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Skip Navigation LinksDepartment of Housing and Public Works > Construction > Building and plumbing > Building > Security of payment for subcontractors

 Security of payment for subcontractors

On 22 August 2017, a significant milestone was reached with the introduction of Security of Payment legislation to parliament.

Security of payment is about helping subcontractors in the building and construction industry get paid for the work they do—in full, on time, every time. Subcontractors are particularly vulnerable to non-payment as they are usually further down the payment chain.

The Queensland Government is progressing a series of reforms to improve security of payment in the building sector, including Project Bank Accounts.

This is not just important for subcontractors and their families, it is important for Queensland’s economy and productivity.

Background

From 17 December 2015 to 31 March 2016, the Queensland Government released a Security of Payment discussion paper (PDF, 141MB) to seek feedback from industry and the community on how best to tackle this issue for subcontractors.

The discussion paper included a series of options for the public to consider:

  • Option 1—Project Bank Accounts: A project bank account facilitates simultaneous payments of a project's head contractor and all participating subcontractors through a trust arrangement.
  • Option 2—Retention Trust Fund Scheme: This option requires subcontractors’ retention money to be held in a separate trust account.
  • Option 3—Insurance schemes: This option includes a range of insurance schemes to safeguard against defects, late completion and insolvency of contractors.
  • Option 4—Federal legislative changes: This option seeks to lobby the Commonwealth government for reform to Commonwealth legislation relating to security of payment.
  • Option 5—Education: This option proposes education for the building and construction industry stakeholders regarding matters such as financial management and business management.
Finally, the discussion paper sought feedback in 2014 on the effectiveness of the amendments to the Building and Construction Industry Payments Act 2004, as well as the Subcontractors’ Charges Act 1974 and the Queensland Building and Construction Commission’s Minimum Financial Requirements Policy.
 
The government engaged Deloitte to undertake economic and financial analysis of certain reform proposals that arose from consultation.

Report findings

The Deloitte report, Analysis of security of payment reform for the building and construction industry (PDF, 355KB), shows that implementing Project Bank Accounts will deliver positive benefit cost ratios (BCR) over a 20 year evaluation period in certain scenarios.
 
Deloitte’s analysis also shows strong positive rating scores for delivery of an education program, and positive overall benefits from proposed changes to the Building and Construction Industry Payments Act 2004.
 
A cost-benefit analysis on the Retention Trust Fund Schemes option found that these did not provide a positive benefit.

Our progress

Security of Payment legislation was introduced to parliament on 22 August 2017. The Building Industry Fairness (Security of Payment) Bill 2017 introduces new legislative provisions to support the implementation of Project Bank Accounts.
 
The Bill also amends existing provisions of the:
  • Building and Construction Industry Payments Act 2004 (BCIPA)
  • Subcontractors’ Charges Act 1974 (SCA)
  • Queensland Building and Construction Commission Act 1992 (QBCC Act).
Finally, it incorporates relevant existing provisions from the above legislation, as well as the PBA provisions, into a new single Act about security of payment.

What are the benefits of the proposed changes?

  •  Amendments to the BCIPA will reduce the opportunity for head contractors to delay payments and allow subcontractors to resolve payment issues faster.
  • The existing SCA will be simplified and streamlined to make it easier to read and interpret.
  • Enhanced education programs for QBCC licensees will be introduced to improve financial management practices and business skills in the building and construction industry.
  • A single security of payment Act will make relevant provisions easier to find and interpret. It will also provide a holistic view of Queensland’s comprehensive security of payment regime.
  • Amendments to the QBCC Act will enhance the QBCC’s ability to detect non-compliance with payment obligations.

What are Project Bank Accounts?

PBAs are trust accounts that aim to ensure payment for work completed by subcontractors. Progress payments are held in trust for head contractors and subcontractors. In events such as insolvency, the money is safe and helps ensure subcontractors are paid.

In the first phase, it is proposed PBAs will apply to all government projects (excluding engineering projects) valued at between $1 million and $10 million from 1 January 2018.

Pending successful implementation of the first phase, the government will roll out the PBA model to both government and private sector projects over $1 million no sooner than January 2019.

More information

If you have any questions regarding proposed security of payment reforms, please email securityofpayment@hpw.qld.gov.au.


Last updated 22 August 2017    Creative Commons Attribution 4.0 International (CC BY 4.0)


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