Building Industry Fairness (Security of Payment) Act 2017 (Queensland) — Zoe

Queensland act

Building Industry Fairness (Security of Payment) Act 2017

In ForceQLD

Jurisdiction

Queensland

Act Number

43 of 2017

Collection

act

Plain English Summary

8/10 complexity

The Building Industry Fairness (Security of Payment) Act 2017 helps ensure people in the building and construction industry get paid for their work.

It does this in four main ways:

Project trusts: For many larger contracts (generally $1 million or more where over half the value is construction work), the main contractor must hold client payments in a special bank account (a project trust). This protects subcontractors by ring-fencing the money so it cannot be used for other debts if the contractor gets into financial trouble. The contractor acts as trustee, and subcontractors are beneficiaries with rights to be paid from the account.
Progress payments: Anyone doing construction work or supplying related services has a legal right to regular payments as the job progresses, even if the contract is silent on this or says otherwise. Claims must be made in writing, and there are strict timelines for responses and disputes.
Adjudication: A fast, low-cost process to resolve payment disputes. An independent adjudicator decides how much is owed based on claims, responses, and evidence. The loser must pay quickly or face court enforcement.
Retention and subcontractors' charges: Money held back for defects must often be placed in a retention trust. Subcontractors can also place a 'charge' (a legal claim) on money owed higher up the chain to secure their payments.

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What it does

The Building Industry Fairness (Security of Payment) Act 2017 (the Act) establishes a comprehensive framework to secure payment for work in the building and construction industry. Its main purpose, stated in s.3(1), is "to help people working in the building and construction industry in being paid for the work they do." This is achieved primarily through four interlocking mechanisms set out in s.3(2):

(a) requiring the use of statutory trusts for particular contracts (project trusts under Ch 2 Pt 2 and retention trusts under Ch 2 Pt 3);

(b) granting an entitlement to progress payments, whether or not the relevant contract makes provision for them (Ch 3 Pt 2);

(c) establishing a procedure for making payment claims, responding to them, the adjudication of disputed claims, and the recovery of amounts claimed (Ch 3 Pts 3–4); and

(d) enabling the use of a statutory charge in favour of subcontractors (Ch 4).

The Act binds all persons, including the State, and, as far as legislative power permits, the Commonwealth and other States (s.4).

Project trusts are the centrepiece of the trust regime. Under s.11, a project trust is a trust over amounts payable in connection with a project trust contract or subcontract and required to be deposited in the project trust account. The contracted party is both trustee and beneficiary (s.11A(1)), while subcontractors for project trust subcontracts are beneficiaries (s.11A(3)). Beneficial interests are defined in s.11B: subcontractors have an interest in amounts they are entitled to be paid, with the contractor holding the remainder. Trusts are required for contracts meeting the eligibility criteria in s.14 (contract price $1 million or more where >50% is project trust work, with the contracting party being the State, a State authority, local government, individual, private entity or hospital and health service) or prescribed by regulation (s.14D), subject to exemptions in ss.15–15F (e.g. small-scale residential work, maintenance, professional design, contracts with <90 days to practical completion). The requirement is triggered when the contracted party enters a subcontract (s.12(2)(c)) and continues until dissolution under s.21, regardless of variations or changes in price or scope (s.12(4)).

Current sections

Direct links to the current provisions in Building Industry Fairness (Security of Payment) Act 2017.

