Queensland legislation makes project trusts statutory trusts. Trust describes a relationship in which the trustee holds the property for the benefit of the parties. A project trust account is where money is paid to head contractors and subcontractors and kept in trust until payment for a building project is due. Each project must have its account under the project trust account framework.
What is a project trust account?
A project trust account allows payments to be made under an eligible contract between the contracting party (usually the principal contractor) and the contracted party. These payments are then paid and distributed to the subcontractors and contracting party:
- The principal (contracting party) makes progress payments to this account for amounts that are liable under the head contract.
- The head contractor pays all subcontractors only through this account
- The head contractor pays only from this account.
What is the role of the QBCC for trust account?
The QBCC regulates the trust system, including project trust accounts. It is also responsible for regulating the new trust framework, including project trust accounts, and functions such as:
- Receive notices regarding trust accounts and maintain a register of trust accounts
- Approving financial institutions that may hold trust accounts
- Conducting approved audit programs to ensure trust account compliance
- Investigating complaints regarding possible non-compliance with trust laws
- Conducting enforcement activities, which may include the prosecution of alleged offenses
- Where appropriate, directing trustees or financial institutions in some instances
- Providing education and awareness to industry and the public
You must keep a project trust fund account under the name of its trustee. Within five business days after creation, a project account must be notified to the QBCC so that you can publish details about the project account. Only the beneficiaries listed in the trust account can use the funds. You must also refrain from using the trust account to pay for unfinished or defective work. Breaching these regulations could lead to up to 2 years of imprisonment.
How to comply with Project Trust Account Framework?
Creating and managing these files might take a lot of work, especially if done manually or via a general system. One downside of these procedures is the possibility of making mistakes and failing to meet specific regulatory standards. Construction companies can handle these documents using document management software. It is one piece of software that helps businesses comply with the new project trust account framework.
Building estimating software Australia allows the organization to retain a separate account ledger for each approved project. It can keep track of all trust account deposits and withdrawals in chronological order, along with other transaction details.
To know more about the matter, here is an infographic from Bizprac.