The BIFA trust’s regime is designed to protect cash retentions.
As stated in the Explanatory Notes for the Building Industry Fairness (Security of Payment Act 2017) (BIFA):
“A retention trust account is required when certain criteria of a contract are met, including that the contract or subcontract is one associated with a project trust account. The requirement to have a retention trust account starts when a retention amount is withheld under a contract which meets the criteria.”
In introducing the Bill, the responsible Minister Mick de Brenni explained things this way:
“If you have a project trust and you withhold cash retentions, you need to establish a retention trust account. Unlike the current framework, where there is one retention trust account per project, new section 34 of the BIF act will provide that a trustee holds all retentions across any number of projects in a single account.”
While eligible government projects of $1 million or more and private sector projects of $10 million or more will continue to require the establishment of a retention trust account under BIFA, in a media statement of 19 March 2023 the government announced extending the commencement date for eligible contracts for up to two years–between $3 and $10 million to 1 March 2025, and over $1 million to 1 October 2025.
This means BIFA will not assist in the protection of cash retentions for contracts of this nature for several years.
There are many pauses and changes in the history of BIFA
Since BIFA was initially introduced into parliament in 2017 there have been delays prior to this most recent delay that I have addressed in previous articles.
Furthermore, BIFA was the subject of very significant amendments in 2020. This occurred after several years of the operations of ‘Project Trust Accounts’ in the government sector. At this time, there were approximately 130 altered or new trusts provisions in BIFA.
Let’s take a minute to consider how to best protect cash retentions
It needs to be noted that the geneses of BIFA, was the Government, through the predecessor of the QBCC released a discussion paper entitled ‘Payment dispute resolution in the Queensland building and construction industry’ on 21 December 2012, which posed a number of questions for consideration by parties and stakeholders, one of which was:
“Question 12: Is security of payment an issue for retentions? If so how do you think this could be improved?”
In an article that I published almost 5 years ago entitled RIP Statutory Construction Retention Bond/Trust Scheme, I stated:
“An idea that the most effective way to prevent the misuse of cash retentions is to require all such funds be held in a Statutory Construction Retention Bond/Trust Scheme (‘statutory scheme’), has always resonated with me.
Such a statutory scheme would operate along the same lines as the Residential Tenancies Authority does in relation to protecting the misuse by landlords of rental bonds paid by tenants when entering into accommodation leasing arrangements.
“However the Building Industry Fairness (Security of Payment Act) 2017 (BIFA) does not accommodate such a statutory scheme and in the alternative, seeks to address this issue through the establishment of Project Bank Accounts.
The statutory scheme idea has been in a death spiral of committees, but does it need resuscitating?”
Obviously, my views in this regard did not resonate with others and BIFA, 2017 version sought to address this issue through the establishment of job-specific, retention trust accounts.
I circled back in 2020 to again outline my views in this regard.
I circled back to again express my concerns about the lack of protection for subcontractors’ cash retentions in another article entitled Protection of subcontractor’s cash retentions is still an illusion, dated August 13, 2020.
In this article I stated:
“I believe that the single most important thing which can deliver substantial SOP improvements for subcontractors is the effective protection of cash retentions.
In my view, addressing this industry scourge should have been the primary focus in developing appropriate legislation.
It has been my experience in the construction industry for over 25 years that the misuse of cash retentions by head contractors is the major SOP issue that has always confronted subcontractors.”
I again, in this article, advocated for such a statutory scheme to protect subcontractors’ cash retentions. Clearly, again, my idea did not resonate with others because as I have previously stated, while there were many changes to BIFA trusts provisions in 2020, this was not one of them.
Again, I am advocating for such a scheme
Given this most recent BIFA trusts delay, I am again attempting to get a conversation going on this possible solution for the protection of cash retentions.
How would such a scheme operate?
In a recent video chat, Emily Taylor and I had about the delay in the rollout of the BIFA trusts regime, we spoke about my ‘Rental Bond’ type cash retentions scheme. Is it time to explore this option to protect cash retentions?
Myself and Emily Taylor (a recently admitted lawyer at Helix) have launched a new podcast series called Deconstruction. So far, we have recorded three episodes, one of which is now live!
We have thoroughly enjoyed the episodes we have recorded to date. We have also enjoyed our pre-podcast (scheduled to be recorded) chats with our innovative “walk the talk” guests. You can watch our first episode with Kate Raymond of Master Builders on YouTube or listen on Spotify here. Stay tuned for future episodes – you’re not going to want to miss these!
Future of Construction Summit [3 & 4 May 2023]
We are super excited to join the innovative crowds again this year at the Future of Construction Summit 2023 (FCON). The Helix team have attended FCON since its commencement in 2021. Each year, we have left feeling inspired by the insightful and thought-provoking speakers and booths.
Our Director Jacqui Doyle is hosting the “Risky Business: Learning to Trust Again” panel. This will occur on Day 1 of FCON, Wednesday 3 May at 11:00am. The panel discussion will centre around the lack of trust which exists between all stakeholders in the industry. It will explain how it is one of the biggest barriers to change. Jacqui will ask the question:
“How do we learn to trust again so that we only need a 2-page contract to deliver a $1 billion project?”.
If you haven’t already registered, you can attend in person in Melbourne or virtually on the website here.
We are also showcasing our home-grown innovation product Diligence by Helix at FCON this year. Diligence is a tool that empowers better contracting decisions for anyone in the building game. Diligence brings together multiple industry-specific due diligence searches in one easy-to-use search tool. This includes, for example, QBCC Licence details, Qld Adjudication Decisions, Court Proceedings and Company Notices in one easy-to-use search tool.
Bracing for a High-Tech Future [25 May 2023].
We are kicking off our own Helix Innovation Series for 2023. There will be a showcase of game changing products and services that will revolutionise the construction industry.
Come along on 25 May 2023 and put your finger on the pulse of the next wave of innovation. Kick off will be at 6pm at The Precinct, Level 2/315 Brunswick Street, Fortitude Valley QLD 4006.
Register to attend here.
If you have a new product or idea of application to the construction industry, get in contact with us at Helix today for the opportunity to pitch your idea to a room full of industry in our Innovation Series for 2023.
Here’s a clip from one of our past innovation series events.
Not Another Construction Conference [7 June 2023].
We’re hosting an immersive and cutting-edge construction conference that will stir up conversation about real issues shaping the industry in 2023 on 7 June at Smoked Garage, Fortitude Valley.
Our one-day event will bring together leading experts and professionals from across the construction sector. They will share their broad insights and experiences on a range of topics concerning the industry. This includes how to cope with Project Trust Accounts, adjudication challenges, minimum financial requirements for those who build and more.
Attendees will have the opportunity to attend workshops, network with peers, and learn something new!
Tickets are on sale now here. More details coming soon.Not intended as legal advice. Read full disclaimer.