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Amendment triggers (s.14A): A contract not initially eligible can become so if amended to increase project trust work percentage by ≥30% or contract price by ≥30%. This is retrospective to the amendment date; failure to open a trust account within 20 business days (s.18(3)) attracts 500 penalty units. Many overlook that "amendment" includes variations (s.8).
Related entities (ss.10A, 14C, 24, 25): First-tier subcontracts with related entities require separate project trusts. The definition is broad (family, 50%+ interests, land holding trusts per Duties Act 2001 Sch 6). Reporting is mandatory within 5 business days; non-compliance is 200 penalty units. Courts will pierce arrangements that appear designed to avoid this (see s.10A(2) "substantially one arrangement").
Shortfall obligations (s.51, s.20C): Trustees must top up shortfalls immediately (100 penalty units or 1 year imprisonment). Where multiple beneficiaries claim simultaneously and funds are insufficient, pro-rata reduction applies (s.20C(2)), but the trustee remains personally liable for the balance. The "reasonable excuse" defence in deposit obligations (s.19(2)(e)) is narrowly construed.
Adjudication "one bite" (s.79(4)): Only one adjudication application per reference date. Including previously claimed amounts risks the entire application being invalid. Complex claims (> $750,000) have longer response times but require detailed supporting statements (s.75(7)–(9)).
Retention trusts and defects liability (s.36(2), s.15D): Withdrawals for defects corrections cannot occur until the defects liability period ends. "Maintenance work" exemption (s.15D) excludes improvements or statutory upgrades; misclassification exposes trustees to 300 penalty units or 2 years imprisonment.
Commissioner directions (s.53B): If a contract is terminated or the contractor is insolvent/under administration, the commissioner can freeze accounts or require audit reports. This overrides normal trust administration and has been used in high-profile collapses.
Interaction with charges (Ch 4 and s.97B–97H): A payment withholding request under Ch 3 Pt 4A creates a charge (s.97G) with PPSA priority. Giving a Ch 4 notice of claim while pursuing adjudication suspends the latter (s.62), a trap for the unwary.
Record-keeping and audits (s.52, s.189–189B): Trust records must be kept 7 years post-dissolution. Approved audit programs allow commissioner access; failure to produce documents is 100 penalty units. Self-incrimination is no excuse, but use immunity applies (s.189B).

Who it affects

The Act casts a wide net across the construction supply chain.

Contractors and head contractors (defined in s.8 as the party required to perform work, whether personally or by causing it to be carried out) bear the heaviest burdens. They must establish and administer project trusts for eligible contracts (s.12), open dedicated accounts (s.18), deposit all incoming payments (s.19), and ensure withdrawals comply with authorised purposes (s.20A). Related-entity subcontracts trigger additional trusts (s.14C). Record-keeping (s.52), notices (ss.23, 23A, 23B, 24, 25), and shortfall top-ups (s.51) are mandatory. Breaches attract penalties up to 500 penalty units or 2 years imprisonment (e.g. ss.18(1), 19(4), 20A(1)–(2), 21A). Under Ch 3 they must respond to payment claims within 15 business days (s.76) or face liability for the full amount (s.77) and potential adjudication.

Subcontractors (including first-, second-, and higher-tier per s.6) are primary beneficiaries. They gain rights to progress payments (s.70), adjudication (s.79), and charges over upstream money and securities (ss.109, 122). For project trust subcontracts they must receive notices (s.23), transaction updates (s.23A), and information on request (s.23B). They can require higher parties to withhold payments (s.97B) and enforce charges in court (s.134). Retention trust beneficiaries enjoy similar protections (ss.31A, 40–40B). However, they must provide supporting statements with claims (s.75(7)–(9)) and certify claims via qualified persons (s.122(2)–(3)).

Principals/clients (contracting parties under s.8) must deposit all payments into project trust accounts (s.19) and report related-entity issues (s.24). They face direct liability if they fail to do so (s.19(2), 200 penalty units). For retention trusts they act as trustees (s.31A). State authorities and hospital and health services have lower thresholds ($1M vs $10M pre-2024) but enjoy some exemptions (ss.15A–15B).

Government and State authorities are bound (s.4) and frequently act as contracting parties. They must comply with trust and payment rules but benefit from exemptions for contracts solely between the State and a State authority (s.15B) and certain maintenance/professional work.

Financial institutions holding trust accounts face obligations under ss.55–55C (reporting overdrawn accounts, complying with commissioner directions, providing records to investigators). Approved institutions enter agreements with the commission (s.55(2)).

The commissioner (Queensland Building and Construction Commission) holds extensive oversight powers: maintaining the register of trusts (s.53), requiring information (s.53A), issuing directions to freeze accounts or obtain audit reports (s.53B), appointing special investigators (s.53D), excluding auditors (ss.54–54F), and approving financial institutions (s.55). The registrar manages adjudication referrals, the adjudicator register, records, and audits (s.154).

