On 1 March 2021, Queensland implemented a new trust account framework under the Building Industry Fairness (Security of Payment) Act 2017.

The phased rollout of the Project and Retention Trust Account requirements will impact many building and construction projects in Queensland above $1 million.  

This new framework is designed to strengthen the security of payments of subcontractors in the Queensland construction sector.  

As a leader in the construction business management software space, MYOB hosted a webinar session covering the introduction of this new trust framework.  

In the webinar we heard Bruce Minty, Senior Product Manager, MYOB talk with Laura Hattin, Principal Consultant, Building Trusts.  

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Laura is an expert on the trust account requirements for builders in Queensland. 

She brings more than six years of experience working to implement new legislation with the Queensland Building and Construction Commission (QBCC) and is one of the leading speakers on both the policy objectives and the QBCC expectations for compliance with the new requirements.   

In this webinar, Bruce and Laura discuss in detail the best practice in managing trust accounts in construction and addressed a range of industry-related concerns. 

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What’s the impact? 

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As Laura explained, the projects that are currently impacted by the new legislation include:   

• State Government and hospital and health service projects valued at over $1million;   
• Local government projects valued at over $10million;  
• Private sector projects valued at over $10million.   

She noted that there are a few exemptions:  

“The main ones being for small scale residential work such as a house; a project for 2 living units or less does not require a trust account. 

“There is also an exemption for Federal Government projects and projects where the majority of the work is for civil or mining work such as roads, bridges and tunnels.” 

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How to remain compliant 

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There was robust questioning around compliance to this Act, with Bruce asking Laura how builders and contractors can ensure they’re remaining on top of their obligations. 

As Laura outlined, the keys to remaining compliant include: 

• Open a bank account at an approved financial institution – one project trust account per eligible project and an overarching retention trust account.  

• Notify parties of the account including the QBCC.  

• Ensure that payments from the principal are transferred directly into the project trust account.  

• Pay subcontractor beneficiaries from the project trust account and transfer any cash retentions withheld into the retention trust account at the time that they are withheld from payment.  

• Ensure that there are sufficient funds in the trust account and top up if required.  

• Notify beneficiaries of all trust account transactions that relate to them.  

• Keep the required trust records including a separate ledger, record of deposits and withdrawals and all associated reports, statements, notifications, contracts and progress payment documentation relating to the project.   

• Conduct monthly reconciliations for each trust account.  

• Complete the mandatory retention trust training and engage an independent auditor to conduct an annual review of the retention trust account.  

While there seems to be “a lot of additional back-office work for companies across both their administrative and finance functions”, noted Bruce, not remaining compliant will have a greater impact on your business.  

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Using the right software 

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The discussion covered a lot of useful topics, including the tools available to manage your business compliance.  

“It’s not possible to be compliant with the trust account requirements without using some form of accounting software”, Laura explained.   

“This is because there are strict record keeping requirements that must be met for each trust account and records must be immutable and separate from a company’s business records.”   

In addition, she noted each trust account must be reconciled monthly and certain notifications sent when payments are made.   

“Accounting software has the potential to significantly improve a trustee’s ability to track and manage project payments, the company’s cashflow and overall financial position.”   

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Best practice tips

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• Prepare in advance — it takes time to build working capital and prepare for the impact to your cashflow, and it takes time and money to change or upgrade your software. Prepare your internal processes and procedures, educate your staff, employ additional resources, and update your contracts.   

• Consider the costs — understand how much it will cost to administer a trust account and consider this when tendering for eligible projects. These costs may include additional staff, professional advice, external audit costs and any software or bank fees that are added.  

• Act quickly — there are strict timeframes that must be followed with setting up accounts and issuing notices, Laura explained. Make sure that you’re ready before entering into the head contract for a trust project.  

• Get it right from the start — prepare for an audit of your trust account from the start is Laura’s best advice. Ensure that project documents are saved, all detail within trust records are included, invoices are paid on time, notifications sent as required and rules regarding transactions are followed correctly.  

• Add extra compliance measures — trust accounts bring a significant increase in compliance risk to businesses, Laura explained. Protect yourself as the trustee from hefty fines and the risk of regulatory action by having additional approvals or restrictions on trust transactions.   

• Look for ways to automate or simplify — consider upgrading your software to make administration, reporting and record keeping a lot simpler and easier and reduce the risk of non-compliance.
  There are other ways that you can save time, and therefore money, by amending templates, having notifications included in your standard contracts or aligning payment terms to reduce the administrative burden that trust accounts bring.   

For construction businesses that need to meet the trust account requirements, MYOB has fast-tracked development of additional MYOB Acumatica Construction functionality to create smart tools to support day-to-day transactions and reporting to help you remain compliant.  

Watch the full recording of the webinar here.