Australia: Project Bank Accounts (PBAs) - What does it mean and how will it work?

Last Updated: 24 November 2017
Article by Nerida Whelan

On 26 October 2017 the Queensland Parliament passed the Building Industry Fairness (Security of Payment) Act 2017 (Qld) ("Amendment Act"). It will commence on a date set by proclamation (which has not yet occurred).

In addition to various amendments to Queensland's security of payment legislation, the Amendment Act amends the Building and Construction Industry Payments Act 2004 (Qld) ("BCIPA") to introduce project bank accounts ("PBAs").

The Queensland Government has indicated that PBAs will be required from 1 January 2018 for projects where the principal is the State of Queensland (or a State authority which elects to opt in), so long as at least 50% of the contract price relates to the performance of building work1 and the contract price is more than $1 million but less than $10 million. The Government has indicated that PBAs will be rolled out more widely (i.e. for all building contracts with a contract price of more than $1 million) from 1 January 2019.

The introduction of PBAs has been contentious. They are intended to protect down the line subcontractors (inferior contractors) from the insolvency of up the line contractors (superior contractors). What remains to be seen is whether they will achieve that intent.

The PBA Provisions

What are PBAs and how do they operate?

In a nutshell:

  1. PBAs are trust accounts operated by the superior contractor as trustee. The superior contractor is also a beneficiary of the trust along with all inferior contractors.
  2. For applicable contracts, superior contractors are required to open three bank accounts – a general trust account for the deposit of funds by the principal and for payments to inferior contractors ("GTA"), a retention account in which retention monies are to be held ("RTA") and a disputed funds account in which all disputed funds are to be held ("DFTA").
  3. All payments made to contractors by the principal to the superior contractor and all payments made by the superior contractor to inferior contractors must be made through the PBAs.
  4. No withdrawals can be made from PBAs except to satisfy:
    1. A liability from the principal to the superior contractor (but only where the funds to be transferred do not relate to a sum the superior contractor is liable to pay to an inferior contractor (section);
    2. A liability from the superior contractor to the principal; or
    3. A liability from the superior contractor to an inferior contractor.
  1. A superior contractor is not entitled to withdraw from an RTA unless it is for the purpose of returning retention monies to an inferior contractor or to reimburse itself for the correction of defective work or otherwise secure performance of the subcontract.
  2. Should there be a shortfall between the amount held in the PBAs and the amount that a superior contractor is required to pay inferior contractors, the superior contractor must cover the shortfall from its own funds. Conversely, a superior contractor is not allowed to withdraw from the PBAs to pay itself where the withdrawal would cause the balance of the PBAs to fall below the value of its liabilities to inferior contractors (including all retention amounts held).
  3. Where a payment dispute arises,2 the superior contractor must pay the disputed funds into the DFTA.3
  4. Payments from the DFTA can be made to:
    1. An inferior contractor; or
    2. The superior contractor in accordance with the outcome of a dispute resolution process; or
    3. Another person in the circumstances prescribed by regulation.
  1. Principals have various rights to information regarding payments made to and from PBAs. Further, the superior contractor must serve on the principal a copy of all payment instructions it gives to its financial institution in respect of payments made from PBAs.
  2. Principals are obliged to inform the Commissioner of the Queensland Building and Construction Commission ("QBCC") of any discrepancies it identifies in the payment instructions given to it by a superior contractor. A failure to do so attracts a penalty of up to $12,615.

There are various penalties which apply should principals and superior contractors fail to comply with their obligations in respect of PBAs. The maximum penalties range from periods of imprisonment (1 or 2 years depending on the offence) and fines of $12,615 to $63,075.

The Problems?

While the legislation is relatively detailed, there are some gaps and inconsistencies which are likely to cause problems for the administration of PBAs, including:

  1. What is meant by and when payments are "due"?

The provisions make reference to amounts to which various persons are "entitled to be paid", or are "due to be paid", and other amounts which a person is "liable to pay". These terms are not defined in the Amendment Act and superior contractors and inferior contractors are likely to adopt different interpretations of what they mean.