Adjudicators must be registered (Ch 5 Pt 2), comply with a code of conduct (s.181), and decide applications impartially within statutory timelines (ss.84–86). They enjoy immunity for good-faith acts (s.186) but face exclusion for misconduct (s.54A).

Qualified persons certifying claims or supporting statements (architects, engineers, licensed builders, quantity surveyors per s.147) must avoid conflicts and financial interests in the work.

Related entities (defined broadly in s.10A: family, majority shareholders, 50% interests, beneficiaries, land holding trusts) trigger additional trusts (s.14C) and reporting (ss.24–25). Arrangements designed to circumvent are ineffective (s.10A(2)).

Beneficiaries (subcontractors, contractors as remainder beneficiaries) have rights to information, priority payments, and court supervision (s.51G).

The Act excludes certain domestic building for resident owners (s.61(2)(b)), oil/gas/mining extraction (s.65(3)), and non-value-based contracts (s.61(2)(c)). Professionals (architects, engineers, certifiers) often fall outside trust requirements if performing only advisory/design work (s.15E).

Key duties and rights

Duties (trustees/contractors):

Determine eligibility at contract formation and on amendments (ss.12, 14, 14A–14E). Failure to open a project trust account within 20 business days is 500 penalty units (s.18(1)).
Deposit all contracting-party payments into the trust account (s.19(1)–(2), 200 penalty units; criminal sanctions for knowing receipt outside trust: 200 penalty units or 2 years imprisonment per s.19(4)).
Limit withdrawals to authorised purposes (s.20A: pay beneficiaries, trustee's entitlement net of subcontractor amounts, error corrections, retentions, adjudication/court orders). Unauthorised withdrawal: 300 penalty units or 2 years imprisonment; repayment obligation (s.20A(2)).
Maintain priority: cannot pay self if insufficient for current subcontractor liabilities (s.20B, 300 penalty units or 2 years imprisonment).
Cover shortfalls immediately (s.51, 100 penalty units or 1 year imprisonment). Pro-rata distribution where multiple claims exceed funds (s.20C).
Keep trust records for 7 years post-dissolution (s.52, 300 penalty units or 1 year imprisonment).
Provide notices: project trust notices before subcontracts (s.23, 200 penalty units or 1 year imprisonment), transaction notices within 5 business days (s.23A, 100 penalty units), information on request (s.23B, 100 penalty units). Report related entities (ss.24–25).
For retention trusts: open account before withholding (s.34, 500 penalty units), deposit retentions (s.35, 200 penalty units or 2 years imprisonment), withdraw only for authorised purposes post-defects liability period (s.36, 300 penalty units or 2 years imprisonment).
Complete prescribed training (s.41, 100 penalty units).

Rights (subcontractors/beneficiaries):

Entitlement to progress payments from each reference date (s.70), valued per contract or reasonable rates (ss.71–72).
Serve payment claims identifying work, amount, and requesting payment (s.68). Complex claims (> $750,000) attract longer response periods.
Receive payment schedule within 15 business days or contractual period (s.76). Absence renders respondent liable for full claim (s.77).
Apply for adjudication within 30/20 business days (s.79). Adjudicator decides within 10/15 business days (s.85), considering only permitted materials (s.84(2)).
Enforce adjudication via certificate as judgment (s.93). Suspend work after 2 business days' notice if unpaid (ss.92, 98).
Place charge on upstream money/securities/retentions (ss.109, 122). Notice within 3 months of practical completion (s.122(5)); for retentions only, within 3 months after defects liability period (s.122(8)).
Require higher parties to withhold via payment withholding request (s.97B), creating a charge (s.97G) with PPSA priority.
Access trust information (ss.23B, 40B), including balance statements and transaction records.
Court supervision of trusts (s.51G) and enforcement of charges (Ch 4 Pt 5).

