Planning a trust account
It is important for those who enter into building and construction contracts to determine whether they need to prepare for the trust account framework. Not all projects and parties are captured but there are important considerations and obligations for those that are.
When is a trust account needed?
There are criteria that determine when trust accounts are required to be used for payments and retention amounts.
A contracted party (head contractor) is required to have a PTA for their contract if all the following apply:
- at least one subcontractor is engaged for all, or part, of the contracted work AND
- more than 50% of the contract value is project trust work AND
- for a Queensland state government or Hospital and Health Service contract—the contract price is:
- $1 million or more
- for a private sector, local government or state authority contract—the contract price is:
- $10 million or more for contracts that start between 1 January 2022 and 31 March 2023
- $3 million or more for contracts that start from 1 March 2025
- $1 million or more for contracts that start from 1 October 2025.
If a head contractor requires a PTA and they engage a related entity subcontractor (e.g. family member, corporate relationship, etc.), the subcontractor is also required to have a PTA if they further subcontract work.
Even if all the above criteria are met, some contracts are exempt from requiring a PTA:
- contracts relating to small-scale residential construction work for 1 or 2 living units
- contracts solely for maintenance work
- contracts between the state government and a state authority
- contracts solely for professional design, advisory or contract administration work
- short term contracts for work that is to be completed in less than 90 days
- subcontracts (unless the subcontractor and head contractor are related entities).
See Project trust work for common project types that may require a PTA.
A contracting party is required to have an RTA if:
- the project requires a PTA, AND
- they are holding cash retentions against a contracted party AND
- they are
- a head contractor
- a principal
- from 1 October 2023—a subcontractor.
If the party withholding the retention amount is the Queensland state government, a state authority, the Commonwealth government or a local government, they are not required to have an RTA.
What do you need to consider?
You may need to make some adjustments to your business practices to manage your trust account obligations. This page looks at some factors you should consider in deciding whether (and what) changes are necessary.
The administrative effort of operating a trust account is a factor for businesses to consider. This may include additional staff, training and procedures to manage trust accounting requirements.
Trustees can choose to nominate another person to administer on the trust account on their behalf but trustees retain full responsibility for any action undertaken by the trust administrator.
If you will not be responsible for administering your retention trust account, you must nominate another person and notify the QBCC of the nomination online via myQBCC or Form TA7 – Notice of retention trust account administrator.
If the person responsible for administering the retention trust account changes, you must nominate a new person and notify the QBCC. You can change the nominated person at any time; however each nominated person must complete the required retention trust training.
The ‘Trustee guide – trust accounting’ details the administration and record keeping requirements for a trust account.
The QBCC cannot endorse or prohibit a computer system or software product for trust record keeping. It is the trustee’s responsibility to ensure the system they use:
- is not being capable of deleting any part, or all, of the trust account ledger or record of deposits and withdrawals
- is capable of producing separate reports for—
- transactions for particular time periods
- transactions for each beneficiary.
We understand that some accounting software packages may be inadequate for some of the trust accounting and record keeping requirements. Regulatory responses will take this into account.
We encourage you to provide feedback to your software provider if you believe your accounting platform is not compliant.
Money in a trust account must only be used for the purposes, and at the times, specified by law. Generally, this is limited to paying a beneficiary when they are entitled to be paid. See Operating a trust account for more information about allowable deposits and withdrawals.
In this way, trust accounts effectively quarantine funds, which may affect a business’ working capital and cash flow.
Businesses may need to consider strategies for improving cash flow, or increasing available capital by the securing a line of credit (e.g. short-term loan from a bank).
A trustee who fails to uphold their obligations in relation to trust accounts can face regulatory action.
Responses to non-compliance range in severity from education and warnings through to penalties, licence conditions/suspension/cancellation and prosecution in court.
Some of the factors that the QBCC will take into account when deciding on an appropriate and proportionate response include:
- State of mind: Is there evidence of an intention to avoid complying with the requirements? This includes evidence of hiding information from the QBCC or being uncooperative with an audit.
- Seriousness: Has the non-compliance caused loss to subcontractors, and if so, how much?
- Scale: How many breaches have occurred, or how long has the offender been in breach without remedying?
- Systems: Has the contractor/principal failed to put in place adequate business and accounting systems and processes (having regard to the size and operations of the offender) to ensure compliance with its obligations? Did they have access to (or the choice of) adequate systems and processes that would have allowed them to achieve compliance?
- Any other relevant matters: Each situation is unique and the QBCC will consider all relevant factors in determining its regulatory response.
See, Project and retention trust regulatory guide for more information.