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Making payments from project bank accounts

A head contractor is legally and contractually obliged to pay its subcontractors on time and in full for work completed. All payments to subcontractors must come from the project bank account (PBA).

This information outlines the process for paying subcontractors and head contractors.

If you're a subcontractor and having difficulty getting paid, read these dispute resolution options.

You can also notify the Queensland Building and Construction Commission (QBCC) using the PBA complaint form (PDF, 802KB).

Note: Suppliers are not paid from the PBA. Head contractors should pay suppliers according to existing contractual arrangements. If you're unsure if you have suppliers or subcontractors, read the criteria for a PBA.

Paying subcontractors

Head contractor claim

A head contractor must prepare a payment claim, including a subcontractor payment summary and statutory declaration, and submit it to the principal according to the building contract.

The principal:

  1. assesses and certifies the work completed
  2. issues a payment schedule
  3. directs payment into the PBA when it's due.

The principal must make all payments by depositing into PBA's general trust account via electronic transfer (rather than the head contractor's private account).

Often, the date that subcontractors need to be paid won't align with the date that the principal provides the payment. This may happen when:

  • subcontractors are on weekly or fortnightly payment terms
  • subcontractors request upfront deposits or early payment on work completed
  • the principal's payment doesn't clear, or isn't paid or received, on time.

A head contractor must pay all subcontractors only from the PBA and ensure the PBA has enough money to pay amounts when they're due to be paid.

If you're a principal of a PBA, read more details about your obligations in the Principals guidelines (PDF, 1.1MB)

Subcontractor claim

A subcontractor must make a valid payment claim to the head contractor according to their subcontract.

When the head contractor gets a subcontractor's payment claim, they:

  1. certify the completed work
  2. give the subcontractor a payment schedule (unless they intend to pay in full)
  3. issue a PBA payment instruction to the financial institution stating how much to transfer to which account (e.g. the subcontractor's bank account, or the retention or disputed funds trust accounts) and when to do so
  4. give the subcontractor and principal a copy of the payment instruction information.

Insufficient funds

The head contractor must ensure there are enough funds to make the payments when an amount is liable to be paid.

An insufficient balance is not an acceptable excuse for failing to pay subcontractors.

A head contractor is liable to pay a subcontractor if:

  • the amount is due to be paid to the subcontractor in connection with the subcontract
  • the amount is certified, or otherwise assessed, as payable to the subcontractor under the subcontract
  • the head contractor gives the subcontractor a payment schedule for the amount
  • the amount to be paid falls under section 77 of the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act)
  • the amount must be paid because of an adjudication under chapter 4, part 4 of the BIF Act, of a disputed progress payment relating to the subcontract
  • the amount must be paid because of a final and binding dispute resolution process
  • a court or tribunal orders the head contractor to pay the amount to the subcontractor.

When the relevant trust account doesn't have enough funds when an amount becomes due, the head contractor must cover this shortfall by depositing the necessary amount into the trust account (i.e. the difference between the available balance and the amounts they're liable to pay).

The top-up must be paid when the amount is due, rather than when it's liable or the head contractor becomes aware of the shortfall.

For example, if they need to pay $6,000 to subcontractors on a specific date, and the balance of the general trust account is $4,000, the head contractor must deposit $2,000 into the general trust account before the due date.

Note: A head contractor may reimburse itself for any top-up amount after they receive the principal’s progress payment if this withdrawal payment is made in accordance with other provisions in the BIF Act (see sections 31 and 32).

Failing to top up the PBA is an offence under section 30 of the BIF Act with a penalty of up to 100 penalty units or 1 year of imprisonment.

When a head contractor can't top up

In limited circumstances, a head contractor may not be able to top up the project bank account with the shortfall.

In this case, they should pay the subcontractor part of what's owing using the available funds in the PBA, even if they can't pay the full liable amount.

If 2 or more subcontractors are liable to be paid from the trust account at the same time and there aren't enough funds, the head contractor should reduce the amount for each subcontractor by an equal proportion.

For example, if 1 subcontractor is due to be paid $50,000 and another $30,000, but only $40,000 is available, they would pay the subcontractors $25,000 and $15,000 respectively.

Head contractors should be aware that:

  • an inability to top up the PBA may represent an insolvency event, which will raise concerns about their financial sustainability
  • after they make a pro-rata payment, they remain liable to pay each subcontractor the outstanding balance of the full amount due
  • failing to pay a subcontractor the full amount due may be a breach of their legal and contractual obligations. The subcontractor may be able to lodge a complaint with the QBCC and/or commence legal action to recover unpaid amounts.

Paying head contractors

A head contractor may pay themselves an amount due and owing, in line with the contract, from the balance held in the PBA's general trust account.

They must prepare a payment instruction and submit it to the bank, and give the principal a copy of the payment instruction information.

However, they can't pay themselves from the PBA until they've paid all amounts due and owing to subcontractor beneficiaries at the time of withdrawal.

There are significant penalties, including possible imprisonment, for withdrawing amounts from a PBA trust account before paying subcontractor beneficiaries.

For more about head contractor obligations, read the Head contractors guidelines (PDF, 981KB).

Contact

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