Commissioner/registrar powers:

Refer adjudication applications (s.79(5)), maintain trust and adjudicator registers (ss.53, 154(2)(b)).
Require information/documents (s.53A), issue freezing directions or require audit reports (s.53B), appoint special investigators (s.53D).
Exclude auditors for breaches (ss.54–54F).
Approve financial institutions (s.55).
Issue guidelines (s.59) and audit under approved programs (s.189).

Rights of higher parties/financiers:

Limited liability: no direct action by beneficiaries against contracting party (s.25A).
Ability to withhold on payment withholding request (s.97B) but must retain (s.97C, 50 penalty units) and face joint liability for failure (s.97D).
Charge over retained amounts (s.97G).

How it interacts with other laws

The Act is not standalone.

Queensland Building and Construction Commission Act 1991 (QBCC Act): Central interaction. Project trust work largely aligns with "building work" (s.8A referencing QBCC Act Sch 2). Licensing requirements apply to trustees (s.8 definitions). Minimum financial requirements are affected by trust obligations (s.53B(1)(e)). Retention limits in QBCC Act Pt 4A apply (s.36(5)). Penalties for late payment under building contracts reference QBCC Act ss.67P, 67U, 67W (s.73). Commissioner is the same entity; audits and directions overlap (ss.53–53G).

Acts Interpretation Act 1954: Applies to commencement (s.2 excludes s.15DA for Ch 9 Pt 1 Divs 1–4). Definitions (e.g. "business day") and service rules (s.102 referencing s.39).

Corporations Act 2001 (Cth): Related bodies corporate (s.10A(3)), insolvent under administration triggers (s.53B(1)(b)), auditor registration (s.50 definition of auditor).

Personal Property Securities Act 2009 (Cth): Statutory interests declared under s.73(2) for project/retention trust charges (ss.33A, 56, 97G) and subcontractors' charges (s.56). Priority preserved.

Duties Act 2001: Land holding trusts in related-entity definition (s.10A(3)).

Architects Act 2002, Professional Engineers Act 2002, Surveyors Act 2003, Electrical Safety Act 2002, Building Act 1975: Define professional work exempt from trusts (ss.8A, 15E) or included in project trust work.

Hospital and Health Boards Act 2011: Defines hospital and health services as State authorities (s.8).

Civil Proceedings Act 2011: Interest rate on unpaid amounts (s.73(2)(b)).

Trusts Act 1973 and Trust Accounts Act 1973: Expressly excluded (s.56A).

Criminal Code: Executive officer liability (s.58A referencing Ch 2).

Court inherent jurisdiction over trusts preserved (s.56B(2)). Equity principles apply except where inconsistent (s.56B(1)).

Adjudication decisions are subject to jurisdictional error review but otherwise final. Subcontractors' charges interact with PPSA via statutory charges.

Recent amendments (2020 No. 24, 2024 No. 14) aligned thresholds, expanded definitions (project trust subcontract s.9A), and strengthened commissioner powers in response to insolvency inquiries.

Recent changes and why

The Act has been substantially amended since 2017 to address practical weaknesses.

2018 amendments (No. 17): Clarified related entities (new s.10A), adjusted minimum contract price, refined definitions (amended ss.2, 3, 8–10, 14, 19, 23–25, 30–36, 55–56), and inserted early audit/exclusion provisions (ss.52A–54F, 57–58). Response to initial implementation issues with trust identification and related-party avoidance.

2020 amendments (No. 24): Major overhaul. Lowered project trust threshold to $1M for most parties (amended s.14), introduced mandatory retention trusts (new Ch 2 Pt 3), refined eligibility (ss.14A–14E, 15–15F), added commissioner oversight (new ss.53–53G, 57A–57C), strengthened information and reporting (ss.23A–25B), clarified dissolution and shortfalls (ss.20B–21A, 51–51F), and aligned with federal PPSA. Driven by 2016–2017 reviews showing persistent subcontractor non-payment despite SOP laws; trusts were seen as necessary to "ring-fence" funds.

2022 amendments (No. 11): Minor technical changes to definitions (ss.50, 54A, 57, 57A), audit reporting, and training extensions.

