Australia: Building Industry Fairness (Security of Payment) Act 2017: New bank account regime in Queensland

Principals, contractors and subcontractors operating in Queensland should become familiar with the new project bank account regime under the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act), which will commence on 1 March 2018.

The regime will require head contractors to establish a project bank account for government building contracts between $1 million and $10 million (where the government tender was issued or advertised on or after 1 March 2018).

The security of payments provisions (including consolidation of the amended Building and Construction Industry Payments Act and the Subcontractors' Charges Act) have not yet been proclaimed. It is still to be confirmed when these will commence.

THE BIF ACT: A SUMMARY

The BIF Act received Royal Assent on 10 November 2017. For a detailed explanation of its key amendments, read our previous publication here.

The provisions establishing the project bank account (PBA) regime (under Chapter 2 of the Act) received proclamation on 22 February 20181, and will commence on 1 March 2018. This means that the PBA provisions will apply to government building contracts between $1 million and $10 million, where the tender for contract was issued or advertised on or after 1 March 2018.2

In addition to the PBA regime, the other provisions which will commence on 1 March 2018 are set out in the Commencement Table below:

COMMENCEMENT TABLE – KEY BIF ACT CHAPTERS
Chapter 1 (Preliminary) Proclaimed - to commence 1 March 2018
Chapter 2 (Project bank accounts) Proclaimed - to commence 1 March 2018
Chapter 3 (Progress payments) Not yet in force
Chapter 4 (Subcontractors' charges) Not yet in force
Chapter 5 (Administration) Not yet in force
Chapter 6 (Legal proceedings) Proclaimed - to commence 1 March 2018
Chapter 7 (Miscellaneous)
Other than section 201(2)(b) to (g)
Proclaimed - to commence 1 March 2018
Chapter 8 (Transitional)
Including repeal of BCIPA and Subcontractors' Charges Act
Not yet in force (NB: BCIPA and SCA not yet repealed)
Chapter 9 (Amendment of this and other Acts) Not yet in force
Section 211 (Transitional regulation-making power)
Other than section 211(1)(a)(ii) and (5)
Proclaimed - to commence 1 March 2018
Section 307(1) (Amendment of Dictionary)
Other than to the extent it omits the definition demerit matter
Proclaimed - to commence 1 March 2018
Schedule 1 (Consequential Amendments)
Includes amendments to Judicial Review Act 1991 and Queensland Building and Construction Commission Act 1991
Not yet in force
Schedule 2 (Dictionary) Proclaimed - to commence 1 March 2018

The Queensland Government has not indicated when commencement of the remaining provisions will occur. Those provisions largely relate to security of payment and subcontractors' charges (including consolidation of the amended Building and Construction Industry Payment Act and the Subcontractors' Charges Act).

THE PROCLAMATION OF REGULATIONS

Accompanying the proclamation on 22 February 2018 were Regulations and Transitional Regulations, which also commence on 1 March 2018.3

The Regulations provide guidance on the operation of the PBA regime, including:

  • the meaning of 'building work';
  • 'prescribed information' required to be provided by head contractors;
  • payments into PBAs; and
  • withdrawals from PBAs.

What is 'building work'?

Under the BIF Act, a head contractor will be required to set up a PBA for any building contract for 'building work'.4

In addition to the definition of 'building work' under the BIF Act,5 'building work' also includes:

  • the erection, management and removal of scaffolding if the scaffolding is or was used for carrying out other building work;
  • work that is a building certifying function within the meaning of the Building Act 1975; and
  • the assessment of the energy efficiency of a building under the Building Code of Australia or the Queensland Development Code.6

To the extent it relates to other building work, work performed by an architect, a registered professional engineer or a surveyor will be building work (and hence a PBA will be required).7

What is not building work?

PBAs will not be required for engineering projects. For example, building work does not include projects for:

  • the construction, maintenance or repair of:
    • busways, roads or railway; and
    • tunnels for a busway, road or railway; or
  • an authorised activity under the Mineral & Energy Resources (Common Provisions) Act 2014.8

Prescribed information for head contractors

Head contractors may be required to give the principal and the subcontractor beneficiary certain 'prescribed information' when a PBA is initially set up, or when it issues a payment instruction to a financial institution.9

If a PBA is required, the head contractor must, within five business days after entering into a subcontract for the building contract, give the principal 'prescribed information', which includes:

  • the name of each subcontractor beneficiary; and
  • the financial institution details of each PBA for each subcontractor beneficiary, including the bank name, BSB and account numbers.

Additionally, as soon as practicable after giving a financial institution a payment instruction, the head contractor is required to give the principal and the subcontractor beneficiary 'prescribed information', which includes the name of each beneficiary, details of amounts to be paid, which account it is to be paid into or from, and the date of payment.10

PBA payments and withdrawals

Under the BIF Act, the head contractor must not cause funds to be transferred to11, or withdrawn from12, a PBA unless it is for an authorised purpose (which may be prescribed by regulation).

The Regulations now make it clear that a payment made because of an adjudication of a 'payment claim' under the Building and Construction Industry Payments Act (BCIPA), by either a head contractor under a building contract where a PBA is required or a subcontractor (not suppliers) under a first tier subcontract, may be made to, or withdrawn from, a PBA.13

Transitional Provisions and BCIPA

Though the new security of payment provisions have not yet commenced, principals, contractors and subcontractors should note that payments made under the BCIPA regime will still be subject to the PBA provisions if they relate to a current building contract for which a PBA is required.

For example, payments made because of an adjudication of a payment claim under BCIPA may be required to be paid into a PBA. Additionally, the Transitional Regulations make it clear that a 'payment dispute' may include disputed amounts regarding payment claims under the BCIPA regime14, which must also be held in a PBA.15

LOOKING AHEAD: WHAT YOU NEED TO KNOW

Principals, contractors and subcontractors should prepare for the commencement of the PBA regime on 1 March 2018.

In particular, head contractors should keep in mind that government building contracts between $1 million and $10 million will require the establishment of a PBA where the tender for contract was issued or advertised on or after 1 March 2018.

Additionally, parties should be aware that while the new security of payment provisions have not yet commenced, payments made because of an adjudication, or payment disputes under the BCIPA regime, may still be subject to the PBA provisions.

Footnotes

1 Proclamation dated 22 February 2018, Building Industry Fairness (Security of Payment) Act 2017.

2 Section 18 of the BIF Act.

3 The Building Industry Fairness (Security of Payment) (Transitional) Regulation 2018.

4 Section 8 of the BIF Act.

5 Section 8 of the BIF Act.

6 Section 3(2)(c).

7 As under the Architect's Act 2002, the Professional Engineer's Act 2002, or under the Surveyor's Act 2003. See section 3(3) of the Regulations for further information.

8 Section 4 of the Regulations.

9 Section 50 (subcontract information) and 51 (payment instructions).

10 Head contractors should review the regulation section 10 and section 51 of the Act in detail to be sure of its obligations when giving a payment instruction.

11 Section 28(e) of the BIF Act.

12 Section 31 of the BIF Act.

13 Section 6 and 7 of the Regulations.

14 For example, see section 5 of the Transitional Regulations: A payment dispute occurs where the amount to be paid (via payment instruction) is less than stated in a payment schedule, or where a payment claim is not served within the time required under BCIPA.

15 See section 23(c) and 36 of the BIF Act: disputed payments are to be held in the disputed funds account.

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.

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