The construction industry in Australia is renowned for its high business insolvency. Payment default is both a major cause and effect of this insolvency. Reports and recommendations have touched on these issues over the years. The recommendations to come out of these reports have often been for the establishment of a statutory payments trusts scheme. These trust schemes have the objective of ensuring payment to all contractors and subcontractors in the construction industry and preventing payment default. Statutory payments trusts schemes (established through what they call “project bank accounts”) have already been adopted in Queensland in early 2018 for certain public construction projects.
The establishment of project bank accounts (which are simply trust accounts in practice) in certain public construction projects often raised questions about whether they could also be established in the private sector. In response to this, legislation which aims to extend the application of project bank accounts to private sector construction projects received assent on 23 July 2020.This legislation comes in the form of the Building Industry Fairness (Security of Payment) and Other Legislation Amendment Act 2020 (“BIFOLA Act”). The BIFOLA Act is supported by the Building Industry Fairness (Security of Payment) and Other Legislation Amendment Regulation 2020 and the Building Industry Fairness (Security of Payment) (Transitional) Regulation 2020 (both approved by the Governor in Council on 1 October 2020). The BIFOLA Act amends the following legislation:
- Architects Act 2002
- Building Act 1975
- Building Industry Fairness (Security of Payment) Act 2017
- Professional Engineers Act 2002
- Queensland Building and Construction Commission Act 1991
- Retirement Villages Act 1999.
- From 1 March 2021, project bank accounts will apply to eligible state government contract valued between $1 million and $10 million (these types of contract were already subject to certain project bank account requirements established by previous legislation).
- From 1 July 2021, government, hospital, and health services contracts valued at $1 million or more will be subject to project bank account requirements.
- From 1 January 2022, project bank accounts will be introduced to contracts valued at $10 million or more in the private sector. They will also be introduced to local government, statutory authorities’ and government owned corporations’ contracts valued at $10 million or more.
- From 1 July 2022, the project bank account framework will extend its reach to all private sector, local government statutory authorities’ and government owned corporations’ contracts valued at $3 million or more.
- Finally, from 1 January 2023, all eligible contracts valued at $1 million or more will be subject to the project bank account statutory framework.
In addition to the above trust account/project bank account framework changes, the BIFOLA Act will also:
- Relieve Principals from trust account oversight requirements.
- Replace the disputed funds account with added protections for subcontractors.
- Increase the regulatory functions and oversight of the Queensland Building and Construction Commission, including audit powers over trust accounts.
- Reduce the number of accounts: instead of three accounts, one project trust account will be needed for each eligible contract.
- Only require one retention trust account to be held per contract if the contractor holds cash retentions.
This article was written by Nina Flewell-Smith
 Bianca Wei Joo Teng and Jeremy Coggins ‘In Which Payment Trust Should the Australia Construction Industry Place its Trust?’ (2020) 28 Insolvency Law Journal 113, 113.
 See Building Industry Fairness (Security of Payment) Act 2017 (Qld) Ch 2; above n1, 114.
 Queensland Government Department of Energy and Public Works, Building Industry Fairness (security of Payment) and Other Legislation Amendment Act 2020 (Web page, 2 March 2021) <https://www.epw.qld.gov.au/news-publications/legislation/building/fairerbuildinglaws>.