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A fair go for subcontractors – BIF Act amendments 2020

September 29th, 2020

Subcontractor late payments Queensland

Working in the building industry with or as a subcontractor? This year has seen significant changes made to building industry payment laws that may affect you.

In July the Building Industry Fairness (Security of Payment) Act (“BIF Act”) was amended in the hope of improving the process for dealing with late and non-payment of subcontractors in Queensland. The changes aim to:

introduce new protections for monies in dispute;
simplify trust account frameworks; and
strengthen the regulatory oversight of trust accounts.

So, how is the new BIF Act achieving those goals?

New protections for monies in dispute in business

The new legislation introduces security of payment reforms to better protect monies in dispute. Now where an adjudicated amount is not paid within the timeframes required by the BIF Act, subcontractors may have recourse to a “payment withholding request”, issued to a party above the respondent in the contractual chain, in order to protect money that may be payable. If that party does not withhold the adjudicated amount they could be liable for the amount owed to the subcontractor.

The updated BIF Act also enables a head contractor to lodge a statutory charge over the property where construction work occurred, if owned by a BIF respondent who does not pay an adjudicated amount in the required timeframe.

Simplified trust account frameworks

Changes to the BIF Act promise to simplify trust account frameworks in a number of ways. Prior to the amendments, head contractors were required to open three bank accounts for each eligible contract, including a retention account. The changes reduce the number of accounts required to one single “project trust account”. If a retention trust is required, a contractor is now able to hold all retentions across a number of projects in a single account. The former “disputed funds account” has been abolished in favour of added protections for subcontractors.

The new project trust regime will be rolled out in stages to allow time to adjust to the changes, a plan that has been temporarily affected by COVID-19. Provisions dealing with project trusts and retention trusts will not commence until “a day to be fixed by proclamation”, wording that provides the government with flexibility to work around the changing pandemic situation. We do not expect to see full implementation of the project trust regime until at least 2023.

Strengthened oversight of trust accounts

Though responsibility for oversight of project bank accounts previously lay with the principal, they have no oversight role in the new project trust regime. Instead, the Queensland Building and Construction Commission (“QBCC“) will monitor the trust regime. To this end, changes to the BIF Act increase the QBCC’s regulatory functions, including audit powers over trust accounts. QBCC will, among other things, be empowered to “freeze” trust accounts, and request the provision of information about trust accounts in cases of noncompliance. Retention trust accounts will be subject to regular independent audits.

To further assist QBCC in its monitoring and oversight role, legislative amendments to the QBCC Act have also been proposed to take effect on 1 October 2020. These changes will introduce new penalties, including for provision to the QBCC of false and misleading information about a licensee’s financial situation, and for failure to provide a supporting statement that states all subcontractors have been paid when requested.

The changes to building industry payment laws, as they are implemented over the next few years, will significantly impact the conduct of disputes involving subcontractors. If this is you, our experienced legal team is here to help, contact us on 4036 9700.