Superior contractors may well take the view that only scheduled amounts are "due" to inferior contractors, whereas inferior contractors are likely to consider claimed amounts to be what is "due". Superior contractors have the better argument, which runs contrary to the intention of the amendments and PBAs generally. The issue is amplified by the fact that differences between the claimed and scheduled amounts are not considered by the Amendment Act to be disputed funds and therefore are not required to be deposited into the DFTA. Consequently, the differences between claimed and scheduled amounts will not be protected in the event of superior contractor insolvencies.

The nature of the provisions may act to encourage aggressive under certification by superior contractors so that superior contractors can ensure that they are able to pay themselves amounts from the GTA which are not considered to be "due" to an inferior contractor. Should aggressive under certification occur, we can expect inferior contractors to increasingly rely upon BICPA and contractually prescribed dispute resolution provisions, and in all likelihood, less money flowing down the chain from superior contractors to inferior contractors in circumstances where those funds are not required to be retained in the PBAs.

Given the ambiguity surrounding "entitled", "due" and "liable", the QBCC is likely to view under certification as an intentional contravention of the PBA requirements and may take a proactive approach towards enforcement. In enforcement proceedings under the new regime (and they will result) the meaning of "entitled", "due" and "liable" will take center stage. It will also be interesting to see what approach will be taken by the QBCC and the Courts to withdrawals made by superior contractors from PBAs for the purposes of paying themselves in circumstances where they held an honest and reasonable belief that there were no funds "due" to an inferior contractor but that belief is later found to be mistaken. Watch this space.

  1. Will PBAs restrict the usefulness of informal dispute resolution?

While we will see an increase in disputes, it is unclear whether superior contractors and inferior contractors will retain the discretion to resolve disputes on their own without reference to formal dispute resolution processes (such as BCIPA adjudications). If a dispute arises and the funds relevant to the dispute are transferred to the DFTA, withdrawals from the DFTA can only be made as follows:

  1. To an inferior contractor at any time (whether by agreement between the parties or in accordance with the outcome of a dispute resolution process); or
  2. To the superior contractor in accordance with the outcome of a dispute resolution process (my emphasis); or
  3. To another person in the circumstances prescribed by regulation.

A dispute resolution process is said to be "a process prescribed by regulation". No amended regulations have yet been enacted so we do not yet know what a dispute resolution process is. It may be that "dispute resolution process" will be defined as formal dispute resolution processes (such as arbitrations and BCIPA adjudications). If that is the case, payments from the DFTA to superior contractors will only be permissible to give effect to the outcome of formal dispute resolution process. This will severely restrict the usefulness of engaging in informal settlement conferences and the like.

  1. Will contractors have unfettered access to retention sums?

There may also be significant dispute over funds held in RTAs and withdrawals from those accounts. Section 34 of the Amendment Act allows superior contractors to withdraw from an RTA to make payment to itself "of an amount to correct defects in the building work, or otherwise to secure, wholly or partly, the performance of the subcontract". What does "to secure, wholly or partly, the performance of the subcontract" mean?

On one interpretation, this entitles the superior contractor to deduct damages of all descriptions from the RTA as ultimately damages act to "secure.. performance" of a contract. In contrast, another interpretation of "securing.. performance" is that this only relates to what is necessary to secure performance of the contract going forwards, and is not designed to provide superior contractors with an ability to recover damages for purported past non-performance.

There is scope for significant argument as to what withdrawals are permissible, and when they are permissible, from the RTA.


PBAs are intended to promote the flow of funds down the chain and protect inferior contractors against insolvencies up the line.

Will they achieve that end? Quite possibly not. Further, given the vague nature of the legislation, there will certainly be extensive litigation before its true meaning and effect is known.

Lastly, it is possible that the legislation will not survive a change in government if one occurs on 25 November 2017, so this may all become theoretical. However, if it does not, there is one certainty – PBAs will come at significant risk and cost to the industry.


1As it is defined in section 8 of the Amendment Act.

2 Being where the contractor proposes to pay an inferior contractor an amount less than the amount certified in a payment schedule or otherwise fails to serve a payment schedule in response to an inferior contractor's payment claim.

3 The amount to be transferred to the DFTA is the difference between the scheduled amount and the amount proposed to be paid by the contractor, or where there is no payment schedule, the difference between the claimed amount and any amount that the contractor proposes to pay.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions