In November 2017, the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act) introduced reforms to help ensure Queenslanders who work in our building and construction industry are paid for the work they do.
Project Bank Accounts and trust accounts
Project Bank Accounts applies to project bank accounts for certain government contracts with tenders released between 1 March 2018 and 28 February 2021. Project Bank Accounts require funds to be held in a set of three trust accounts until payments are due, as part of a building contract.
In 2018 a review of Project Bank Accounts was undertaken by the independent Building Industry Fairness Reforms Implementation and Evaluation Panel who recommended a simplified model.
On 1 March 2021 the new streamlined trust account framework commenced. The trust account framework applies to eligible state government contracts valued between $1 million and $10 million. The trust account framework will be gradually rolled out to other eligible building and construction contracts.
A payment claim is a written document requesting payment for construction work or the supply of related goods or services that:
- identifies the construction work or related goods and services
- states the amount claimed
- requests that the claimed amount be paid.
A payment claim can be given on or after a valid reference date, either provided for in the contract or otherwise per default provisions in the BIF Act. Every payment claim could be considered made under the Act as long as it contains the required information and is given on or after a valid reference date.
From 1 October 2020, a payment claim given by the head contractor must be accompanied by a supporting statement, declaring that all subcontractors have been paid. If they have not been paid, it must say so and include the reasons why. However, a payment claim will not be invalid because a supporting statement has not been provided.
Complaints to the Queensland Building and Construction Commission can be made about a payment claim, including the failure to provide a supporting statement, or if you believe the information contained in it is false or misleading.
If you receive a payment claim and you don’t intend to pay the amount claimed in full by the due date, you must give a payment schedule to the claimant. The amount stated in a payment schedule must be paid by the due date.
A payment schedule is a written response to a payment claim, which:
- identifies the invoice or payment claim that it is responding to
- tells a contractor the amount they will be paid, if any
- provides reasons why the amount may be less than the amount claimed
- must be provided in response to every payment claim unless paying the full amount of the claim by the due date
- if required, must be provided within 15 business days of receiving a payment claim or earlier if stated in the contract.
A penalty of 100 penalty units may apply if you fail to issue the payment schedule in the required time and from 1 October 2020, if you don’t pay the amount in the payment schedule by the due date.
Complaints to the Queensland Building and Construction Commission can be made if you think that someone has not complied with these requirements. Read more about protecting your payment rights on the QBCC website.
Adjudication is a quick and low-cost way to resolve a payment dispute.
Adjudication is available to a person (claimant) who made a valid payment claim, and:
- has not been paid the payment claim amount in full by the due date; or
- has not been paid the full amount in the payment schedule; or
- disagrees with the amount proposed to be paid in a payment schedule
To start an adjudication process the claimant must give an adjudication application to the Registrar, and also ensure they provide a copy to the person with whom they dispute payment (respondent).
As part of the adjudication process, the adjudicator will consider the payment claim and may request written submissions from either party involved. However, there is no ability for the respondent to give an adjudication response if a valid payment schedule was not given to the claimant, or to raise new matters not provided for in the payment schedule.
At the end of the adjudication process the adjudicator will decide if the respondent is required to pay an amount (the adjudication amount) to the claimant and a copy of their decision must be given to the respondent and claimant.
An adjudicated amount must be paid within 5 business days after the decision is given, or another time decided by the adjudicator. A penalty of a maximum of 200 penalty units applies for failing to pay. From 1 October 2020, the respondent is also required to notify the Registrar within 5 business days of making the payment. If the respondent does not pay the claimant, the claimant can take further action including suspending work, giving a monies owed compliant or applying to court for a judgement debt.
Additionally, from 1 October 2020 if an adjudicated amount is not paid, the claimant can:
- make a payment withholding request to the higher party in the contractual chain. The higher party is the party in the contractual chain directly above the respondent.
- where they are a head contractor, lodge a statutory claim over the property where the work was done, if the respondent, or a related entity of the respondent, owns the property
Subcontractors’ charges are a way for unpaid subcontractors to secure a claim over money owed to them from a higher party in the contractual chain. They can make a subcontractors’ charge over money due to be paid by the principal or a higher contractor to the contractor they have a subcontract with.
Read more about subcontractors’ charges
Defects liability period and retentions
A contract may provide for the withholding of retentions until after the defects liability period. The BIF Act sets a default defects liability period of 12 months from the date of practical completion, if a contract doesn’t provide a defects liability period.
There are penalties for not paying a retention amount, or other security, to a contractor (without a reasonable excuse) at the end of the defects liability period.
Learn more about defects liability period and retentions