Deposits into a Project Trust Account
In this section:
What money must be deposited into the Project Trust Account?
There are very strict rules around what money can be deposited into a Project Trust Account with heavy penalties for a breach of those rules.
This includes any and all payments made by the principal to the head contractor that relate to the Project Trust Contract including:
- payments made under the head contract;
- payments relating to a dispute resolution process or an adjudication in relation to the head contract;
- payments made by court order in relation to the head contract; and
- payments made for any other reason under the head contract.
The only exceptions to this requirement are for amounts that:
- were due to be paid before the Project Trust was established;
- have been paid into court;
- are to be withheld from payment to the head contractor because of a payment withholding request given to the principal under section 97B of the BIFA;
- are to be paid directly to a person under chapter 4 of the BIFA in connection with a subcontractor’s charge; or
- the principal has a reasonable excuse for failing to deposit into the Project Trust Account.
What other money can be deposited into the Project Trust Account?
The only other money that can be deposited into the Project Trust Account is money that is:
- deposited by the principal when the exceptions listed above no longer apply;
- deposited by the head contractor in order to pay subcontractor beneficiaries in connection with a subcontract for the Project Trust Contract; or
- deposited by the head contractor in order to repay an amount withdrawn from the account in error; or
- deposited as prescribed by regulation (there is nothing in regulation at this time).
It is an offence for the head contractor to allow any money (other than the money listed above) to be deposited into the Project Trust Account (max penalty: 200 PU ($27,570) or 1 year’s imprisonment). This does not apply to interest that may be deposited into the Project Trust Account by the bank.
Deposits by head contractor into the Project Trust Account
If there is not enough money in the Project Trust Account to make a payment that is due to a subcontractor by the head contractor on the date that it is due to be paid (shortfall), the head contractor must deposit money into the Project Trust Account to make the payment that is due (max penalty: 100 PU ($13,785) or 1 year’s imprisonment).
The head contractor must deposit the amount into the Project Trust Account as soon as practicable after receiving the amount into the business account (max penalty: 200 PU ($27,570) or 2 years imprisonment).
It is important that head contractors keep a close watch on their business accounts to ensure that they quickly identify if an amount has been paid into the business account that should have been paid into the Project Trust Account. This is especially important for head contractors that have previously carried out work for the principal and that previous project did not have a Project Trust Account. It is quite common for businesses to set up 'accounts' in their financial management systems to streamline payments to their contractors but the bank accounts noted on the 'account records' for the previous project will not be applicable for new projects that have Project Trust Accounts. Little errors or oversights like this will create extra work for the head contractor to correct and also expose the principal to a serious penalty for this breach of the BIFA (max penalty: 200 PU ($27,570)).
This page considers the situation where Project Trusts apply to head contracts. Unless noted otherwise, all references to a ‘subcontractor’ in relation to a head contract Project Trust refers to a subcontractor that is a beneficiary of the Project Trust.
If a subcontract also requires a Project Trust, the rules set out on this page are the same but the subcontractor is the ‘trustee’ and its subcontractors are ‘subcontractor beneficiaries’.
Last updated: 1 January 2022