We will update members once the training programs have been launched by the QBCC. Costs of the training must be covered by the participants.

The Retention Trust Account must be audited by an independent registered company auditor every 12 months and on closure of the Retention Trust Account. Auditors can be excluded by the QBCC. The auditor has obligations to report any suspected non-compliances to the QBCC within five business days with penalties if it does not do so. The auditor must complete its audit within 40 business days and provide a copy of the audit report to both the head contractor trustee and the QBCC within 20 business days of completing the audit. The auditor’s Account Review Report certifies that the trustee has complied with all of the requirements of chapter 2 of the BIF Act during the period to which the report relates.

Another significant difference between the Frameworks is the number of subcontractors who are beneficiaries under the trusts – this impacts on the costs involved in administering the trust accounts but also in understanding which projects trigger the ST Framework.

Anyone currently involved in a Project Bank Account project can transition to the new ST Framework for that current project provided the transition is done by 31 August 2021.

We are running 4-hour workshops that will step members and non-members through the new ST Framework. The format of the workshops has been changed so that participants will be walked through a typical project scenario to illustrate what steps must be taken by a trustee and when along with the many obligations on the head contractor trustee under a Project Trust Contract.

If you are unsure of your obligations in relation to Statutory Trusts, or trust records, please contact Members Legal. It is important that you take steps to set up the appropriate systems to keep the required trust records properly and within the applicable timeframes.

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