2023–2024 amendments (No. 23 of 2023, No. 14 of 2024): Updated executive liability (s.58A), removed obsolete "minimum contract price" and "protected work" (ss.8, 10, 32), broadened project trust subcontracts (new s.9A), lowered general threshold to $1M (replaced s.14), refined related-entity reporting, and expanded commissioner audit powers (ss.189–189B). Aimed at closing loopholes for smaller contracts ($3M–$10M previously exempt) and improving compliance post-COVID insolvencies.

These changes reflect a policy shift from "pay now, argue later" adjudication to proactive fund protection via trusts. The 2024 expansion to most contracts ≥$1M addresses criticism that the 2020 reforms left too many subcontractors unprotected. Why? Successive reviews (e.g. 2019 Building Industry Fairness Reforms Implementation) showed adjudication alone insufficient against upstream insolvency; trusts reduce the "disappearing money" problem.

Court challenges and controversies

Adjudication decisions are frequently challenged for jurisdictional error. Key cases (grounded in the text):

Whether a contract is a "construction contract" (s.64) or work is "construction work" (s.65) is jurisdictional. Misclassification voids the decision.
Reference dates (s.67): the final reference date survives termination only if the contract so provides; otherwise the termination date is the final date. Strict compliance required.
Supporting statements (s.75(7)–(9)): failure invalidates the claim for head contractors.
Adjudicator bias or failure to consider mandated materials (s.84(2)) renders decisions void.
"One bite" rule (s.79(4)): multiple applications per reference date prohibited.

Subcontractors' charges have generated disputes over:

Certification by "qualified person" (s.122(2)–(3), s.147): non-compliance extinguishes the charge.
Timelines: 3 months from practical completion (s.122(5)); for retentions, 3 months after defects liability period (s.122(8)).
"Notice of claim" form and content: strict compliance required; defects fatal (s.122(9)).

Trust litigation centres on:

Eligibility triggers on amendment (s.14A): 30% increase in price or project trust work percentage.
Related entities (s.10A): broad "one arrangement" test catches contrived structures.
Unauthorised withdrawals (ss.19A, 20A): criminal sanctions applied in insolvency cases.
Commissioner directions freezing accounts (s.53B): challenged as administrative overreach but upheld where insolvency evident.

Controversies include compliance burden on SMEs (dual trust accounts, training, audits), perceived commissioner bias in referrals, and interaction with QBCC licensing (trust breaches can suspend licences under s.53B(1)(d)). The "Gotcha" of pro-rata distribution (s.20C) in multi-claim scenarios leaves subcontractors underpaid while the contractor remains liable.

High Court influence: Southern Han (2016) 91 ALJR 233 confirmed reference dates are jurisdictional, shaping s.67 drafting.

Gotchas

Most practitioners miss these nuances:

"Project trust work" is extraordinarily broad (s.8A): includes not only erection/renovation but site testing, termite reports, architectural/engineering/survey work associated with a building, scaffolding, earthmoving, energy assessments, fire safety advice, wet pour rubber, prefabricated components, and mechanical services. A $1.2M contract that is 51% "associated" professional work triggers a trust. Many contracts are caught inadvertently.
Amendment rule (s.14A(2)) is a trap: if an initially exempt contract is varied so project trust work percentage rises ≥30% or price ≥30%, a trust is required retrospectively to the amendment date. The 20-business-day clock for opening the account starts then (s.18(3)). Variations increasing scope by 25% can easily tip the threshold.
Related-entity subcontracts (s.14C): a first-tier subcontract to a related entity requires its own project trust even if the head contract already has one. The related-entity beneficiary remains a beneficiary of the head trust (s.14C(2)). Family companies and 50% joint ventures are routinely caught; disclosure within 5 business days is mandatory (ss.24–25).
Supporting statement trap (s.75(7)): head contractors must attach a statutory declaration that all subcontractors have been paid in full or list unpaid amounts with reasons. Omission invalidates the claim. "All amounts owed" includes disputed or unclaimed sums—conservative drafting is essential.
Pro-rata and personal liability (s.20C): if trust funds are insufficient and the trustee has not topped up (s.51), beneficiaries are paid proportionally. The trustee remains personally liable for the shortfall. In multi-subcontractor collapses this creates priority fights and personal exposure.
Retention trust "defects liability period" (s.36(2)): withdrawal for defect corrections is prohibited until the period ends. "Defects liability period" is contractual; if none, reasonable estimate. Misjudging this exposes the trustee to criminal sanctions.
Commissioner "reasonable suspicion" directions (s.53B(1)(c)): a mere suspicion that the account is misused allows freezing without notice. No merits review; only judicial review for Wednesbury unreasonableness.
Audit immunity (s.189B): documents produced under s.189A carry use immunity but not derivative-use immunity. Careful segregation of privileged material is required.
PPSA interaction: charges under ss.33A, 56, 97G are statutory interests with priority. Failure to perfect other securities can subordinate them.
"Reasonable excuse" defences: narrowly construed. Financial difficulty or "waiting for upstream payment" rarely suffices for deposit failures (s.19(2)(e)).

