Chances are that you have heard about Project Bank Accounts (PBA) if you’re a Tradie who’s worked on big building projects. The Queensland Building and Construction Commission (QBCC) has introduced a PBA requirement as part of their Building Industry Fairness Reforms in 2018.

The idea of setting up Project Bank Accounts is a positive development for all builders and tradies who are working with large head contractor companies. What many people don’t realise is that not all building work actually requires the establishment of a Project Bank Account. In this article we’re answering key questions often asked on this topic to keep you up-to-date.

What is a Project Bank Account?

The Queensland Government has introduced the project bank account requirement to improve the security of payment for Subcontractors in the building and construction industry in 2018.

A project bank account is comprised of three bank accounts that operate as a trust for building contracts, where the Head Contractor is the ‘trustee’, and the Head Contractor and first-tier Subcontractors are ‘beneficiaries’ to that account. Progress payments, retention monies and disputed amounts are held in the PBA trust accounts.

Who is responsible for setting up a Project Bank Account?

The head contractor for the building project is responsible to set up a PBA after reviewing the criteria outlined in the Head Contractor Guidelines document. They need to apply a threshold test and if the project passes all of them, they need to set up a PBA.

Do all construction projects require a PBA?

At present the Queensland Government is only requiring PBAs to be set up for certain State Government building projects, where the State Government is the Principal, or any State Government authority that has opted into the scheme.

What is the Threshold Test?

The Threshold test includes three main criteria the head contractor needs to review in relation to the proposed building project.

1. More than 50% of the contract value is for building work.
2. The contract value is $1–10 million (including GST).
3. At least 1 subcontractor will be engaged under the contract.

If specific advice about the contract or PBA applicability is required, Head Contractors may need to seek independent legal advice.

What is considered ‘Building Work’?

‘Building work’, for the purposes of requiring a PBA, includes the following activities:

• erection or construction of (and any related site work for) a building
• the renovation, alteration, extension, improvement or repair of (and any related site work for) a building
• the provision of (and any related site work for) lighting, heating, ventilation, scaffolding, air- conditioning, water supply, sewerage or drainage for or in connection with a building
• the preparation of plans or specifications (including work performed by architects, engineers and licenced surveyors) and the carrying out of completed building inspections for the building work
• carrying out of fire protection, termite inspections and investigations, contract administration, building certification or the assessment of energy efficiency of or for a building.

‘Building work’ does not include civil, engineering and infrastructure projects such as bridges, roads, tunnels and ports; public transport infrastructure such as busways, railways and associated bus/rail stations; or an authorised activity under a resource authority. These types of projects DO NOT require a PBA.

What is the difference between a Subcontractor and a Supplier?

A Subcontractor for a building contract means a Subcontractor for a first-tier subcontract. It is the contractor that is engaged by the head contractor.

The head contractor may also engage suppliers for the building project for which he has set up a PBA. As long as the subcontract with the supplier only procures goods or services, they are not considered a subcontractor in this context.

In addition, the supplier cannot carry out any building work as part of their services, and if they do not require a relevant licence to lawfully supply their goods and services, they are NOT considered a subcontractor for the purposes of requiring a PBA.

Who is responsible for payment of contracts?

Only Subcontractors and Head Contractors can be paid as beneficiaries from a project bank account. Suppliers cannot be directly paid from the PBA. A Head Contractor is still, however, obligated to pay suppliers in accordance with existing contract and industry laws.

Before considering widening of the scheme, the QBCC is evaluating the introduction of the project bank account requirement during Phase 1, which commenced in March 2018 and is at present only applicable to projects where the State Government is the Principal.

Regardless of who is paying your contract, you also need to have your financial systems in good shape. Are you confident that you can produce accurate quarterly reports to meet the Minimum Financial Requirements (MFR) to the QBCC? If you have any doubts, contact us for a FREE QBCC Compliance Check.