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31 January 2020

Addressing Subbies Concerns Regarding Delays to Project Bank Accounts

Recent commentary on security of payment issues faced by some subcontractors is highly critical of alleged delays by Government in introducing Project Bank Accounts. The proposed vital legislation, which is likely to be complex, has yet to be drawn up and reviewed by industry operators.

The time table referred to in our past article on the issue, Building Industry Fairness Reforms: Report to Government and Government Response, in the circumstances, would seem sensible as there would be nothing worse than having such significant changes released on an industry ill-prepared.

While some contractors are critical of the changes, on the basis of compliance costs, that battle is over and PBA’s will, no doubt, be rolled out in a new format prior to July 2020 but only applying to State Government projects valued above $1 million. It won’t be until 1 July 2021 that all projects above $10 million in value will require them.

The next stages that arguably will affect most contractors are as follows:

  • Phase 4 – 1 January 2022 – all projects above $3 million
  • Phase 5 – 1 July 2022 – all projects above $1 million

What attitude the LNP will bring to this, given this is an election year, is unknown. No doubt it will be tested over the next few months.

Pending those changes being introduced, subcontractors should not forget they may have available remedies under Chapter 4 of the Building Industry Fairness (Security of Payment Act) being the provisions of the old Subcontractors Charges Act.

If used correctly in a timely way, subcontractors can become secured creditors with a charge over monies owed from up the contractual chain. Using those provisions may put subcontractors in a much better position should there be an insolvency.

Quite often, the key to success in any recovery using these provisions is speed and timing. A reluctance to use, resulting in delay, can be fatal.

The provisions are particularly powerful should you be a sub-subcontractor where you may have an ability to charge monies at several levels of the chain.

If a contractor, principal or subcontractors have a query or concern, they shouldn’t hesitate to contact our Construction Litigation team on +61 7 3001 2999 or via our Contact page.

 

 


Individual liability limited by a scheme approved under professional standards legislation (personal injury work exempted).

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