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Retention money in project bank accounts

Retentions for subcontractors

A subcontract can provide for retention money to be withheld from progress payments. The head contractor must retain a percentage of each payment otherwise due to the subcontractor as retention money (i.e. security for performance).

The head contractor must ensure these retention amounts are held only in the project bank account (PBA) retention trust account.

They must transfer retention funds from the general trust account to the retention funds trust account, with the money clearly identified in the account (e.g. 'Retention – Subcontractor name' or 'Retn – Subcontractor initials').

The head contractor can withdraw funds from the retention trust account only to:

  • pay the subcontractor an amount withheld in connection with the subcontract
  • after the end of the defects liability period for the subcontract
    • to pay for the correction of defects or to secure the performance of a subcontractor
    • to pay another contractor engaged by the head contractor to correct defects or omissions in the subcontracted work if the payment is also made in accordance with the related subcontract
  • make a payment ordered by a court.

The retention trust account doesn't include bank guarantees. The head contractor may still hold bank guarantees for subcontractors (as per contract arrangements) but these would be held outside the PBA.

Claims for retention money where there is a PBA

As the building project approaches the end of the defects liability period, the head contractor must notify the subcontractor within 10 business days (or within 5 business days after receiving notice if the defects liability period is linked to another building contract) before the end of the defects liability period using the S67NC Notice of end of defect liability period (PDF, 40KB).

The subcontractor can use this information to make their final payment claim.

The head contractor must release retention monies according to the building contract unless they have a reasonable excuse. A contractor isn't required to pay retentions immediately when the defects liability period expires. The 'due date' for payment under the building contract is the required release date.

Find more information about responsibilities relating to retentions on the QBCC website.

Read more detail about retention funds in the:

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