Ending Retention Trusts
How is a Retention Trust 'ended'?
Ending a Retention Trust is called ‘dissolving it’. A head contractor cannot dissolve a Retention Trust until all retention money has been released to the party who is entitled to it under the terms of the Retention Trust Contract.
The Project Trust is dissolved by closing the Retention Trust Account and giving written notice to the Queensland Building and Construction Commissioner within 5 business days after closing the Retention Trust Account. The information to be included in the notice can be found here.
On dissolving the Retention Trust, the head contractor is permitted to pay itself any amount for interest that it is entitled to and any remaining amount in the Retention Trust Account as long as there is no money still owing to a subcontractor.
- the new bank must be an Approved Financial Institution;
- all moneys held in the Project Trust Account must be transferred to the new account;
- the head contractor must notify all subcontractors, the principal and the Queensland Building and Construction Commissioner within 5 business days after transferring the Project Trust Account ((max penalty: 200 PU ($27,570)). The information to be included in the notice can be found here; and
- there must not be two accounts open for longer than necessary to transfer the Project Trust Account.
The head contractor may withdraw any interest that has been deposited into the original Project Trust Account prior to the transfer by the bank provided the withdrawal does not cause a deficiency in the Project Trust Account.
This page considers the situation where Retention Trusts apply to subcontracts. Unless noted otherwise, all references to a ‘subcontractor’ in relation to a subcontract Retention Trust refers to a subcontractor that is a beneficiary of the associated Project Trust.
If a head contract requires a Retention Trust, the rules set out on this page are the same but the principal is the ‘trustee’ and all head contractors are ‘beneficiaries’ for head contracts that are Project Trust Contracts.
If a lower-tier subcontract also requires a Retention Trust, the rules set out on this page are the same but the higher tier subcontractor is the ‘trustee’ and its subcontractors are ‘subcontractor beneficiaries’.
Last updated: 1 January 2022