What is a project bank account?
The Queensland Government has introduced new laws requiring a head contractor to set up a project bank account (PBA) for certain projects to ensure subcontractors are paid for the work they do.
The PBA's structure and strict rules help subcontractors:
- get paid regularly in a timely manner
- protect their retention and disputed monies.
What is a PBA?
A PBA is a set of 3 bank accounts that operate as a trust:
- general trust account: which the principal makes payments into and the head contractor pays subcontractors from
- retention trust account: which holds subcontractors' retention money
- disputed funds trust account: which holds amounts subject to certain payment disputes until they're resolved.
A PBA provides a trust over:
- an amount paid by the principal to the head contractor under a qualifying building contract
- an amount a subcontractor is entitled to be paid by the head contractor in connection with a first-tier subcontract
- a retention amount withheld from a subcontractor under a first-tier subcontract
- an amount that is the subject of a payment dispute.
The funds are held in trust until payments are due, as part of a building project.
Parties involved in a PBA
The parties involved in a PBA are the:
- principal: for whom the building work is being carried out under the contract (for phase 1: only the Queensland Government or a statutory authority if it has opted in)
- head contractor: who is carrying out the building work under the contract, including principal consultants, architects and building inspectors if they employ a subcontractor to do all or part of their contract work
- subcontractor: who are first-tier subcontractors subcontracted by the head contractor to carry out work under the contract
- Queensland Building and Construction Commission: which monitors PBA compliance and investigates PBA discrepancies and payment concerns raised by a principal or subcontractor.
Under the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act), a first-tier subcontractor is a subcontract that contributes directly to the performance of the contract (see section 6(5)). Therefore, a party to a subcontract for the building contract would be a first-tier subcontractor.
Under the BIF Act, a head contractor is responsible for:
- determining whether a project bank account is needed for a building contract
- setting up a PBA for every contract that needs one
- operating the PBA according to the law.
The head contractor is the PBA trustee and a beneficiary. Each subcontractor who signs a subcontract also becomes a beneficiary.
The PBA requirements don't apply to second-tier subcontractors (sub-subcontractors). And a subcontractor doesn't need to establish a PBA or pay sub-subcontractors.
As beneficiaries, all first-tier subcontractors and the head contractor must be paid from the PBA. No one else can be paid from the PBA.
Subcontractors can't opt out of being paid from the PBA.
When you do and don't need a PBA
As the head contractor must determine whether a contract needs a PBA, they must understand the thresholds, exemptions and other factors that will help them make the correct decision.
Read how to determine whether a PBA is needed.
Changes to tendering
Tender and contract documentation issued by the Queensland Government now includes PBA requirements.
Head contractors must determine if a PBA is required and, if so, complete the 'returnable tender schedule' with their documentation.
What a PBA doesn't affect
A PBA doesn't affect a head contractor's contractual arrangement with a contractor. They can still manage subcontractor performance in line with existing legislation and contractual practices.
Both parties maintain their rights to seek adjudication or start legal action in a dispute.
More information about PBAs
- Last reviewed: 26 Feb 2019
- Last updated: 26 Feb 2019