The 4 things to note as a head contractor
So, you’re a head contractor on a project that will need a Project Bank Account. How do you go about it?
To put it simply – Project Bank Accounts are trust accounts which are held by you as the head contractor, for the benefit of the subcontractors on a project.
Each subcontractor becomes a beneficiary to the trust account when they enter into a subcontract on the project. The subcontractors remain as beneficiaries until they are paid all amounts (including retention monies) they are entitled to be paid.
If you aren’t yet sure if you need a Project Bank Account, see our previous article here. If you do know you’ll need one, here are four steps to take into account.
1) Contact your bank to see if they can help
Project Bank Accounts are a first for Queensland, so it’s likely your local branch might not yet be up to speed on all of the requirements. Contact your bank to make sure they do have a suitable product available.
2) Note some specific PBA requirements
For all Project Bank Accounts, there are specific requirements you must adhere to:
- Deposit and withdrawals can only be made using electronic transfers.
- Withdrawals can only be made using a payment instruction given to your bank.
- Transfers between accounts can only be made using a payment instruction given to your bank.
- The account name must include the words ‘trust account’.
The Head Contractor must also allow the Principal on the project access to the Project Bank Accounts, so they can view:
- Deposits and withdrawals to and from the trust accounts
- Payment instructions given to the bank, and
- Account payment reports.
3) You must set up three Project Bank Accounts
You must establish three accounts for each applicable project, namely:
- General Trust Account – for amounts paid under the head contract
- Retention Account – for amounts held as retention amounts
- Disputed Funds Account – for amounts that are subject to a payment dispute
4) Written notice is required to the principal
The head contractor must provide written notice to the principal every time the head contractor:
- Opens a Project Bank Account; or
- Closes a Project Bank Account; or
- Changes the name of a Project Bank Account
The written notice must be provided within 10 business days and must state:
- The name of the Project Bank Account/ trust account
- Details of the bank where the trust account is held, including the BSB, and
- The trust account number.
The Project Bank Account can only be closed if:
- There are no longer any subcontractors to be paid; or
- The only remaining work to be carried out is maintenance work.
Note that penalties can apply
Penalties can be applied if you do not set up a Project Bank account correctly, including significant fines (currently up to $63,075) and prison sentences of up to two years.
Contact MDL for advice on setting up Project Bank Accounts
If you’re a head contractor and you’re unsure about how to set up a Project Bank Account, call MDL’s experienced Building and Construction Law team on 3370 5100 or fill out the contact form here.