How to comply

For head contractors/principals:

At tender/contract stage: Calculate whether >50% of contract price is project trust work (s.8A list is exhaustive but broad). Use the s.9 formula (GST-exclusive, reasonable estimate if uncertain). Check contracting party type (State authorities have $1M threshold).
On execution/amendment: Reassess eligibility (s.14A). If triggered, open approved-institution account within 20 business days of first subcontract (s.18). Name must include trustee name and "trust" (s.18A(2)). Give contracting party and commissioner notice within 5 business days (s.18B).
Ongoing: Deposit every payment from contracting party (including adjudicated amounts, court orders) into the trust account within 5 business days if received outside (s.19(4)). Issue project trust notices to all subcontractors before entering subcontracts (s.23). Maintain electronic records (s.18A(3)), reconcile monthly, cover shortfalls immediately (s.51). Provide beneficiary information on request (s.23B). Report related entities to commissioner within 5 business days (ss.24–25).
Retention: For cash retentions on withholding contracts, open separate retention trust account before withholding (s.34). Deposit immediately (s.35). Release only per contract after defects liability period (s.36(2)). Give notices (s.40).
Payments: Respond to payment claims with schedule within 15 business days (s.76). Pay scheduled amounts by due date (10 business days if no contract provision: s.73). Comply with adjudication decisions within 5 business days (s.90).
Dissolution: Close account only when no beneficiaries remain or only maintenance work left (s.21). Give commissioner written notice. Pay interest and remainder to self (s.21(4)).
Record-keeping and audits: Retain trust records 7 years (s.52). Respond to commissioner information requests (s.53A) and special investigators (s.53D) within time. Complete prescribed training (s.41).

For subcontractors:

Claims: Issue payment claims identifying work, stating amount, requesting payment, with supporting statement (s.75). For head-contractor claims, declare all subcontractors paid or list unpaid with reasons.
Trust notices: Expect project/retention trust notices (ss.23, 40). Request balance/transaction records (ss.23B, 40B).
Charges: For unpaid amounts, serve notice of claim within 3 months of practical completion (s.122(5)), certified by qualified person (architect, engineer, licensed builder, quantity surveyor: s.147). For retentions only, within 3 months after defects liability period. Give copy to contractor (s.123) and security holder (s.124).
Withholding requests: Issue payment withholding request to higher party (s.97B) to create charge (s.97G).
Adjudication: Apply within 30 business days of no schedule or 20 business days of scheduled amount (s.79). Provide all supporting material.

General compliance tips:

Use software that flags eligibility on contract entry and variations.
Maintain separate ledgers for each project trust; never intermingle.
Document all "reasonable excuse" decisions contemporaneously.
Train staff on related-entity definitions (s.10A) and reporting.
For audits (s.189A), have document registers ready; claim privilege where available.
Review insurance for trust breach and adjudication liabilities.
Engage legal review for any variation exceeding 20% of price or scope.

Non-compliance risks not only penalties but QBCC licence suspension, director disqualification, and personal liability under s.58A for executive officers. Early engagement with the commission's advisory service (s.154(2)(j)) is prudent.